NAB scraps home-loan referral perks

After facing public backlash due to the controversies revealed by the royal commission, the National Australian Bank announced that it would discontinue its home-loan referral scheme to rebuild its reputation and regain the trust of borrowers.

In a statement, NAB’s acting chief executive, Phil Chronican, said NAB will no longer pay commissions to members of the public who refer new home-loan clients to the bank.

“Like other businesses, we will still welcome referrals and will continue to build strong relationships with business and community partners,” he said.

NAB’s referral scheme, also known as the Introducer Program, involved payment of a spotter’s fee to people who successfully referred fresh home-loan borrowers to the bank. According to a report in The Sydney Morning Herald, NAB paid roughly $100m in referral payments between 2013 and 2016, providing introducers with commissions of 0.4% of the loans.

During its investigation, the royal commission found that many of the introducers were real estate agents, lawyers, and sports club members. One of the many red flags the investigation uncovered was the commission paid to a gym owner whose profession was not qualified for the program.

The commission also discovered the alleged involvement of some NAB introducers in a bribery ring in Western Sydney.

In response to these findings, NAB initially pledged to bolster its introducer program, creating regulations which would make qualifications for an introducer more stringent. This initial response was in line with Commissioner Kenneth Hayne’s suggestion, which was to improve the regulation of introducer schemes.

“Introducers must only act within the confines of their prescribed role. Entities must have systems in place to ensure that introducers do not exceed this role. And entities should not regard the role of the introducer as modifying their own responsible lending obligations,” he said.

However, Chronican said the bank’s decision to ultimately scrap the scheme is fitting to meet community expectations.

“We want customers to have the confidence to come to NAB because of the products and services we provide – not because a third party received a payment to recommend us,” he said.

Patrick Veyret, policy and campaigns adviser of consumer advocacy group Choice, told the Herald that commission-based schemes would only be detrimental to the industry and to the community it serves.

“As we’ve seen across the industry, percentage-based commissions create conflicts of interest, where advisers, such as introducers, are incentivised to recommend larger and less affordable home loans to maximise their own pay cheques,” he said.



Property Investment In Australia For The Beginners

Property investment can be so complicated. It can be really difficult for beginners to know where to start.  Here are 10 tips for property  investment in Australia for beginners.

1. Knowing How To Make Money

It is a good ideas to actually sit down and learn how people make money in property.

Generally no matter what strategy people are using there are 3 different ways they make money.

  1. Growth in the asset itself which is called capital gains.
  2. Passive income which comes from the rental income being more than the expenses we call it positive cash flow
  3. Tax benefits such as depreciation and things like that can help offset the tax that you have to pay in your employment or  whatever income you derive to for yourself.

2. Set Your Financial Goals

Before one actually go out and start looking at investing in property it’s a good idea to actually sit down and set some financial goals.

Understand what you want your life to be like and where you want to go.

For me my financial goal is $60,000 a year in passive income. The reason I set that goal was that $60,000 a year is not a lot of money but it’s enough that we can live off without someone having to work and we can get by on that.

I plan that once we hit that $60,000 to continue forward but the first goal is definitely $60,000.

Even if it takes me 20 years (I am now 26) I’ll be 46 that’s still 19 years before most people retire. It’s a great idea to set a time frame of five years or ten years or twenty years whatever it might be because that will then help you choose the right investment strategy for you.

3. Choose An Investment Strategy Before You Begin

Choose your investment strategy.

I think it is good to collect a bunch of different strategies, learn about a bunch different strategies and then think about your financial goal what you want to achieve. Then choose the strategy that suits you and your goals before you even go out and look at properties.

4. Be Aware of Salesmen

If you are looking to do a property investment in Australia and you are beginner then chances are you are going to stumble upon some companies that can offer you “investment advice”.

If someone is talking to you and wanting to be an advisor for you but you need to purchase property through them and its all new built property well they are actually going to be making some pretty hefty commissions on top of that which is coming out of your pocket.

What all this means is often beginners get sucked into buying new build properties that are overpriced for the area and they have to wait for years for the market to catch up with them. So be aware of salesmen and again that comes back to knowing the different strategies.

5. Deciding On Your Investment Strategy

It is all about finding a winning formula that works for you and then milking it for all it’s worth. The sooner you can find (and decide on) that winning strategy the better.

6. Go And See a Mortgage Broker

Seek a mortgage broker before you even start looking at property is that a mortgage broker will give you an idea of how much you can actually borrow and kind of deposit you need to save realistically in order to buy a property.

So a mortgage broker will help you understand how much you can borrow and how much you need to save so that you can have a goal to move towards.

7. Do Your Recon (Suburb Analysis)

Learn how to research an area and look at a few different areas such as Kenwick WA and research them.

  • What is the population like? Is it growing or declining?
  • What are the economics of the area is there any gentrification going on in the area where richer people are moving in and thus improving a suburb?

Doing this research and understanding suburb dynamics and how suburbs grow can help you to choose a suburb that is primed for growth and increase your chances of getting a great return on investment.

8. Play Make-Believe

Do a cash flow analysis on the property. Do that recon work into the suburbs. Look for value-added opportunities. All these sort of stuff and work out whether this property in Kenwick WA is actually going to deliver a return on investment or not.

9. After Researching Get Pre-Approval

Before you go and make an offer on a property get pre-approval from your mortgage broker. What this means is that you have approval based on the valuation of the property.

This means that when you do find a property and you do make an offer, the time period from making your offer to getting your loan fully approved is so much smaller. It’s a really great thing to do.

10. Start Making Offers

Make offers on properties that are not necessarily going to buy. Learn to play the game. This will boost your confidence in negotiating skill.