Talking Money To Us | Chris Bates – Wealthful

Candice: [00:00:00] Talk Money to Me. Hello and welcome to talk money to me, I'm Candice Bourke 

Felicity: [00:00:06] and I'm Felicity Thomas, so we're back again for a special episode where we get to interview an expert. Now we're going to continue a conversation about property for our newbies to our show. Talk Money to me is a podcast where we draw on our extensive expertise and experience to help educate you on all aspects of your financial landscape. But we recommend checking on our previous Need to know episode before actually delving into this interview. 

Candice: [00:00:31] Yeah, very good tip Felicity. And as will be chatting about wealth investing and making money, let's be honest, that's our favourite topic, even though we have registered financial advisors at Shaw and Partners. Please note, the podcast and the content discussed does not constitute as financial advice, nor is it a financial product. The content on the podcast today is general in nature, and you should seek appropriate professional advice before making any of your financial decisions. So essentially, guys, if you want to chat about your personal finances in situations, head over to our brand new and super exciting website, which is called CFO Advisory Group Shaw and Partners. 

Felicity: [00:01:14] And if you're not able to write those details down, these details will be in the show notes below. So in last week's episode, we chatted more about the finer details of when it comes to buying property like what principal and interest is, what an offset account is versus a redraw facility. And we also spoke about a few more structures in which you can purchase property like a self-managed super fund. Now, in today's episode, we want to continue exploring the various financial strategies to purchase property with our expert and also hear his insights into lending, finance and the property space. So with that in mind, we're very excited to have Chris Bates from Wealthful on the show. One of Australia's best mortgage brokers in the financial professional, Australia's top 10 Candice Felicity. Welcome, Chris. Thanks for joining us. 

Candice: [00:01:56] So all you have to do really, Chris, is Google your name and you kind of pop up everywhere, you know, with your articles and insights and your experience in the mortgage broking industry. And also, that's how I stumbled across your latest episode, The Elephant in the Room. Curious to know why did you call it the elephant? The Room? Oh, it's 

Chris Bates: [00:02:11] a good question. I mean, I do it with a buyer's agent who's quite vocal as well. We sort of have lots of frustrations. We started over three years ago and around the things that weren't getting talked about in the property market, and it's completely unregulated. And that's probably the first thing for anyone thinking about the property market. Need to really understand that there's zero Bryce protection and no one's really watching what anyone says or does. And so you can walk into an investment property specialist and they can sell you the dream. So you things that aren't true and you kind of go back to and say, Hang on, say I bought that property and I've now lost $100000, etc. So that is just so many elements of the property market we thought weren't but getting discussed. And that's what we kind of the elephant in the room. And then we had a bit of fun with that create like a Dumbo the week story. And you had some amazing Indian music on there. And yeah, we just took it to the next level. But yeah, it was good fun. 

Candice: [00:03:03] That's fun. And I guess to give some more context before we dive in today's conversation with Chris, let me just provide our audience with some more background in how you came about in the world of mortgage broking and how you got there today. So, Chris, you started your career as a financial advisor like us back in the UK and in 2007, just before the GFC hit. Good timing there, working with obviously your clients over there before you decided to come back to Australia. So fast forward to 2014, Chris left the financial advice world and, you know, kind of joined the dark side. Just just just kidding. But you left, you left financial advice service to start up well, for which is your business? Yeah. In a plan to change the way Australians take action with their financial plans and wealth, you know, incorporating property and mortgage broking. Yeah. So Felicity wasn't exaggerating when she said earlier that you are one of Australia's leading mortgage brokers. In fact, wealth for your company was ranked ninth out of 16000 brokers in Australia during 2020. So well done, Chris. On that achievement, especially during Covid, when I was doing a bit of stalking before our chat occurs to prepare for this interview. What really resonated with me in all of your kind of insights and podcasts and blogs is that you seem to have the same message that you believe the role of sound financial advice is to help your clients maximise true wealth, not just financial wealth. So let me start off with that. What do you mean by true wealth? 

Chris Bates: [00:04:27] It's an interesting one. My biggest frustration, which gave you a rebrand actually because of this problem, is that wealth misused in terms of a number and a figure, and we determine our own self-worth based on a number. And I think it's just so wrong. I think of the pursuit of money is meaningless, really. It's a pursuit of living a great life and that means different things and time and energy and family and community and connexion and belonging and so many different things. And I think that's my frustration is it's a wealth management industry, but it completely ignores the fact that wealth really just the. Here to live a good life, and it also puts a number on how successful you are based on that number and just it's a big frustration. I think that, you know, people need to take control of money, but take control of it for reasons that matter to them and everyone. There's a different life and and it's just really sort of, you know, waking people up a little bit and saying, you know, what do you really want out of life? What's that going to cost? And surprisingly, it doesn't cost as much as people think. A lot of things in life are free, actually. So that's sort of what I was trying to do when I was really focussed the business advice business around sort of dragging people in a better direction. I felt around money. And yeah, I mean, oh, since 2012, it's all been young couples and families, and we start working with older clients back then, which is traditionally where a lot of financial advisors work. And I really love helping young people. And that's why we focussed on the property decision because we think that that's the biggest challenge, you know, realistically around, you know, getting there first time or paying down debt or, you know, upgrading, renovating, etc. And so, yeah, we get that sort of blank canvas. So that's sort of the long answer to what true wealth is is so much more than just money. 

Candice: [00:06:08] Oh, I love that. And I think you touched on a really key point that we always chat about is the misconception or the myth busting financial services you don't have to have a lot of money will be uber wealthy in order to seek financial advice, right? Whether it's about buying property or investing in the markets, purchasing shares, you need to start somewhere, right? And that's I love that about what you just described, because that's what you're doing. You're helping, you know, the younger generations get into the property market, which is a scary thing. 

Felicity: [00:06:36] And and the earlier you start, honestly, the better. Realistically, it's like we've both worked with mortgage brokers and we actually know how valuable they are. But why do you think people should work with a broker to purchase property rather than just coming to the bank directly? 

Chris Bates: [00:06:50] Look, it's obviously I'm very biased. I'm a mortgage broker, right? So you know, I'm going to have to fight the good fight for brokers. But you know, there's really three options. You go direct to a bank. You go online or you go to a broker. And you know, the problems with going online or directly to the bank versus the brokers, you are going to get general advice. It's not someone's going to personally say, Look, you should even be doing this, you know, should you structure your loan this way, you need to know that not the bank's got a better deal than this, et cetera. So you walking in and you just going to have to know everything yourself because you're not going to get any advice and you've got to hope that your knowledge is the best right. But really, why you want to go to a broker is that advice. Now, in fairness to all brokers, they're not all equal. The reality is some brokers are writing very little and got very little experience and very much focussed on the transaction. And then you've got brokers at the other end that are writing a lot of licencing. A lot of people got lots of experience and actually seeing themselves as trusted advisers. So assuming you go to one of those trusted advisor Typekit brokers is why would you engage them? Firstly, it's that advice, you know, they can explain to you, you know, is this the right decision? Should you structure your line, you know, relationships with different people that they may know in terms of buyer's agents? But what you get from a broker is the relationship, you know, the relationship to set you up in this thing, but also the next thing, you know, if you go into a bank, we all know how bank staff work. If you great, you get moved on. And so it's very hard to get a relationship in a bank because they're not the business owner, they're not going to be there for 10 years, etc. So the other thing is is it does protect you if things go wrong. You know, we've had clients who have gone to banks and online lenders. They thought they knew everything. Things hit the fan and then they're like, What do we do? And they rushed to a broker, whether it's a low valuation or it's an issue with their income or something. Can so a broker has that choice to sort of send you out in the market as well. So we haven't got the same toolkit. We've got a much greater toolkit than if you a digital or a bank. So it's really that partnership and relationship, similar as a financial adviser rather than using a digital financial adviser. It's that relationship that go to person that you can get, you know, Felicity or Candice. I'm thinking about this. What do you think? And they know your situation? No, no, no, no, no. Go back to your plan, which we know that Typekit time. 

Felicity: [00:08:58] The sounding board. 

Chris Bates: [00:08:59] Yeah, yeah, absolutely. 

Felicity: [00:09:01] You really that sounding board, right? Yeah, that makes a lot of sense. You know, robo advice versus, you know, your personal trusted advisor. So run us through typical questions you'd ask in your client before you actually start talking to the banks in regards to their lending scenario. 

Chris Bates: [00:09:15] Yeah, absolutely. There's two parts. Obviously, the numbers your income PR with your you know what your savings you go, what your debt you've got, what are you spending? I mean, that's all easy stuff, and that's just sort of basically feeling in effect from the real questions a broker should be asking you. This is not just me, but any broker is really getting to know you and your life. Like, you know, a single year in a couple. Your new relationship all relation you thinking about kids. You know where your family lives, like, you know, what's what she sort of needs with family? You know, from a lifestyle point of view, you know what type of where are you going to live longer term? What's going to happen with work? It's all these sort of soft facts. It's that life planning discussion that, you know, good brokers should be asking you. Because if your situation is likely to change, especially in the short or medium term and you make a big property. Decision, it's a lumpy asset, very expensive, and I buy some shares you can get in and out with very little buy and sell costs. And you can always wake up tomorrow and change your mind with property. You can't do that. So you've really got to think through those short term, medium term lifestyle changes and be planning for those rather than just sort of trying to get into the market because of finite taking over. And parents and sisters and colleagues are telling you just to buy anything. So that's what good brokers do is those life planning chats. 

Candice: [00:10:28] And that's a really interesting and good point because, you know, it is it's buying a property rights, buying a home, but it or an investment property, and it can be emotional, right? So like you said, identifying, yes, I'm buying this home because it's my dream home about to start a family. All these things. It's giving you more insights. Do you use those, I guess, client goals and clients insights to help when you come to the negotiation table, so to speak with the banks and with the lenders like talk us through how you actually now go okay, I'm now talking to the bank on their behalf. What's the conversation like with them? 

Chris Bates: [00:11:01] Yeah, it's a good question that you would think that the banks would really care about character and context. And you know what the client's longer term goals are. The reality is banks are like credit assessors. It is really a tick the box exercise. And even with credit luck, you either got good credit, which is normal credit or you've got bad credit and something's gone wrong. But they don't really care if you've had 10 credit cards and you paid them off. They don't, really. It's just luck, which they have no luck. 

Candice: [00:11:23] It's so different. All their marketing messages say 

Chris Bates: [00:11:26] Exactly, is that really what you tried to do in your present application? You are trying to present them in good light. And this is something that I think the best brokers do really well is they do put those soft facts in that way. Do Aquatica comprehensive, you know, cover letter with their application and we talk about those things, you know? You know, Johnny does so and so he's been doing it for some so years. He gets big bonuses. Mary does this and. And if we face any issues with that file that the bank is going to be worried about as they're going through all the documents that we identify that issue and we put in what we call an alleviating factor in terms of something that's going to calm the assessor down to know that we thought about it and this is how it's going to get around it. And in that Covid I really set through, set her up on the right foot because they look at the line go, Oh yeah, that broker's presented everything perfectly, and he's told me the issues. I'm actually feeling positive about this one, whereas if they get in there, there's no notes, bang. They say an issue. They start freaking out and they're already on the decline button rather than the let's get this disapprove. 

Candice: [00:12:26] So you're being proactive, which is great. And I guess in your last podcast episode, you touched on the last couple of property booms at Australia saying in 2012 you mentioned it was more of a investors lending issue, and then it led to the credit crunch in the Royal Banking Commission of late 2018 2019. I guess those events kind of led to the regulator change their tact, right? What's the difference this time around in the current Covid property boom that we all keep hearing about? Like, how has the landscape changed, do you think from the banks perspective? 

Chris Bates: [00:12:58] So it's definitely tightened up dramatically in 2020 or 2021? This is what it was in 2012 to 2015. Lending was like super relaxed, like you could borrow 10 12 times your income, which is astronomical, right? And you know, if you knew how to play copywriters across different banks, you could even increase it even more. There was so many gaps in bank lending policy and, you know, investors who were going to brokers who knew how to play, you know, bank the game and basically, yeah, the 

Candice: [00:13:27] Hunger Games with the banks, 

Chris Bates: [00:13:28] right? Yeah. This property boom, you know, these people buying property every year or that sort of stuff. Or they potentially could, because there were so many holes in bank policy now approximating the last boom and said, No, no, no, I need to fix that up, fix that. And they went literally lender by lender and looked at how they do things. Things haven't gone back to like they were. You can really only borrow six times salary now. It's much harder to get a loan approved on big multiples than it was in the previous boom. What's happened recently is just because owner occupiers are so encouraged to take on a lot of debt at the moment, because rates are just astronomically low. We've seen these just demographics. People are just getting older, they're having kids, they just want a home or they're a new couple. They just want to buy their first place, plus years and years of pent up migration. You've got all these people entering the property market and trying to upgrade, and that's what's causing prices to go so high. It's because people have the confidence to borrow a lot of money because rates are low. And what approach is worried is that there's just so little properties on the market. This, you know, and that's the thing is, I need, you know, four or five percent of properties ever sell every year. And you've got all these people competing on that small number of properties causing prices to go down. So the only thing that can really do is increase interest rates, which would make people go, Oh, actually, you know what? Maybe I shouldn't buy this money, which is really hard for the RBA to do for lots of different reasons. Or they can cut how much people can borrow. And so what they've just done recently is reduce how much people can borrow by a very small amount, only five percent and they should have went much harder. They've really missed the trick that. Right, this 

Felicity: [00:14:59] is a great insight, so I guess that actually kind of leads into our next question. And the question that's on everyone's lips, you know, all of our clients are wanting to know, are rates going to go up should we fix it now? What are your thoughts? And you know, what are you doing for your clients 

Chris Bates: [00:15:14] that we've been fixing pretty hard for most clients all through 2020 and all through this year, and it was a bit of a no brainer, to be honest. It's not like we're sort of great at forecasting the fixed rates were just so far under the variable rate. We're talking like 50 60 basis points and RBI. Is it pretty much zero anyway? And so it's been a great bet to fit just in the last couple of weeks. And, you know, in October now, fixed rates have started to rise very, very slightly, like 10 basis points, you know, per year, not like they've gone from two percent to three percent. So it's still an amazing bet to fix. You know that, you know, who knows when rates are going to rise, obviously, in 2024. I mean, the market's safe and maybe next year, and we just don't know how fast it's going to rise. The problem is is that when I was working in the U.K., rates went to zero back in 2008 and there's still zero. And now the problem is, is that it's going to be really hard for them to increase rates dramatically unless the rest of the world's increasing interest rates, especially because when you look at me out of debt, Australians are Ren and the world, to be honest governments, corporates, et cetera. Every increase in interest rate is going to be massively deflationary. It's going to encourage people to be a bit more conservative, especially if they happen quite fast a couple in a couple of months or something or freak people out. And so it's really hard for the RBA to increase interest rates. And but absolutely, they're going, they're going to they're not going to try to keep it at this level forever. It's just really how far they increase them. If they only go up from nought point one to one percent, that's not really going to slow much down, to be honest. It's whether they got more like three two to four to five per cent. That's when you really see that real tightening happening. 

Felicity: [00:16:52] Yeah, no. That's great for your clients in, you know, last year where you fixing for two years, three years, five years. I mean, obviously, if you can fix for five years, that's a lot better, right? Because it gives you a bit more guarantee. But where the five year rates as attractive as the two and three year, it's interesting. 

Chris Bates: [00:17:08] It's a really good question. So usually the longer you fix, if you make the bet right, the bet will pay off more because you've got more months that you're potentially going to save money, you know, by fixing. And so absolutely, when the rates were at the lowest, you could have got a five year fixed rates under two percent and we had the penny. We had really good clarity on their personal situation. They probably fixed rates as you can't offset them. So you got to be very careful. You don't overthink and you can potentially have big, bright face. And so we were fixing under five years, but then they got expensive and we fixed under four years sub 2%, then they got expensive. Then we started fixing. On the three years they got expensive loan to balance, which still fixed under three years now. And for some clients, they starting to get be more expensive and have two year fixed rates at potentially a good bet for clients. And so it is always changing. And that's the thing. It's we can say where there's a good place to enter. OK, I say all the banks have different fixed rates. All them have different variable rates, depending on how much you're fixing and how much you've got variable rate. This could be a good lender for you to save that small sort of interest margin over another lender. 

Felicity: [00:18:11] And do you find that you're fixing more for investors or more for owner occupiers? At the moment, 

Chris Bates: [00:18:16] it's usually about the same, to be honest, because the thing at the moment is that investment fixed rates are just so low, you know, especially that interest only investment rates like we nab just increase this morning. But you know, till then, till this morning, you could get two point five nine four three years investment interest only, which is just such a good right. And so a lot of investors are usually more likely to fix if their rights are good. Just because they know then, that cash flow for the next three or four years is OK, and also because you want to be paying off your home loan exactly rather than investment property. So you probably want to be using your offset account on that more rather than and tax deductible debt, etcetera. So, yeah, it's an interesting one. 

Candice: [00:18:56] Yeah, it is really interesting. And I guess leading on from that. So what are the lenders saying at the moment? You know, are you finding something more favourable and easy to work with? 

Chris Bates: [00:19:06] Absolutely, yeah. I mean, it's always challenging. Banks have got problems with any credit assessors to assess the loans, and it's, you know, they've got to have people on say, it's really whether they do it here or overseas. And then they have these, you know, great offers and then they flood their credit assessors and they get really busy and then they've got a light package to deal up and solicitors and things like that. And so unfortunately, a lot of the banks have had enormous flows. We're talking almost double the applications in the last 12 to 18 months than they usually say. So you need double predecessors, you need double lawyers, you need etcetera. A lot of the banks got flooded and there's a lot of the banks offshore their credit times and have their back office processing. And we all know what's happened the last two years with Covid and shutdowns in Philippines and India and all these sort of locations. And so as a broker, we're always assessing that and going right if we've got speeds an issue here, whether it's just purchased or that. Want a pre-approval fast or they need to do a quick refinance because they want to buy an investment property. Turnaround times and who's easy to deal with absolutely is a big part of our decision for the client because great rates are very similar across the banks. You know, if you're not going to reprice our price, your product way more than the market because you know you're never going to get your business. So rates usually quite close across the industry. But when you got big loans, you know, 10 basis points or 20 basis points is a very small difference. But on big loans, it's a lot of it's a lot of money, you know, it definitely is.

Candice: [00:20:30] And I guess follow up question from that. I know some lenders are a bit more favourable to the self-employed versus the employed. So how do you figure out which lender is the best fit for each client before you go into conversations with them? 

Chris Bates: [00:20:42] Look, there's probably two different types of self-employed ones that are just newly self-employed. There might be a doctor or, you know, a contracting for a company which is very common in the IT space. You know, certain banks have look at those type of structures and those type of industries are a bit more favourably and I don't see them as traditional self-employed. The other thing is traditional sort of business owner, they are discriminated on. And if you are in a job and you think about starting the business, you've got to really be careful at that point because going to a broker after you've just started a business is highly unlikely. You're going to be out of borrowed money for at least two or three years because you need your ABN, usually for two years and your business usually takes. You have a lot of costs upfront, and so that wipes out your first year's profit. So, you know, a lot of some banks will just look at the last 12 months of your financials versus the last two and taking an average of the lower year. And so it does change. Some clients have had another great 2021 or 2020, and 2019 is better than an average is better and or sometimes the last year's amazing versus the year before. And so we just have to look at their financials and say, this is actually a lender who's going to look at your situation better than someone who averages or someone who looks at the lower of two years, etc.

Felicity: [00:21:56] So I guess Candice, we're not going to be able to get another property for another year because we're one year into the new business. So in a moment, we're going to be chatting more about the current lenders, the financial landscape. And he Chris's thoughts about the future of the mortgage broking as an industry. But before we do, we're going to take a quick break and hear from our sponsors. 

Candice: [00:22:15] So in your experience, Chris, how is the lending landscape changed over the years, you know, in the past decade or so, we've seen the rise of non-traditional banks. They're becoming the more preferred lenders, you know, neo banks, smaller lenders. Do you think they're taking it more of the market share these days? And you know, effectively, are people falling out of love with the big end of town?

Chris Bates: [00:22:33] To a certain extent? Yes, but it's nowhere near as the big four do on the market, you know, and I keep buying people that potentially are doing well, you know, nab for a couple of neo banks, Westpac at you brokers, et cetera. And so the big, big banks, I don't think they're going anywhere and they've got the market pretty much sign up, to be honest. And you do have little, you know, great innovation coming from some of these digital lenders and what they're forcing them to do. And Covid, unfortunately, the the big four love to be, you know, really hard to refinance above their processes to be quite clunky and the experience to be bad because if people get what I want to go through that again, so I just stay there and that's ultimately what they're like, they play on their apathy and just that they're going to no one ever refinance. And the banks make all their money on existing customers. They make not that much money on new customers until they get lazy themself. And so absolutely, I love all these new lenders. I love how they're forcing the banks to get better at évité and digital, and all the banks have come kicking and screaming. They've all got digital docs now. They've all got much better at this sort of application process, et cetera. And you know, these digital banks, etc., their market share and what they actually write is so minuscule on the marketplace and whenever they get good, the big end of town buy them up. And so I love them for the innovation, but I don't think they're really going to dent into their big market share really overnight. They've just the products are usually quite restricted in terms of when you go to these digital lenders, is they they won't do self-employed, they won't do at 90 per cent, they won't do any issues with credit, they won't do a very vanilla loans. And you know, everyone's got some sort of, you know, kink to their application, something where it's like, Oh, I need to get that check with the bank. And so they don't suit everyone. Unfortunately, we do love them as well. You can't fool with these lenders as well, which is this is not me sort of talking to digital ad and said, Oh, it's just the real risk with digital lenders is that their funding lines are very restrictive. There aren't even a certain thing, and that funding line can change in terms of the cost. And so if you are using a digital lender, you also want to have a backup plan if things go, get more expensive for you, refinance to a better lender. So you just got to make sure you're always in a position to refinance just to protect yourself. Yeah, very good point. 

Felicity: [00:24:51] Which means you can't do a fixed rate, right? Because if you refinance, you've got a fixed rate that be breaking costs. Am I right, Chris? 

Chris Bates: [00:24:57] Absolutely. He didn't care for the fixed rate because if you come off the end of a fixed rate and you stay in and you haven't got a job, you start business and then the variable rate jumps up on you because they have a problem with their funding line. You could start to see some issues here and this is what we've seen it with non-banks and even some of the big end of have had issues with this as well. And so, yeah, you always got to be conscious of how your change situation may affect your ability to refinance because you don't want to become a bit of a mortgage prisoner and stuck at a bank paying a higher rate, which we've seen many times. 

Candice: [00:25:27] That's really good. We might have to steal that off. You just want to circle back as you've touched on. A really key point that I just want to hone in on that is, you know, you mentioned like if your circumstances are going to change, you've got to really have a plan in place, right? And one thing that we always chat about, particularly with our, you know, kind of 50+ client bracket, you know, they're thinking about maybe retiring soon and leaving the workforce. Maybe they want to buy another property in their self-managed super fund. And we always say to them, Well, hang on a minute. You're really great in terms of you're looking on paper, super serviceable from the bank's perspective before you leave the world of certainty and income coming in on a regular basis. So that's one thing that we always chat about. And I guess that leads to the next part of the conversation is we've noticed that in the SME mischief lending space, it's getting tougher and tougher and tougher. They just don't like to do it the banks these days. So why do you think that is, Chris? 

Chris Bates: [00:26:18] Look, I think the writing on the wall for gearing superannuation, it's hasn't worked. You know, there's unfortunately a property market. Australians love property, right? And Australians hate their super. You know, the reality is and so if you can put your super into property, you've got the right result. And this was spruiked heavily for the last five years. You know, I've been the home buyer exposed the biggest people spending the most amount of money, the SMSF sort of. And so APRA know about this and there it hasn't been. Working people have been blowing up their super funds, buying poor assets. And you know, I think the issue is is that the writing's on the wall. All the banks pulled out of it, you know, a few years ago now because they knew that, you know, it's been multiple parliamentary enquiry saying that it's not a good idea. That's why the banks don't want to do it. In saying that, though, we've seen a shift in the last 12 months where lenders are starting to offer better rates on self-managed super funds, you know, they've all of a sudden more lenders are coming into the. A space, and so I thought it was dead. I thought it was going to get basically outlawed, I guess, and you couldn't get your super funds, especially into property, but it seems like that sort of ship sailed, so maybe it's going to be OK. So we're really careful. We do very little self-managed super fund loans. The reason is we just don't think it's a great idea for many people. You know, we're very careful about the buying lumpy assets when they're getting close to retirement. You know, you generally want to have an income stream, et cetera. So, yeah, we're very careful around self-managed super funds. You need to have all your ducks lined up. We fail to to, you know, want to help a client do that line.

Felicity: [00:27:51] I mean, there have been, you know, quite dodgy advisors in the past, right, that would refer clients to self-managed super fund recommend. They set one up, then refer them for like a house and land package. For example, the adviser gets a big kickback. It's not a good investment, right? But it can worked really well for potentially some commercial spaces. But you know, again, like Chris said, it really does need to be for the right investment, for the right person. 

Chris Bates: [00:28:17] I think you might even hit the nail on the head, which I didn't say, Felicity. It is amazing in the commercial space, especially if you're a business owner and if you can start to play and commercial is always a better asset, potentially when you get to retirement, better income streams, et cetera. And so I agree it would be a shame for a lot of self-employed business owners that if that sort of change happens, but when you buying residential, you do usually get lower yields and then you do get the property spruikers in there pushing new property. And for your listeners, if you're thinking about buying new property, I definitely think you should potentially look at alternative options and and really investigate that world and consider just buying an established property that scarce that's likely to grow rather than some new build. 

Felicity: [00:28:58] Yeah, definitely. You've kind of we've kind of already touched on this. You know, what are the banks looking for when addressing self-managed super funds trusts and buying personally? The difference is, you know, obviously the self-managed super fund, they're looking at super contributions, the trust they look at, the trust returns as well, you know, as personal returns.

Chris Bates: [00:29:18] Yeah, absolutely. I mean, they will want to look at your full situation. Yeah. And you know, I think it's you've got to be also careful with trust as well. You know, like it's, you know, a lot of people have been sold trust for the sake of it. And it's also about saying, really, what are you trying to achieve here is grassroots action. How's it going to protect you? Is buying a property in this trust, going to create lending issues? And so, you know, you just don't just sort of fall for that. Just have a trust on every property, you know, you really got to make sure it's working for you and fantastic. 

Felicity: [00:29:45] Well, what is the biggest frustration or I guess, positive aspect you're saying when dealing with the current lenders? I mean, what's kind of positive now? What's negative now? You know, what are you kind of saying? 

Chris Bates: [00:29:58] Look, I mean, we've always got frustrations with banks and solicitors. Getting yourself a good conveyance is a is a problem with saying it a lot at the moment. I mean, probably a frustration thing, and this is not talked out about any of that clients, but it's just a learning for people who are thinking about buying something in the property market is get your admin sorted. Why early than you're hoping to buy a property? You know, I guess if you fall in love with a property, you're in the market. You've just started a conversation with a broker or a bank and you really want the speed is everything when you're trying to buy a property. So I think the real frustration for clients is just them not shooting themselves in the foot, really. And, you know, making sure that they've got their admin so that they've got their pre-approval well ahead is what they want to enter the market. Understand all those things around structuring and things like that prior to looking at buying property because you've got to make quick decisions and you need to make sure you're lending sorted. So but there's always frustrations with banks. We're always sort of scratching our head and going, We wish this wasn't an issue and some banks fix them. And then a month later, they still got the same issue. 

Felicity: [00:31:01] How many times have you actually had a client come to you, Chris, saying, I've just bought a property on the weekend at an auction, but I don't have my finance. Do you have that? And you're like, Oh no, we have to get it ASAP. 

Chris Bates: [00:31:13] It does happen. Surprisingly, you would think that and sometimes the people who do that, they think there no issue to a bank. We have one last week, you know, but the problem is he won't start his own company. He's a contractor. He owns a lot of money in contracting space. He's got great assets and just assumed that because he's on a great day, right? And he's got lots of assets, you can borrow a lot of money. The problem is he's now seen as a self-employed, and so we say it when people are usually sometimes, you know, doing well financially. But then I don't understand that banks won't like something about the situation. I could swap jobs. You know, you got a higher bonus paying job to a new job. It's likely to pay a big bonus, but there's no track record. And so but they have just bought a property in a swap jobs at the same time. And so it's these type of issues where, yeah, people can really sort of shoot themselves in the foot. 

Candice: [00:32:04] I wanted to ask your insights because we actually caught up with Simon Cohen from luxe listing on our last interview podcast episode, and he mentioned a really interesting point that during Covid. Moved literally 90 per cent of what he's buying, be it, you know, the top end of town, right? Those, you know, really bonded, right? We drilled down, he's just mainly bone dry. But he said because of Covid, a 90 per cent is actually off market. Are you saying that as well? Are you seeing things just rush through the lack of supply in terms of what's available to buy? 

Chris Bates: [00:32:35] Look, in fairness to Simon, this is nothing to do with him. But I do think it's a bit of a fallacy that buyers agents push off markets. I think the reality is you can see online what sells off market. You can go on to the New South Wales government website and see exactly what's selling in a suburb. And so if you really want to know what's selling off market, do the research in your own suburb and you can say exactly what's selling. The realities of markets are a Catch 22 for the vendor. If you've got a great property, why would you sell it off market when you can get lots of hungry buyers that are desperate more competition right in the high end space? It's a bit different. People want privacy, people want to know that transaction and the number. They can potentially have buyers pre-approved in size in the open homes and things like that. But, you know, a buyer's agent pushing off market this is not against Simon is something that I believe great buyers agents don't do it. The reality is good property. If it's selling off market, usually the vendor wants too much money or a lot of the off market stuff is pretty average. It's not presentable for sale that won't go to market. And so be very careful signing up buyers agents for off markets. What you sign up a buyer's agent for is the relationship with the local real estate agents and their expertise in the local market. That is why you hire them because their expertise in the market and their relationship will ideally help you see a property first. Maybe it's off market, but maybe it's prima pre markets when it's not on the market yet, but it's going to go in the market. And so an eight buyer's agent more likely to get you in first, they're more likely to hear the truth from the agent and what the actual situation is and what it's likely to sell for. And they're more likely to be get the favourable one who gets the contract signed. Because the real estate agents conflicted, they're more likely to want to work with a buyer's agent. They're going to say it another open home and a couple of weeks, then a buyer, they might only say one every 10 years. And they usually like to work with great buyers agents. And so that's my sort of spiel on buyers agents. But yeah, and there's not many that have been doing it five 10 years. Simons, one of those, Simon's been doing a long time and he knows his market, the high end market. You've got to find someone who's super experienced and and not been doing it for two minutes because you don't want to outsource your one of your biggest financial decisions to someone who's still sort of learning the ropes and you usually pay a lot of money for them anyway. 

Candice: [00:34:50] Yeah, good point. So changing tune slightly in terms of the trends being a business owner in your industry, right? Yeah. What are you seeing in the space going forward? So in the past, you know, it was mainly dominated by the banks. We talked about that now, you know, yellow brick road mortgage choice and Aussie homes. Do you see a trend of more and more brokers, you know, kind of teaming up together and going out on their own sort of like what you've done with bowlful? 

Chris Bates: [00:35:13] Yes. So the the big banks are all really struggling to get through their branches because the consumer has made a decision that they think that brokers are a better choice than going to the bank. Every year, the broker market share gets bigger, so it was 20 per cent. Then it went to 40 per cent. Now it's at 60 percent. And you know, obviously I'm very conflicted here, but I do think it's going to keep on rising every quarter. The stats keep going more brokers than banks, right? So the big banks are struggling because no one goes to branches anymore, right? And so there the battle is moving towards brokers. Now brokers are in two different camps. You've got franchise models, which is the Aussies, the yellow brick road, those mortgage choice. Unfortunately, they're still pretty much high street street presence and they're really struggling, to be honest. Aussie sold to a big company called Lending Mortgage Choice. Share price has really struggled. You know why PR? We know issues. They've had their etc. I think the franchise model in terms of the way they take so much off brokers, et cetera. New good brokers don't want to go down that model. Even places like loan market basically bringing their own, you can be your own, don't have to use loan market brand, etc. So the the independents Bryce absolutely. There is definitely scale benefits of brokers coming together. Unfortunately, it's still usually a one man band, but there is definitely organisations out there. Yeah, they're getting lots of good, you know, high performing independent brokers together. And there are they're growing businesses together. And so I do say there'll be a joining of top brokers together, but it was still be a lot of a one man band show. And then there'll be these really bigger independents that are growing that are benefiting from scale. 

Felicity: [00:36:51] And like, we've worked with some of the independents that have grown significantly. And, you know, a lot of the mortgage brokers, we actually work with our independents and, you know, we've got a really, really good relationship with them. They know what their clients really well. And, you know, they kind of work with us to get the best outcome for the client because at the end of the day, you really should have financial advisor working on your team, a mortgage broker and your team solicitor and accountant all actually working together to get the. The very best outcome, right, because we can't be experts in everything, and I guess this kind of leads to another question, you know, coming back to helping your everyday Australian borrow funds, you know, whether it's their first home buying investment, property or commercial real estate. What's the best advice, Chris, that you can give them? 

Chris Bates: [00:37:32] I think the best advice in life is actually really simple, right? And you know, that's what I think of financial advisers good franchises do. As I simplify your situation, you need to focus on these three things, right? And I think when you're talking about property, there's two elements I think you really need to think through your life and your plan and making sure that you're buying these for the right reasons and it's going to set you up for whatever you want to do after that, you know, and save your life plan changes from single to carpool to family, you're going to have a property that's going to be about to evolve and renovate it to suit you, rather than just buying something for today and in three years, letting it are, we want kids, and now you have to move out of the apartment, et cetera. So thinking through your longer term plan, making sure your property aligns to that. The second thing is is you really need to educate yourself on the property market. You know, like the share market, you know, companies move in different REITs, right? And percentages, for example. Now the whole comp you think right now, every property in the country is booming. There's parts of Australia, they're actually fall. And you know, a lot of apartment markets in capital cities have done nothing. And so you really need to make sure you understand the property market around the property market. You really need to understand that new property is generally not as good as established property because new properties and it's not limited by supply properties priced based on its scarcity and its desirability have who wants to own it and live in that. And so educate yourself firstly on making a great life decision in terms of the type of property. But then also, when you're looking at the property, make sure it's a great investment in terms of a property and educate yourself there before you enter. Then you can structure your line drive, then you can get it right, right? All those sort of things. The real key thing and this is what we focus on as mortgage brokers, we can get you a loan. But what we care about is you're actually using that loan to make a great decision and then we try to not lose you for life because we know you've made a great decision. You'll always come back for the next one. And so that's the best advice I could use is think through your life, make sure it really strategic about what you buy, potentially even take on more debt than you would. You didn't think you would, because if that's going to mean that you don't have to upgrade in a few years or that's going to get you a better asset that you could potentially renovate, or then it's not about the amount of debt you take, it's about the quality of asset and the suitability to your life. 

Felicity: [00:39:46] Now that's it, because you don't see me buying a new property every couple of years and paying that stamp duty again, do you? I mean, Candice and I probably both did that. We stretched ourselves a little bit when we bought our second place and did it's, you know, it paid off, really, because, you know, interest rates continue to decrease with really good timing for us. But those are fantastic thoughts and insights. So thank you for that. 

Candice: [00:40:06] I think what I was just in awe listening to at that moment because really what you said is it's a fluid investment decision at the end of the day. So you've got to be able to move with life moments and it's long term you. I don't think short term, which is exactly what we talk about and educate our clients on day to day basis when you're buying any investment, whether it's property listed, shares, ETFs, whatever, it's always long term and you have to have a fluid moving financial plan, right? You've got to be able to adapt because life's messy stuff happens and you know, you've got to be able to move with it, right? No one lives in next chapter, next chapter, next chapter, which have a life and a lot of our clients. So coming to a lump of cash and the like fantastic Candice to see what should I do? We naturally think, Alright, well, let's just not rush into buying another property. Aussies, unfortunately do fall in love with property like you said, but nine times out of 10. That's where the conversation kind of leads to, and we bring them back to think, Well, do you need to pay down property debt? You know what? What can we do about super? Do we want to put money into super? Do we need to diversify your wealth more? Should we go into the share market? So keen to hear your thoughts here on this, you know, great debate as Aussies shares versus property. Obviously, your buyers, your mortgage broker. But coming back to that point, you know, holistic approach. I guess if someone came to you, Chris, I got an extra 100 grand, I want to buy property. Do you go, Whoa, hold the horse. Let's chat about, 

Felicity: [00:41:31] are you buying that property?

Chris Bates: [00:41:33] Absolutely. It's a real. Yeah, I mean, I was a financial advisor for so long. I mean, I was 13 years right? And we were mortgage brokers for the last eight nine, you know, we had we saw lots of clients, a different I just got out of the eighties and seven year olds and then went sixties. And I feel like as I got more experience, I went younger and younger. But you know, and it's really is a life stage thing. You know, if your client came to me when I was an advisor and I was in my sixties, I thought, Why are you looking at property? You know, like, I'd much prefer to be maximising my suit by, you know, having a commercial property potentially, you know, diversifying my share portfolio. I can sell down in retirement. Even clients in their 50s, like if you've got a five 10 year runway to retirement, I just don't know whether residential properties the really the best I. You know, I think you especially if you got lots of equity in your house, maybe you can do more shares, etcetera, so I do think it's definitely tilted residential to younger generations. The reason it's potentially better than a shares for younger generations to build wealth, it's due to leverage. The reality is, if you've got two hundred and fifty thousand dollars and you're earning a couple hundred grand a year as a couple, you could go and buy a million dollar property right or even a bit more than right. And you know, you can get a million dollar asset going for you, compounding potentially even tax free because it's your home versus if you buy a share portfolio, you've got to pay capital gains tax. It's very hard to leverage it anywhere near that amount, and you'd be very hard to be confident to leverage it, even double or triple. And, you know, and that's sort of the reasons why property makes sense. Secondly, then you've got the lifestyle benefit with, you know, family and security and stability and things like that. So it's a life stage thing. Mainly, properties definitely got tax advantages to it, you know, around the tax free home. And you know, things like, you know, potentially it's easier, more comfortable to negatively gear a big property because you've got the rental income there and you don't have to be so much concerned around the volatility in the stock market as much as well. So it's not one versus the other. What I do believe is at some point, though, you're going to cap out, you can't just keep on buying property because you run out of income. And at this point, you start to shift you. I've got enough property right now. I've got enough equity. Why don't I really focus on shares and my super and all these other things? You can't really see in either camp shares a mining share the mining property. Now you're missing a trick, you're going to be both. And you've got to not forget about your super fund as well, which, you know, take ownership of it. It's your money, it's your share portfolio. I like to say it's 

Felicity: [00:44:02] about 10 percent of your salary now, so it's huge. People actually do need to take, you know, control of their superannuation. You know, that's a huge chunk. You know, 10 percent is a lot. I think, you know, like you were saying, you know, people don't want to take that risk with that, you know, a margin loan and the potential for a margin call. So that does make a lot of sense. I think, you know, to summarise diversification, right? You should not have 10 properties and nothing in the market. You know, you should look at having a diversified portfolio of property, you know, residential, commercial, you know, international structures, Australian shares, even some different, you know, fixed interest and more defensive positions in your portfolio to kind of weed out that market volatility. I mean, there are a lot of flip signs with regards to the share market. You know, you don't have that stamp duty, you don't have those legal fees and you do have that daily liquidity. So we could go on this, you know, I guess pros and cons and argument all day long. You know, an interesting question for you, Chris, though, you know, do you think if properties were actually valued every day, you'd see similar volatility to the share market? 

Chris Bates: [00:45:09] Yes and no. Technically, your property is valued every day because people are tracking their property like their biggest asset, right? And they've got agents knocking on their door. They're always tracking what it's worth. Now they don't know the exact value, but they do know roughly what it's worth, right? And you know, and so potentially what happens to downtimes is that less property sell and people have naturally got that real inherent bias where they think it's a good asset. It's that they don't sell as many at that point. And so I don't think daily pricing of property would really affect things because most people who own property and good assets is driven by the owner occupier market and they're living there for decades. And so they, even if it's worth less tomorrow, it doesn't mean they're going to rush and sell. And so I do think that's one of the dangers of shares, though, because it is buying more volatile over potentially short periods and it creates all these issues with behaviour. And we all understand and completely agree with you, you know, drip feed your money and forget about it. Turn off, you lose your internet banking, log into your share portfolios and just let it sit there and do its thing over a long time. People find it really hard to do that, especially some people look at it six times a day and then freak himself out. And so maybe they've got that more confidence that 

Felicity: [00:46:21] we had that last year. Right? With everyone freaking out, the market came off, you know, over 30 percent. And you know, we were telling them not to panic. You know, it's come back to the whole behavioural finance, which you probably see and like emotional biases with property and in the investment industry, essentially. And I guess it really just comes down to creation. You know, you really highlighted this over this conversation. It's about finding the right property. We've had clients that have purchased the property 20 years ago, and it's had no capital growth. Yeah, okay. Great. The rental income pays for the the loan. There's no growth there. So it it comes down to quality investments, right? Doing your due diligence, not rushing into things. Take your time. Speak to an expert. 

Chris Bates: [00:47:07] Absolutely. Wait, wait, wait. And yes, that client apartment in Brisbane. He's worked with us for years. He bought this property before we. Started working again, I didn't try to I shouldn't have all that. No, this is not going to work for you. Six years later, it's done nothing. He's been trying to get out of it that we don't get it out of us, you to get out of at some point. And that's very common. And we say it all the time and the the problem with property investors. People get a little bit of capacity and a little bit of cash, and then they go and buy property and they come on this quantity strategy and it's always about the number of properties. It's really an ego driven thing, to be honest. I've got three properties and the real thing is usually what we've seen and bear in mind. We've been speaking to property focussed investors who lost almost a decade now, thousands of people that people with quantity do not perform anywhere near as much as the people with quality of a few a number of properties. And that has been exaggerated in the last 12 months because the quality assets are the ones that have gone through the roof. You know, we're talking much bigger returns in the regions and the outskirts and the apartments and the cheaper stuff. And so really don't fall for that. A number of properties thing. If you're going to get a property, get a couple of good ones. That would be an amazing outcome outcome versus I potentially having five poor want. And so the big thing is, you've got to be really careful, though, because the property market, like I said at the start, is unregulated as lots of buyers, agents pushing stuff and as a lot of buyer's agents, they're pushing the quantity strategy. And the reason they do it is it's easy for them to buy and they can get paid multiple times. If they buy four properties for you, they get paid four times and it's really easy for them to do their job because these assets are easy to buy. And so just be really careful how you enter the property market and you don't really care for going to a broker or financial adviser or someone who only works with one property partner. Because what they do is they send all their clients to one person and that person can't possibly be an expert across the whole of Australia. They can't possibly understand all the different markets, and they were basically just, you know, going into a shop and then just buying the same product. And so what we do as a business, we actually work with lots of different buyers agents. So the clients buying Gold Coast, that would be a different buyer's agent to Brisbane and different parts of Brisbane's different buyers agents. Sunshine Coast in Sydney, we work with over a dozen different buyers agents in Melbourne, the same things in the local area, specific buyers agent who buys that property market every day for the last almost a decade. 

Candice: [00:49:32] That's so true, and that's really quality advice to you from your perspective. It's kind of using the analogy to what we talk about in the listed investment space is, you know, we're obviously Australian financial advisors. We know the Australian economy a lot better than someone sitting in the UK or the US. However, we will outsource to either ETFs or active fund managers. If we're looking for a niche part of the market, like the best investment companies, growth companies based in India, right, go to the source. And the other thing you said, which I think is just a key point of before we wrap up, is it's all about quality. Less is more. And we say that so many times on a day to day basis to our clients, you want a high conviction portfolio. Right? Less is more high conviction in the for the long haul, whether that's properties shares fixed interest less is more. So, I guess to wrap up, we ask our guests a very important question. So you're not getting singled out here. We've asked everyone this coffee or tea or tequila. What's your preference? 

Chris Bates: [00:50:33] I gave up alcohol. Sorry, Steve, my wife is pregnant for the second time, so I've had it drink all this year. So congratulations. I'm definitely a what a coffee machine. A couple of thousands, maybe a year ago as well. That was not a good decision because my coffee intake has gone through the roof and I kind of see myself as I embrace that. But right now it's a lemon and ginger. I'd say right next to it. I'm a mixture of good 

Felicity: [00:50:57] husband giving up alcohol with your wife. That's fantastic. I wish mine would do that with me. 

Chris Bates: [00:51:03] Yeah, it's a bit unfair. I'm sitting there with a nice classic shiraz next to her and looking at her belly. So I've I've taken it for the team.

Candice: [00:51:10] Yeah, it's right. You might as well suffer together. 

Chris Bates: [00:51:13] Yeah, exactly. 

Felicity: [00:51:15] If you'd like to get in contact with either Candice or I or to find out more about Wellfield, the details are in the show notes below. You can also find Chris on LinkedIn if just Chris Bates that you need to search.

Chris Bates: [00:51:29] You may just if you want to learn more about myself. It's just, you know, obviously can get contact the business or jump on LinkedIn after I post lots on there or listen to the podcast. Thanks for listening 

Candice: [00:51:38] or check out his podcast, which is WWE Elephant in the room dot com today, 

Felicity: [00:51:43] you. Until next time 

Candice: [00:51:44] Adios