Solutions-based broking

by AB20 Nov 2018

Stuart Styles, MD of Arthurmac explains how he transitioned from selling cars to specialist loans and why finance is all about asking the right questions

Changing careers is a dream many hold but few pursue, despite the success stories.

Amazon founder Jeff Bezos started his working life as an investment banker before launching an online marketplace from his garage. Actress Lisa Kudrow worked as a biologist for almost a decade before joining the cast of Friends, and Arnold Schwarzenegger went from body builder to Terminator to governor of California – becoming highly successful in each role.

From purpose to pay scale, there are dozens of reasons to switch careers: satisfaction, work-life balance and the opportunity to make a difference are often cited by those who make the leap. For Stuart Styles, managing director of the award-winning Arthurmac & Co, it was a combination of all of the above.

The son of a car salesman, he started in the auto trade running a yard with his father before working in showrooms for the big brands. While he enjoyed the people and finance side of the work, he was battling against absent managers and a seven-day working week, and morale was dwindling.

Then he spoke to a friend who happened to run a brokerage and, accepting an offer to learn the trade, Styles decided to focus on his passion for arranging finance, and build a new career in broking non-conforming and private loans.

“It was hectic to begin with. The hours were nine to five, six or seven, but I had my weekends back and I loved it from the start,” he recalls. “It was everything I needed in terms of a career: I love the finance aspect, I love dealing with people, and it was just really interesting for me.”

“We have had to find the right lender and solution for the client and really utilise our skills as brokers to get the deal done” - Stuart Styles, managing director, Arthurmac & Co

As part of a four-strong team writing upwards of 90 mortgages a month, it was a baptism of fire to say the least. However, the move also brought a serendipitous encounter with the person who would become Styles’ business partner, Angela Simonetta. Two years later. Arthurmac & Co was established.

“I started in private and nonconforming lending. and in my first two years of broking I had learned how to get the difficult deals done. It was good in a way because I learned what questions to ask clients to find out how to solve the problem for them. Once you find an appropriate solution for a client they tend to be very loyal. They come back to you the next time, and as a result you really want to take them from point A to D or E down the track,” Styles says.

Today, as much as half of Arthurmac & Co’s business is derived from repeat clients: private lending and second mortgages, business clients and even developers looking for end-to-end finance solutions.

“We’re a bit unique in that we do the whole lot, not just the broker part and sending it to a lender. We get all the ducks in a row for settlement; we do the whole transaction from start to finish,” Styles says.

Generating results

The non-conforming space has witnessed rapid growth over recent months as vast swathes of borrowers have discovered they now fall outside of the mainstream banks’ lending criteria.

Research commissioned by Pepper Money and released by Fifth Dimension in September shows that six in 10 declined home loan applicants are likely to be eligible for an alternative loan, yet don’t know where to turn.

While the goalposts have moved, it doesn’t mean these would-be borrowers are any less able to repay their loans: as demand soars, non-conforming arrears are falling. Standard & Poor's Performance Index has posted a steady decline in arrears throughout the year, with non-conforming loan arrears reaching a record low of 3.65% in May. Meanwhile, delinquencies continue to rise among prime mortgagors.

This shift in dynamics means more brokers have to get to grips with the alternative solutions available in the market.

“I’ve always been cynical because I work in the nonconforming space, whereas a lot of brokers automatically go to the big four. What we are doing is more solutions-based lending, where we have had to find the right lender and solution for the client and really utilise our skills as brokers to get the deal done," Styles says.

“It’s not just here, tick this box, give us two payslips and off we go. There is a little more to it, and it takes a bit of time – which I guess is why most brokers have shunned it,” he adds.

The change in market dynamics has also brought new life to the private, or peer-to-peer, lending space.

Data from ASIC shows that in 2017 Australian consumers and SMEs borrowed $300m from private lenders – almost double the $156m recorded in 2015–16. More than simply an indicator of the sector’s maturity, the figures also reflect a shift in sentiment among borrowers and investors.

“Some brokers simply take orders for their customers … Don’t be an order taker, be a dealmaker” - Stuart Styles, managing director, Arthurmac & Co

“We act in the purest sense of the broker. We source private investors who want to lend funds on mortgages, and we also seek out the borrowers. We put those two together and we do a whole transaction,” Styles says.

This has been identified as a primary area of focus for Arthurmac & Co over the coming six months, and the firm’s AFS licence is currently in the pipeline, meaning it will soon be able to facilitate and manage loans end-to-end.

“That will be a big step for us, and it will bring a lot of efficiencies that currently we don’t have. We rely on the investors, who sometimes don’t necessarily have the proper processes in place to manage everything, but this will be our main focus for the next six months and we are pretty excited about it,” he says. “Our funding lines are getting bigger and bigger.”

Finding a niche

Specialisation has been the key to success for Arthurmac & Co, allowing the firm to compete within its own class and on its own terms. However, that isn’t to say it has always been easy, especially during the GFC.

In 2012, after weathering three consecutive years of growth declines in the region of 30% annually, Styles closed the Arthurmac & Co office and took a broking job at a second-tier bank.

“It was just a crazy period. I shut down the office, moved everything back home and took the bank job. I lasted three days – I just couldn’t do it!” he says.

With a network of potential clients still demanding his expertise, Styles started to rebuild the business, diligently growing to a point of critical mass. Within 12 months he required admin support and new premises.

After taking time out to work for another firm, Simonetta returned in 2014 and a new team was recruited.

“We have had a lot of setbacks, but I guess I’m just the type who perseveres. I’m someone who just doesn’t give up, and I think to succeed in anything you just have to push through those days where it’s tough,” Styles says.

The firm is currently in what Styles refers to as its second incarnation – Arthurmac & Co 2.0 – with a bespoke office and a strong path marked out for the short- to mid-term future. The current team of three full-time and two part-time members comprises Angela Simonetta, settlements and administration of private loans; Michael Hughson, senior broker and credit analyst; Bonnie Dalziel, key administration executive; and Melinda Rea, trust administration.

“We get all the ducks in a row for settlement; we do the whole transaction from start to finish” - Stuart Styles, managing director, Arthurmac & Co

This core team will expand to 10 over the next 19 months, and there is more on the cards too.

Managing people – as well as the demands of the industry – comes with its own set of challenges, and Styles attributes the team’s working relationship to a combination of prescriptive processes, collaboration and the chance to have ownership of their work.

“Management style is something you learn as you go. I’m more of a hands-off type of operator; I like the team to use their own initiative. Everyone contributes, and it sounds a little bit cliché but it’s a real team effort,” he says.

On the flip side, for a team to be successful, its members must have a great attitude.

“I learned a long time ago that I can’t get everything done on my own. You need good people around you, and you need to be able to rely on them. So trust is a big thing, and number two is attitude.

“All we need is someone who can work in a team, and that’s down to attitude. We can teach the rest,” Styles adds.

 


From left: Michael Hughson, Sally Styles, Stuart Styles, Bonnie Dalziel, Angela Simonetta

The right question

In adopting a consultative approach to broking, Styles and the team at Arthurmac & Co have been able to utilise the loans available from various lenders in the marketplace to help clients achieve their goals in almost any circumstances.

For Styles, it’s the difference between being average and being excellent, and it’s dependent on asking the right questions.

While on the one hand there are brokers who simply go through the motions of asking about credit cards and offset accounts, the ones who do more than scratch the surface are asking about different things entirely.

“This is about consultative selling. You need to find out about your clients, and in this environment it’s even more important to do that because, if you don’t, you will be left behind.

“Some brokers simply take orders for their customers: do you From left: Michael Hughson, Sally Styles, Stuart Styles, Bonnie Dalziel, Angela Simonetta . want an offset with that? Do you want a credit card with that? Don’t be an order taker, be a dealmaker,” he says.

It’s an approach that has served Styles well, and, as a result, at the 2018 Australian Mortgage Awards Arthurmac & Co won the Pepper Money Broker of the Year – Specialist Lending award. There will no doubt be many more success stories to come.

“I’ve had a lot of help to get where I am, and I couldn’t have done it without people in the industry helping me in one way or another. This is a people business and we rely on other people,” Styles says.

“We are really looking forward to our next step. It has taken a while for us to get here – we’re not an overnight success; you just have to persist. You have to persevere and you have to keep the goal of what you want to achieve at the front of your mind. If you don’t, you won’t get it."