Key ingredients of Pepper Money’s winning formula
In a world where those at the coalface can sometimes find themselves unheard, there’s a reason this non-bank is obsessive about listening to brokers
John Alvarez
FinSelect Group
Industry experts
Clemond (Clem) Kian
FinSelect Group
Ben McKell
Pepper Money
Yasmine Shah
Impact Brokers
John Alvarez has recently taken on a director and investor role at FinSelect Group. He has also been a director at Alva Capital and Finstead Capital, director of asset finance at Valiant Finance, worked for leading lenders such as Citibank and Westpac, and has a wide range of business experience including in the telecoms industry.
FinSelect Group
John Alvarez
Clem Kian is the co-founder and managing director of FinSelect Group. With 25 years’ extensive knowledge and experience, he has carved out a highly respected reputation within the industry. Results-focused, Kian has helped many Australians achieve their financial goals in a friendly, professional and seamless manner. As an industry mentor who enjoys giving back to the community by mentoring new-to-industry finance brokers, he has paved his way in the industry and received outstanding recognition, winning many industry awards throughout his career.
FinSelect Group
Clemond (Clem) Kian
Ben McKell is the national sales manager of commercial at Pepper Money. He has over 20 years’ industry experience in lending and has spent the majority of his lending career helping provide self-employed commercial solutions, including SMSF loans. McKell’s passion is for working within the SME and commercial lending landscape – for the customer, their business, their why and their vision. He shares the broker’s passion and enjoys supporting the growth of Australian small business and commercial customers.
Pepper Money
Ben McKell
Based in Goulburn, NSW, multi-award-winning mortgage broker Ashleigh Pakis founded Panache Financial in 2017. She is committed to empowering diverse women in finance. With expertise that spans from guiding first home buyers to aiding farming families and self-employed individuals, her brokerage offers a gamut of services, including home loans, asset finance and agricultural loans. Through her dedication, Pakis not only provides financial solutions but also cultivates trust and long-lasting relationships.
Panache Financial
Ashleigh Pakis
Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending, and is responsible for its strategic direction and operating performance across sales, product, credit and operations functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades of experience in financial services, Saoud has held numerous roles across areas ranging from legal to company secretary, sales and product management at the likes of Aussie (Home Loans), GE Capital, HSBC and Norton Rose Fulbright. He is a passionate leader with proven ability to grow businesses and exceed targets.
Pepper Money
Barry Saoud
Ben McKell, Pepper Money
Non-banks offer certain advantages in a high interest rate environment.
Broker Ashleigh Pakis pointed to the flexibility of non-banks versus mainstream lenders and the fact that they allow buffers at a lower rate than other lenders for clients with limited borrowing capacity.
“Non-bank lenders have a diverse policy set, so they will accept certain incomes that other lenders won’t, [including] different thresholds around percentages of rental incomes and certain incomes that other lenders will shade more than others,” she said.
FinSelect MD Clem Kian agreed that this supported customer concerns around higher interest rates.
“I’ve found the non-bank lenders have a lot more flexibility in terms of policies and how they look at different types of income,” he said. “This has made a difference in being able to help people who, unfortunately, otherwise may be forced to sell their property.”
Yasmine Shah, Impact Brokers
Pepper Money is well aware that flexibility and good service make all the difference to brokers when the economy is tight.
“We are in a rising interest rate environment, but you couple that with affordability issues, cost of living pressures and an almost stagnant property market – what we at Pepper Money are really trying to focus on is how to better support our brokers and customers,” said Barry Saoud.
He called the non-bank’s agility a key advantage in a quickly evolving environment, listing a number of its policy and service change-ups to help brokers, such as reduced serviceability buffers; same-day credit decisioning; accepting additional types of supporting documentation; and allowing fixed rate home loans with no break fee, or offering a 40-year loan term.
“We’ve tried to be really responsive and proactive,” Saoud said.
FinSelect’s John Alvarez pointed to longer-term changes in commercial markets and the growing role that non-banks are playing in them.
“The biggest change that I’ve seen over the course of the last five years has been with regard to small business and non-coded loans from non-banks … [non-banks] are effectively new players coming into the market to solve a particular problem,” he said.
“Non-coded loans have picked up [with] lots of new players in the marketplace; there are about 600 non-listed funds that are lending at the moment in the country – that’s a lot.”
“I do feel that they’re being underserved. We always pitch that [SMEs] are the backbone of the economy, but when it comes to lending support from mainstream lenders, I believe they are missing out.”
Against this practical background, it’s also important to remember the human aspect of commercial lending. “At the end of the day, there is a customer at the end of that transaction,” McKell said.
Pepper Money’s Siobhan Williams backed this view, pointing to some of the tragic effects that tough economic conditions are having on households and small business owners around Australia.
“There are some sad media reports of children coming to school without food in their lunchboxes. These kinds of [economic] pressures do create that need for non-bank lenders to offer that real-life approach to customers that are struggling,” she said.
“Things like debt consolidation or cash flow solutions, whether that be in the commercial or residential lending space, can really ease the pressure on those households and allow them a much more affordable position moving forward.”
Pepper Money understands that the real value of many financial transactions can often be found in the quality and usefulness of the products on offer and in the professionalism with which they are delivered. This craftsman-like mentality perhaps explains why the non-bank focuses so much energy on polishing its broker-facing processes.
Providing the best possible service based on products that meet the needs of the current market as opposed to those of last year’s market allows brokers, in turn, to provide optimal service to their clients, just as Franklin was encouraging his young tradesman to do.
Continuing on the theme of the human side of lending, McKell emphasised the calibre of people at Pepper Money as a key point of difference.
“I really love the culture that we have at Pepper Money and the people that all want to succeed and see others succeed together,” he said.
“There will be fails along the way as well. But I know, hand on heart, that if I’ve got a problem, I can reach out to my direct report … or my colleagues and peers. It’s not just work; it’s a family. And our broker partners are an extension of our family also – we want to help everyone to succeed.”
Pakis agreed this aspect spilled over into broker and client relationships. “[Pepper Money] understand the circumstances of people’s diverse situations and where they’ve come from – it’s more of a personable relationship with the client, not just a transactional-based relationship,” she said.
The emphasis tends to be on long-term solutions not short-term fixes, she added.
Kian said the corporate culture at Pepper Money made his dealings with clients easier. “[I’ve helped] countless clients where the option, the solution that Pepper Money has offered, has made a real difference. Any time I’ve had an issue, they’ve been very responsive and very helpful.”
Franklin never became US president, but he arguably had as much impact on US history as presidents John Adams and Thomas Jefferson. Pepper Money, likewise, isn’t a bank but is influencing the Australian financial system along with its non-bank peers in ways that mainstream lenders are not able to.
Like Franklin, while Pepper Money formally belongs in a so-called secondary category, that hasn’t stopped the non-bank from understanding the important issues in its field ahead of its rivals and responding to the challenges of the day even as its less agile peers maintain their status quo.
Australian Broker recently sat down with Pepper Money and friends at Cafe Sydney restaurant in Circular Quay to discuss how a rapidly changing economy is affecting lending markets; what brokers need in order to do their jobs well; new developments and products; and the importance of the broker–non-bank relationship in keeping the system running and responsive to real-world demands.
Pepper Money representatives included general manager for mortgages and commercial lending Barry Saoud; head of mortgages Siobhan Williams; and national sales manager for commercial Ben McKell.
They were joined by four brokers to provide a different perspective: director Yasmine Shah of Impact Brokers; mortgage specialist Ashleigh Pakis from Panache Financial; and FinSelect Group’s managing director, Clem Kian, and John Alvarez, who has taken on a director and investor role at the Parramatta-based brokerage.
Read on
Pepper Money is one of Australia and New Zealand’s leading non-bank lenders. Established in 2000, Pepper Money first launched as a specialist residential home loan lender in Australia with a focus on providing innovative home loan solutions to customers who were being underserved by traditional lenders. Today, Pepper Money has a broad product offering of residential home loans, personal loans, asset finance, novated leases and commercial real estate loans across Australia and New Zealand.
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Siobhan Williams
Pepper Money
Barry Saoud
Pepper Money
Clemond (Clem) Kian, FinSelect Group
Yasmine Shah is founder and director of Impact Brokers, an ethical and sustainability-focused commercial broking business. With over 18 years of experience in finance broking, she is a highly respected mentor, business coach and connector of women in the industry. As founder and CEO of the Women’s Commercial Finance Forum (WCFF), Shah serves a community of 1,000-plus women with diverse skill levels in commercial finance. The WCFF is currently the largest community for women specialising in the commercial finance sector. Since the forum’s inception in February 2020, Shah has mentored hundreds of female brokers to establish thriving and diversified finance broking businesses.
Impact Brokers
Yasmine Shah
In Partnership with
Share
Ben McKell
Pepper Money
Siobhan Williams
Pepper Money
Barry Saoud
Pepper Money
Industry experts
Yasmine Shah
Impact Brokers
Ashleigh Pakis
Panache Financial
Clemond (Clem) Kian
FinSelect Group
Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending, and is responsible for its strategic direction and operating performance across sales, product, credit and operations functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades of experience in financial services, Saoud has held numerous roles across areas ranging from legal to company secretary, sales and product management at the likes of Aussie (Home Loans), GE Capital, HSBC and Norton Rose Fulbright. He is a passionate leader with proven ability to grow businesses and exceed targets.
Pepper Money
Barry Saoud
Siobhan Williams has over 18 years’ experience in financial services, 14 of them with the Pepper Money team. She is currently head of mortgages for retail broker. Williams has a deep understanding of the alternative lending sector and extensive experience across a range of support and leadership positions – including credit and settlements support roles, as well as business development management at state (NSW) and regional (Southeast) levels and most recently at a national level as head of retail sales at the leading non-bank. Prior to joining Pepper Money, she also spent over three years in NAB’s customer lending division.
Pepper Money
Siobhan Williams
Ben McKell is the national sales manager of commercial at Pepper Money. He has over 20 years’ industry experience in lending and has spent the majority of his lending career helping provide self-employed commercial solutions, including SMSF loans. McKell’s passion is for working within the SME and commercial lending landscape – for the customer, their business, their why and their vision. He shares the broker’s passion and enjoys supporting the growth of Australian small business and commercial customers.
Pepper Money
Ben McKell
John Alvarez has recently taken on a director and investor role at FinSelect Group. He has also been a director at Alva Capital and Finstead Capital, director of asset finance at Valiant Finance, worked for leading lenders such as Citibank and Westpac, and has a wide range of business experience including in the telecoms industry.
FinSelect Group
John Alvarez
FinSelect Group
Clemond (Clem) Kian
Based in Goulburn, NSW, multi-award-winning mortgage broker Ashleigh Pakis founded Panache Financial in 2017. She is committed to empowering diverse women in finance. With expertise that spans from guiding first home buyers to aiding farming families and self-employed individuals, her brokerage offers a gamut of services, including home loans, asset finance and agricultural loans. Through her dedication, Pakis not only provides financial solutions but also cultivates trust and long-lasting relationships.
Panache Financial
Ashleigh Pakis
Barry Saoud joined Pepper Money in July 2021 as general manager, mortgages and commercial lending, and is responsible for its strategic direction and operating performance across sales, product, credit and operations functions for Australia and New Zealand mortgages, commercial loans, personal loans and direct sales. With over two decades of experience in financial services, Saoud has held numerous roles across areas ranging from legal to company secretary, sales and product management at the likes of Aussie (Home Loans), GE Capital, HSBC and Norton Rose Fulbright. He is a passionate leader with proven ability to grow businesses and exceed targets.
Pepper Money
Barry Saoud
Siobhan Williams has over 18 years’ experience in financial services, 14 of them with the Pepper Money team. She is currently head of mortgages for retail broker. Williams has a deep understanding of the alternative lending sector and extensive experience across a range of support and leadership positions – including credit and settlements support roles, as well as business development management at state (NSW) and regional (Southeast) levels and most recently at a national level as head of retail sales at the leading non-bank. Prior to joining Pepper Money, she also spent over three years in NAB’s customer lending division.
Pepper Money
Siobhan Williams
Ben McKell is the national sales manager of commercial at Pepper Money. He has over 20 years’ industry experience in lending and has spent the majority of his lending career helping provide self-employed commercial solutions, including SMSF loans. McKell’s passion is for working within the SME and commercial lending landscape – for the customer, their business, their why and their vision. He shares the broker’s passion and enjoys supporting the growth of Australian small business and commercial customers.
Pepper Money
Ben McKell
John Alvarez has recently taken on a director and investor role at FinSelect Group. He has also been a director at Alva Capital and Finstead Capital, director of asset finance at Valiant Finance, worked for leading lenders such as Citibank and Westpac, and has a wide range of business experience including in the telecoms industry.
FinSelect Group
John Alvarez
FinSelect Group
Clemond (Clem) Kian
Based in Goulburn, NSW, multi-award-winning mortgage broker Ashleigh Pakis founded Panache Financial in 2017. She is committed to empowering diverse women in finance. With expertise that spans from guiding first home buyers to aiding farming families and self-employed individuals, her brokerage offers a gamut of services, including home loans, asset finance and agricultural loans. Through her dedication, Pakis not only provides financial solutions but also cultivates trust and long-lasting relationships.
Panache Financial
Ashleigh Pakis
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“Non-bank lenders have a lot more flexibility in terms of policies and how they look at different types of income. This has made a difference in being able to help people”
“We don’t really have limitations in place in terms of deal requirements or volume of clients or even commercial experience ... we want to partner and help [brokers] learn”
“We don’t have to bend over backwards to break our backs to try and sell a deal to credit [when] the credit person on the other side is from a non-bank”
Ashleigh Pakis
Panache Financial
Siobhan Williams has over 18 years’ experience in financial services, 14 of them with the Pepper Money team. She is currently head of mortgages for retail broker. Williams has a deep understanding of the alternative lending sector and extensive experience across a range of support and leadership positions – including credit and settlements support roles, as well as business development management at state (NSW) and regional (Southeast) levels and most recently at a national level as head of retail sales at the leading non-bank. Prior to joining Pepper Money, she also spent over three years in NAB’s customer lending division.
Pepper Money
Siobhan Williams
7,000
5,600
4,200
2,800
Source: MFAA Industry Intelligence Service 16th Edition
4,539
Apr 20–
Sep 20
Number of mortgage brokers also writing commercial loans
“[We are seeing] minimal requests for more information and quite a significant drop in the number of times that that application needs to cross a set of eyes – [this is important] because time is money”
Siobhan Williams, Pepper Money
“Our strategic intent in our technology is all about how we improve the broker experience. So we are looking at fresh ways to make things fast, easy, predictable and consistent. That’s our whole motto”
Barry Saoud, Pepper Money
John Alvarez, Finselect Group
“The biggest change that I’ve seen over the course of the last five years has been with regard to small business and non-coded loans from non-banks ... [non-banks] are effectively new players coming into the market”
“[Pepper Money] understands the circumstances of people’s diverse situations and where they’ve come from. It’s more of a personable relationship with the client, not just a transactional-based relationship”
Ashleigh Pakis, Panache Financial
“[It helps to] understand the business of the client from the client’s perspective … so their accountant, their business adviser, their in-house bookkeeper, all of the people that are involved in the finance team that perform various tasks that help that business go forward.”
Alvarez highlighted that while commercial clients can be high-maintenance, they are also very loyal.
“If you do it well, you have a client for life, by virtue of the number of products that the client has in the portfolio that you’ve delivered on; they will rarely leave unless there is a fundamental screw-up at some point or a critical incident.”
Pepper Money encourages diversification and has its systems set up to support more brokers in getting into the commercial area.
“I’m very, very excited about what the next three to four years will bring for commercial brokers. There aren’t that many of us who specialise in commercial, and I think there’s an opportunity for the broker market to improve their understanding of both the client and the solution set available.”
At the same time, he is wary of residential brokers diversifying into commercial on a whim.
“It requires a high level of commitment on the part of a broker who’s never done commercial to really immerse themselves in the segment and in the solution set,” Alvarez said. “With an SME client, it’s not just about understanding the financial problems, it’s understanding the mindset.”
Commercial brokers need to deal with the emotional component of running a business and juggling life, he said. “It does require a slightly different skill set because you need to be able to empathise. It also requires patience and resilience, because you will fail, you will screw up at times, but you just need to persist. You need to surround yourself with good and understanding lenders and people.”
Pakis echoed these sentiments, saying that moving into commercial wasn’t a commitment to be taken lightly.
“An SME client is normally a heavy client, they’re not a light client; they’ve got a lot of a lot of things that they need.”
Shah pointed out the impossibility of knowing any client business like an insider and the need for brokers to get on board with the internal financial team to come up with appropriate solutions.
Alvarez pointed to long-term trends in the market and the fact that more SMEs are getting rejected for loans at major banks.
“[This is] an opportunity for brokers who understand the market to come in and fill that vacuum, but the negative side of that is that a lot of business owners have to suffer poor experiences with the bankers before they realise the importance of the broker.”
Like many in the industry, Alvarez believes that the role of non-banks is only set to expand in Australia.
Non-banks in general seem to have a better reputation for customer service than their mainstream competition, a big factor for brokers when sending in commercial loan applications.
“Definitely customer experience,” said Shah. “Being a solution-focused broker myself, it’s really, really important that the customer experience is protected.”
Part of this service is taking a nuanced approached to business customers. Just because a client has had a loan turned down in the past shouldn’t mean they are somehow blackballed forever.
“While the current point in time might be problematic for various reasons, that doesn’t mean that the next point in time will be exactly the same,” Shah said. “Taking that solution-based approach to everything that we’re doing with the SME is really important, as is working with a funder that understands that the current point in time isn’t what determines the business’s future.”
Pepper Money relies on comprehensive credit reporting to verify a customer's repayment history, which saves a mountain of paperwork for brokers.
“The ability for a lender to rely on something like comprehensive credit reporting to establish that payment history, rather than asking the broker to offload all of the transactional history for that client, certainly saves both on time and effort,” said Williams.
The other big time-saving comes through Pepper Money’s service providers.
“Having that digital loan document option, we save on average 10 days per transaction by taking advantage of what our service providers can offer to complement our process.”
Pepper Money also has a digital checklist that brokers use to make sure all the necessary documents are included in the application.
“[We are seeing] minimal requests for more information and quite a significant drop in the number of times that that application needs to cross a set of eyes – [this is important] because time is money,” Williams said.
Again, all this tech is designed to make life easier for the broker so that they can do their jobs better and help more clients in more meaningful ways.
“Our strategic intent in our technology is all about how we improve the broker experience. So we are looking at fresh ways to make things fast, easy, predictable and consistent. That’s our whole motto,” Saoud said.
“We’ve tried to create a faster time to ‘yes’ and leverage some of those technology tools to support our brokers with the confidence that we can give a yes answer. But also on the back end, it’s how we create a seamless experience for our brokers and their customers.”
“It’s difficult, but it doesn’t mean it can’t be done. I think that’s part of the challenge of any commercial product, and what keeps it interesting for us is that you can deal with a business in the same industry, at the same life stage, and still be arriving at different conclusions on a product solution level.”
Kian said tech tools were a game changer in helping narrow down a range of appropriate products for the client.
Pakis agreed, saying that in many cases a tech solution outshone analogue due to the time saved.
“Tech answers questions a lot quicker than people on the phone. We can pretty much do the preliminary check when we’re there with the client straightaway with the Pepper Money tools and go, ‘right, that’s going to fit that’, so we’re not needing our staff to do any policy checks,” she said.
Technology and leveraging it well is also key to Pepper Money’s strong broker following.
McKell pointed out the benefits of the digital BDM that could fill in the gaps when human BDMs were otherwise engaged as a significant step forward in the commercial space.
Shah said commercial had been behind compared to the tech advances seen in residential lending.
“[Commercial is] a lot more manual, so anything that is quick and easy like a one-page or two-page application that is straightforward and to the point … is golden,” she said.
This was especially true when walking a client through an application and the reasons why a deal may, or may not, have legs.
Alvarez agreed that the finance sector needed to start investing more in tech around commercial lending. “Part of the historical challenge has been the diversity of problems that we encounter with commercial clients,” he said. “It’s very difficult to simplify solutions to deal with every single type of eventuality or client profile.”
With a range of different products on offer, there were also multiple solutions to deal with eventualities around credit risk, lending limits and things such as location of assets, he added.
Speed and accessibility were also cited by multiple brokers as being a dealbreaker in many cases.
“But it’s also the way they go about doing business and collaborate which we appreciate,” said Alvarez.
Saoud stressed the importance of Pepper Money not resting on its laurels. “We want to continue to be that leading first-choice non-bank lender. We’re continually focused on improving ourselves and our business and better supporting our brokers.”
This includes product expansion and innovation, including the recent launch of self-managed super fund lending; offering alternative lending options for commercial and residential; an increase in debt limits; a commitment to maintaining industry-leading service levels; as well as increasing credit predictability and consistency.
“We’re continuing to enhance what we are currently doing and optimising to ensure that we’re delivering brokers the best possible service,” said Saoud.
From left: John Alvarez, FinSelect Group; Yasmine Shah, Impact Brokers; Ben McKell, Barry Saoud and Siobhan Williams, Pepper Money; Ashleigh Pakis, Panache Financial; and Clemond (Clem) Kian, FinSelect Group
Non-banks are relatively new to many lending markets, and one key role of brokers is not only to ensure that clients are familiar with what’s available but also to understand the lenders and their ability to deliver a proposition.
“[Brokers should] run due diligence on the lenders coming to market to understand how they source their funding … if you get the right lender and the right process, you can deliver an outcome very, very quickly to clients,” Alvarez said.
Pepper Money’s Ben McKell emphasised the need for non-bank solutions for SMEs as banks increasingly close the door.
In some ways, tougher economic conditions act as a tailwind for lenders that have more flexible options.
“In this environment, non-bank lenders really lead, because they provide us brokers with access to credit,” said Yasmine Shah from Impact. “There’s nothing more difficult for a broker then trying to navigate through a middle person to sell the scenario at hand, and being able to speak to a decision-maker sometimes makes or breaks the transaction.”
Non-banks are also more broker-oriented in terms of service.
“We don't have to bend over backwards to break our backs to try and sell a deal to credit [when] the credit person on the other side is from a non-bank ... banks, on the other hand, can be a little bit difficult – their policies are a lot stricter,” Shah said.
THE ROLE of non-banks in the Australian economy continues to grow as mainstream lenders pull back from various areas.
Driven by the third party channel, the relationship between non-banks and brokers is a close one that promotes the transfer of key information not only about any given client but also about broader market trends that affect different classes of lending.
Given the pace of change in the Australian economy over the last few years, it isn’t surprising that this close relationship has, in some ways, allowed non-banks to stay ahead of the curve compared to their mainstream rivals when it comes to the ebb and flow of market needs.
Being able to spot a gap in the market first or meet the needs of underserved customers can make a major difference to the fortunes of a financial institution, as well as those who use its products and services to assist their own customers.
Businesses of all kinds naturally want to provide the best service possible, but not many can position themselves optimally to be able to react with agility to credible and current information about what’s happening at the coalface. As the saying goes, ‘time is money’.
Some people are surprised when they hear that Benjamin Franklin is said to have coined this aphorism not when discussing finance but in an essay entitled “Advice to a Young Tradesman” – it was about providing good service rather than looking for new sources of income.
John Alvarez
FinSelect Group
Yasmine Shah is founder and director of Impact Brokers, an ethical and sustainability-focused commercial broking business. With over 18 years of experience in finance broking, she is a highly respected mentor, business coach and connector of women in the industry. As founder and CEO of the Women’s Commercial Finance Forum (WCFF), Shah serves a community of 1,000-plus women with diverse skill levels in commercial finance. The WCFF is currently the largest community for women specialising in the commercial finance sector. Since the forum’s inception in February 2020, Shah has mentored hundreds of female brokers to establish thriving and diversified finance broking businesses.
Impact Brokers
Yasmine Shah
Pepper Money understands that the real value of many financial transactions can often be found in the quality and usefulness of the products on offer and in the professionalism with which they are delivered. This craftsman-like mentality perhaps explains why the non-bank focuses so much energy on polishing its broker-facing processes.
Providing the best possible service based on products that meet the needs of the current market as opposed to those of last year’s market allows brokers, in turn, to provide optimal service to their clients, just as Franklin was encouraging his young tradesman to do.
Franklin never became US president, but he arguably had as much impact on US history as presidents John Adams and Thomas Jefferson. Pepper Money, likewise, isn’t a bank but is influencing the Australian financial system along with its
non-bank peers in ways that mainstream lenders are not able to.
Like Franklin, while Pepper Money formally belongs in a so-called secondary category, that hasn’t stopped the non-bank from understanding the important issues in its field ahead of its rivals and responding to the challenges of the day even as its less agile peers maintain their status quo.
Australian Broker recently sat down with Pepper Money and friends at Cafe Sydney restaurant in Circular Quay to discuss how a rapidly changing economy is affecting lending markets; what brokers need in order to do their jobs well; new developments and products; and the importance of the broker–non-bank relationship in keeping the system running and responsive to real-world demands.
Pepper Money representatives included general manager for mortgages and commercial lending Barry Saoud; head of mortgages Siobhan Williams; and national sales manager for commercial Ben McKell.
They were joined by four brokers to provide a different perspective: director Yasmine Shah of Impact Brokers; mortgage specialist Ashleigh Pakis from Panache Financial; and FinSelect Group’s managing director, Clem Kian, and John Alvarez, who has taken on a director and investor role at the Parramatta-based brokerage.
Pepper Money is well aware that flexibility and good service make all the difference to brokers when the economy is tight.
“We are in a rising interest rate environment, but you couple that with affordability issues, cost of living pressures and an almost stagnant property market – what we at Pepper Money are really trying to focus on is how to better support our brokers and customers,” said Barry Saoud.
He called the non-bank’s agility a key advantage in a quickly evolving environment, listing a number of its policy and service change-ups to help brokers, such as reduced serviceability buffers; same-day credit decisioning; accepting additional types of supporting documentation; and allowing fixed rate home loans with no break fee, or offering a 40-year loan term.
“We’ve tried to be really responsive and proactive,” Saoud said.
FinSelect’s John Alvarez pointed to longer-term changes in commercial markets and the growing role that non-banks are playing in them.
“The biggest change that I’ve seen over the course of the last five years has been with regard to small business and non-coded loans from non-banks … [non-banks] are effectively new players coming into the market to solve a particular problem,” he said.
“Non-coded loans have picked up [with] lots of new players in the marketplace; there are about 600 non-listed funds that are lending at the moment in the country – that’s a lot.”
Non-banks offer certain advantages in a high interest rate environment.
Broker Ashleigh Pakis pointed to the flexibility of non-banks versus mainstream lenders and the fact that they allow buffers at a lower rate than other lenders for clients with limited borrowing capacity.
“Non-bank lenders have a diverse policy set, so they will accept certain incomes that other lenders won’t, [including] different thresholds around percentages of rental incomes and certain incomes that other lenders will shade more than others,” she said.
FinSelect MD Clem Kian agreed that this supported customer concerns around higher interest rates.
“I’ve found the non-bank lenders have a lot more flexibility in terms of policies and how they look at different types of income,” he said. “This has made a difference in being able to help people who, unfortunately, otherwise may be forced to sell their property.”
“I do feel that they’re being underserved. We always pitch that [SMEs] are the backbone of the economy, but when it comes to lending support from mainstream lenders, I believe they are missing out.”
Against this practical background, it’s also important to remember the human aspect of commercial lending. “At the end of the day, there is a customer at the end of that transaction,” McKell said.
Pepper Money’s Siobhan Williams backed this view, pointing to some of the tragic effects that tough economic conditions are having on households and small business owners around Australia.
“There are some sad media reports of children coming to school without food in their lunchboxes. These kinds of [economic] pressures do create that need for non-bank lenders to offer that real-life approach to customers that are struggling,” she said.
“Things like debt consolidation or cash flow solutions, whether that be in the commercial or residential lending space, can really ease the pressure on those households and allow them a much more affordable position moving forward.”
Major banks pulled out of SMSF lending in 2019, and non-banks have since filled the vacuum. One of a number of non-banks to recently enter this market, Pepper Money first offered a pilot product and now provides a full service for both residential and commercial SMSFs.
“The reason we’ve done that is to better support our brokers, as we understand there is a gap in the market at the moment,” said Saoud.
Continuing on the theme of the human side of lending, McKell emphasised the calibre of people at Pepper Money as a key point of difference.
“I really love the culture that we have at Pepper Money and the people that all want to succeed and see others succeed together,” he said.
“There will be fails along the way as well. But I know, hand on heart, that if I’ve got a problem, I can reach out to my direct report … or my colleagues and peers. It’s not just work; it’s a family. And our broker partners are an extension of our family also – we want to help everyone to succeed.”
Pakis agreed this aspect spilled over into broker and client relationships. “[Pepper Money] understand the circumstances of people’s diverse situations and where they’ve come from – it’s more of a personable relationship with the client, not just a transactional-based relationship,” she said.
The emphasis tends to be on long-term solutions not short-term fixes, she added.
Kian said the corporate culture at Pepper Money made his dealings with clients easier. “[I’ve helped] countless clients where the option, the solution that Pepper Money has offered, has made a real difference. Any time I’ve had an issue, they’ve been very responsive and very helpful.”
Yasmine Shah is founder and director of Impact Brokers, an ethical and sustainability-focused commercial broking business. With over 18 years of experience in finance broking, she is a highly respected mentor, business coach and connector of women in the industry. As founder and CEO of the Women’s Commercial Finance Forum (WCFF), Shah serves a community of 1,000-plus women with diverse skill levels in commercial finance. The WCFF is currently the largest community for women specialising in the commercial finance sector. Since the forum’s inception in February 2020, Shah has mentored hundreds of female brokers to establish thriving and diversified finance broking businesses.
Impact Brokers
Yasmine Shah
Clem Kian is the co-founder and managing director of FinSelect Group. With 25 years’ extensive knowledge and experience, he has carved out a highly respected reputation within the industry. Results-focused, Kian has helped many Australians achieve their financial goals in a friendly, professional and seamless manner. As an industry mentor who enjoys giving back to the community by mentoring new-to-industry finance brokers, he has paved his way in the industry and received outstanding recognition, winning many industry awards throughout his career.
Clem Kian is the co-founder and managing director of FinSelect Group. With 25 years’ extensive knowledge and experience, he has carved out a highly respected reputation within the industry. Results-focused, Kian has helped many Australians achieve their financial goals in a friendly, professional and seamless manner. As an industry mentor who enjoys giving back to the community by mentoring new-to-industry finance brokers, he has paved his way in the industry and received outstanding recognition, winning many industry awards throughout his career.
In a high interest rate environment and with thousands of people rolling off fixed rates, how is non-bank lending making a difference in terms of the products and policies you can offer your customers?
How does Pepper Money differ from its competitors in the non-bank lending space? What changes or further improvements would you like to see from Pepper Money?
What do you look for when it comes to lender technology and platforms, and how can it make a broker’s life easier? What do you like about Pepper Money’s tech offering?
Broker market share of commercial lending is rising. What motivates you to submit commercial deals in the non-bank lending space?
SMSF lending is on the rise. What are the top three features you point out when recommending SMSF loans to your client?
What do you look for when it comes to lender technology and platforms, and how can it make a broker’s life easier? What do you like about Pepper Money’s tech offering?
How does Pepper Money differ from its competitors in the non-bank lending space? What changes or further improvements would you like to see from Pepper Money?
Broker market share of commercial lending is rising. What motivates you to submit commercial deals in the non-bank lending space?
SMSF lending is on the rise. What are the top three features you point out when recommending SMSF loans to your client?
In a high interest rate environment and with thousands of people rolling off fixed rates, how is non-bank lending making a difference in terms of the products and policies you can offer your customers?
How does Pepper Money differ from its competitors in the non-bank lending space? What changes or further improvements would you like to see from Pepper Money?
What do you look for when it comes to lender technology and platforms, and how can it make a broker’s life easier? What do you like about Pepper Money’s tech offering?
Broker market share of commercial lending is rising. What motivates you to submit commercial deals in the non-bank lending space?
SMSF lending is on the rise. What are the top three features you point out when recommending SMSF loans to your client?
Share
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5,268
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6,118
5,864
How do Pepper Money’s new servicing buffers, reduced interest rates and same-day turnarounds for assessments assist you when dealing with customers?
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Copyright © 2023 KM Business Information Australia Pty Ltd
Published 14 Nov 2023
Breaking News
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Copyright © 2023 KM Business Information Australia Pty Ltd
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Copyright © 2023 KM Business Information Australia Pty Ltd
Ben McKell
Pepepr Money
How do Pepper Money’s new servicing buffers, reduced interest rates and same-day turnarounds for assessments assist you when dealing with customers?
Oct 20–
Mar 21
Apr 21–
Sep 21
Oct 21–
Mar 22
Apr 22–
Sep 22
Oct 22–
Mar 23
“We open up to everyone,” McKell said. “We don’t really have limitations in place in terms of deal requirements or volume of clients or even commercial experience … we want to partner and help [brokers] learn with that education piece and give them the experience they need.”
Many of Pepper Money’s tools, for example, are all-in-one tools, which means a broker of any speciality has access to functions that a commercial broker might use.
“It’s really empowering for a broker wanting to learn [a new area],” McKell said.
20
15
10
5
$9.37bn
$10.27bn
$13.40bn
$15.00bn
$17.24bn
$16.49bn
Apr 20–
Sep 20
Oct 20–
Mar 21
Apr 21–
Sep 21
Oct 21–
Mar 22
Apr 22–
Sep 22
Oct 22–
Mar 23
Source: MFAA Industry Intelligence Service 16th Edition
Value of commercial loans written by brokers
$BN
1,400
Major banks pulled out of SMSF lending in 2019, and non-banks have since filled the vacuum. One of a number of non-banks to recently enter this market, Pepper Money first offered a pilot product and now provides a full service for both residential and commercial SMSFs.
“The reason we’ve done that is to better support our brokers, as we understand there is a gap in the market at the moment,” said Saoud.
SMSFs are currently seen as a bright spot in the lending arena in that there is good demand and the market is somewhat insulated from the effects of higher rates.
“What we’ve often seen with SMSF customers is, because their super fund is paying their loan, they’re not as concerned about that situation, it’s not front of mind, it’s not impacting their grocery bill, the ability to put petrol in the car,” said Williams.
Still, the market has a reputation for being hard to understand. There are also strict legal rules around giving financial advice that brokers need to observe. As a result, some are cautious despite the strong performance in this market over the last few years.
“For brokers, this is a very grey area … it’s really important to have a [financial] adviser there that can provide that advice,” said Shah.
Relationships with other professionals such accountants are essential.
“SMSFs are something that you need to have an understanding of what that super fund affects,” said Pakis. “Once it’s set up, it has to stay that way – there’s no changing it. You can change the lender, but you can’t change the structure that you’ve set up, so you have to be really aware of the repercussions if you don't understand it.”
But again, like commercial, done right, being able to cater to customers in this area can become a key asset for a savvy broker.
“If you have self-employed clients, it can be a great way for them to actually have something to look forward to if they’re not paying themselves super. I think if you understand that from a tax perspective, and you have a good relationship with an accountant, you can really help,” Pakis added.
One area that Pepper Money is targeting for SMSFs is refinancing.
“There are many consumers who are sitting on SMSF lines that are 10 or 11% or higher rates … we see there’s a real need for customers who are on those historically high rates and could benefit from a lower rate,” Williams said.
Pepper Money recently introduced a swathe of measures dubbed the ‘Red-Hot Rates Package’ to help address the challenges faced by brokers and their customers in the current market. The package has turned heads among brokers, customers and rival lenders alike.
Pakis said the measures had helped her with her financially stressed clients.
“Sometimes the client can get themselves into quite muddy water, but Pepper Money will always help us solve those solutions before they’re too far gone.”
One key factor in boosting trust is the non-bank’s ability to stick to the rate quoted.
“Honouring that rate [quoted] definitely helps us not have to go back to the customer and say, ‘unfortunately, we got it wrong’, or ‘unfortunately, we selected the wrong product’. It kind of allows us better transparency and confidence with our clients that we are doing the right thing for them,” Pakis said.
Alvarez pointed to speed as a factor.
“Any time you’re speaking to a small business owner, and you’re talking about faster turnaround times or lower rates, you’ll never get any complaints. [The recent package] makes our ability to deliver a better customer experience much faster.”
McKell was quick to emphasise Pepper Money’s leading position on quick turnarounds.
“If it’s a full-doc deal, there is a bit of due diligence that needs to go into it, but we’re still market-leading in terms of having this turnaround in three days for commercial. That is second to none.”
Pepper Money introduced the recent campaign on the back of significant feedback from brokers. Listening to those at the coalface and responding with practical tools to help is a major strength of the non-bank and shows that its thinking is centred around brokers.
“Brokers are the lifeblood of our operations,” said Saoud. “We understand that these were some of the significant pain points that they were encountering with their customers … we listened to that feedback, used it and leveraged it to come up with this Red-Hot Rates campaign.”
The market response has been positive on the broker side. “We’ve seen a significant uplift in applications on the back of this campaign,” he said.
But the campaign has also benefited the non-bank because it has reinforced to Pepper Money BDMs the importance of the broker channel.
“They’ve gone from a position where we were probably writing a lot of prime volume, back to a really good balance between our true specialist client and prime,” said Williams. “It’s really encouraged them to get into brokers’ offices, spend more time on that education piece, help with the application packaging and showcase the power of non-banks.”