The Brown Wall - Mortgage Shield Blog

Whats the difference between a recession and a depression?

2009-02-05T20:04:00.000-08:00

So, what is the difference between a recession and a depression? The old joke states: "A recession is when your neighbour loses their job. A depression is when YOU lose your job".
On a more serious note, whilst there is no agreed definition, a depression may be defined as a recession where real GDP falls by more than 10%. The last one in larger developed economies was the Great Depression of the 1930s, where unemployment in Australia got to 20%. Recovery from this was patchy, with another less severe depression during 1937-1938.
Normal economic activity did not return until 1940-1941. Since then the US has not had anything close to a depression. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent.   Given the sober global outlook for 2009, Perennial’s latest projection is that our economy will have a mild recession with the second half of 2009 starting to see positive growth returning.

The experts are saying Year-on-year GDP growth for 2009 should be just positive (could possibly turn out to be slightly negative), with positive growth for 2010. Therefore, the view that this is NOT a depression. Whilst we believe unemployment may hit 7% at its worst, with 93% of Australians still employed, this is not near depression levels.
So, don't read too far into the media who suggests we are going to see unprecedented job losses, and all is doom and gloom for years to come. There is some hope in the near future.

Keep your clients up to date

2009-01-20T16:50:00.000-08:00

There is alot of news coming and going about how terrible the economy is going, and the world market falling to bits, etc. But what does it mean to the everyday Australian?
Many 'ordinary people' who have minimal understanding of how markets and economies work struggle to relate this news to their lives.
This article, found in our Spotlight series is written by David Potts of the Sydney Morning Herald outlined gives a good explanation that is easy to understand and what some of the predictions are, coming from economists and leading financial authors. It may be something you want to pass on to clients or include in a newsletter.

Are you prepared and willing?

2009-01-13T20:34:00.000-08:00

Welcome back to the working week, and I'm sure you've had a great Christmas period.
It's that time of year where gym memberships are at their highest and Non smoking ads are gracing our sreens more than Eddie McGuire. It's also the time when small business plans for the year ahead.

With all the doom and gloom talk that has been around for the past few months, what are you doing to make this year different than the last? We all want to increase business from the previous year, however many of us fail to put things in place to succeed at it.

We are committed this year, to providing brokers with quality marketing material for new and existing clients, and are happy to help with additional services if needed.

One of the biggest advantages many of you have over your competitors, is you current client base! There is a vast range of people who know and trust you, who NEED advice in areas such as insurance. Do they know you have access to insurance? We have some great, non-intrusive letters that can be sent to your client base, either via a newsletter, or just on it's own. There are several letters that can be used along with printed material, all with the option of having your own brand and contact details on there. Please contact me to get hold of it. We know this type of resource works. It's been tried and proven.

I would challenge you to try to be more proactive in your approach, not only to your core business, but also in areas such as insurance, to give clients more value by dealing through you. Successful brokers are in regular contact with their clients, and offer access to a range of financial services. This way, clients have no need to go anywhere else.

I look forward to working with you over the next 12 months. Let's make this a great year, and learn something new along the way.
Kind Regards,
Paul

Have a fantastic Christmas & New Year

2008-12-21T17:03:00.000-08:00

Well, it's that time of year again when the flurry of Christmas messages drop into our inbox, followed closely by a myriad of invitations to Christmas parties from clients, referral sources and institutions. It's also the time of year that slows for most of us. In most cases, things need to be done, but due to the limited amount of time to accomplish these tasks, they are left to 'next year'.

Over the next two weeks, it's a great time to make a list, check it twice (sorry, I had to throw that in) of plans of things you would like to accomplish over the next 6-12 months. Each year, I compile a list of around 10 things that need to be done to make next year more successful than the one just gone. These include things like researching different marketing angles, strategic alliances, training for clients and associates. Then there are the strategic planning parts such as narrowing down the alliances already in place, and calculating how beneficial they are to the business, and whether they can be improved upon, or cut. This, I believe will make your strong relationships even stronger and allow you to work on quality alliances rather than just working with everyone.

Then there's the monetary planning. How much will come through the door this year? What are the expenses? And what sources is this income coming from. Lastly is education. What are you going to learn this year that you haven't already known? There is a great saying that I have in my office - "To achieve more than the average person, you must know more than the average person deems necessary - education is paramount to success". Even to refine knowledge in a certain area you are already knowledgeable so that your expertise in that area is far beyond what others know. People PAY for knowledge, so what are you going to learn in the next year?

One thing you may want to accomplish is knowledge in the are of insurance, whether it's basic knowledge, or detailed involvement in your clients financial needs, Mortgage Shield can help you achieve this through our ongoing online training directly into your mailbox. Contact us now, or in the new year to get a plan in place so that you can offer your clients access to quality insurance advice starting in early 2009.

I want to thank you for being on board this last year, and I look forward to helping you achieve all theat you are expecting in the areas of insurance and becoming a QUALITY adviser to your clients in 2009. Have a Blessed Christmas and a safe New Year.
Paul Davies

Insurance through super - Simple explanation

2008-10-28T19:03:00.001-07:00

Over the past 6-12 months, Australians have been feeling the pressure of the increased cost of living due to rises in crude oil, groceries, water, loan repayments, etc. For the first time since the introduction of superannuation in 1986, there has been a massive jump in people taking out their super to meet repayments on their mortgages. Over 55% of all cases involving financial hardship (around 9,000 people) said they needed their super to meet repayments to prevent losing their home.

Cashflow is something that many people struggle with and Life Insurance is something that is usually first on the expense chopping block. Sadly, there have been cases where the client has chosen to cancel their Life policy and a claim arises at a later stage. Life Insurance is the ugly duckling of the finance industry and generally speaking, people don’t want it until they ‘Need’ it.

Did you know that you can fund your life insurance premiums through your superannuation? If you have any old super funds from previous employers, they can be rolled into one fund and the super be deducted from the account balance. With Mortgage Shield, if we were to help with this strategy, we do not charge rollover fees, so the cost is almost the same as using an industry fund. However, the main purpose for doing this is to fund the insurance so the client keeps their cover in place.

To give an example, Mr Anderson is a carpenter and has had several jobs over the years, which has produced a variety of different super funds. He wants life and income protection insurance, but the premiums are around $180 per month, which he cant afford due to mortgage commitments, etc.

As Mr Anderson can’t afford NOT to have this cover in place as he is quite highly leveraged, we decide to round up all of his super funds and roll them all into one fund with Zurich (for example). In the end, he has $20,000 in this fund now that it is all tied together. We start his Income Protection and Life Insurance, which costs $180 per month. But instead of the premiums coming from his bank account, we ‘attach’ it to his superannuation and the premiums are deducted from his account balance.

Mr Anderson now has the flexibility of paying into his super to cover the cost of the premiums, so it doesn’t dwindle away too much, or he can choose to leave it for a few months while his cashflow improves.

There are certain tax advantages that I won’t cover here to save information overload, but see future articles on our BLOG for details.

This now means that Mr Anderson has the appropriate cover in place in the event that he was to die, or be unable to work due to sickness or accident, but has the flexibility that if he can’t afford the premium for whatever reason, he can simply ‘put the payments on hold’ while they come from his super. It’s a great way to keep customer satisfaction while increasing the success rate with client uptake of insurance. Please be mindful that there are only a couple of insurers that are able to use this strategy for administration purposes, which Mortgage Shield has agencies with. This is why it is not widely used.

Take full advantage of the rate cut!

2008-10-22T20:16:00.000-07:00

Last week, the Reserve Bank of Australia decided to lower interest rates by a whole 1%, which is only now being passed on, reluctantly, by the lenders to your clients. No doubt, you may have spoken to clients regarding this already by way of PR, but this raises some very attractive commercial opportunities to your existing client base.
All that is needed is a letter stating that they are now saving 1% on their home loan and that affordability is starting to come back into the normal realms of what we are used to. Now that clients are 'used' to paying a certain amount each month, they should continue to do so for two reasons.
One is that, depending on how they are structured, they will obviously pay more off their home loan;
And Two, they should consider some form of 'Wealth Protection' to cover their existing loan. With the money they are saving from teh interest rate cut, they can fund Life and Income Insurance without a worry. And in most cases, there are tax deductions available by doing this.
This gives you, the broker an opportunity to get your name and brand in front of your clients once again, and giving them valuable advice on their mortgage and direction on how they can best utilise their savings. If you would like to find out more about how to administer insurance in your business, Mortgage Shield can help you make it simple and cost effective. Simply visit www.mortgageshield.com.au

Focus on Wealth Protection story

2008-10-15T17:07:00.000-07:00

I found this intersting in moneymanagement.com.au today. I thought you might find it interesting to see that many facets of the property and finance industry are seeing wealth protection as a leading issue. Read on.

Property Planning Australia director James McFall said future income outweighed other assets such as superannuation and the family home.

“It is the most important asset and there should be insurance in place to protect against a loss of income,” he told the audience at the CPA Congress in Melbourne.

According to McFall, a 45-year-old presently earning $60,000 a year will earn $1.6 million until they retire at 65.

Similarly, a 25-year-old earning $40,000 today will earn $3 million before retirement.

“Income is making wealth creation possible, so any loss has an impact on retirement,” he said.

McFall said, according to the Institute of Actuaries, the average duration of a disability that causes the insured to stop working is nearly five months.

“Being injured and it resulting in a disability often leads to the loss of a job, and then the client’s wealth creation plans will get worse,” he said.

Based in figures from the Institute of Actuaries, 31 per cent of males and 10 per cent of females have lost their jobs through an illness or injury in the last 20 years, McFall said.

Advisers need to assess what insurance their clients will need in the short, medium and long-term.

Income protection insurance should be taken out to cover 75 per cent of income till 65 and critical illness protection to cover 25 per cent of income, again till 65.

McFall said total and permanent disablement (TPD) insurance should be taken out to cover 25 per cent of income, plus debts, to cover for permanent disablement.

However, the cost of the insurance should also be included in the equation, as it is expensive for an older person to buy certain types of cover.

McFall said a balance has to be achieved between stepped and level premiums.

If income protection and critical illness cover are taken out at an early age, a level premium should be the chosen payment method.

“Level premiums are expensive in the beginning, but are cheaper in later life,” he said.

For life and TPD cover in the medium term, the client will probably have to pay stepped premiums, although again, if the insured takes out the policies at a young age, a level premium can be negotiated.

Do you have a charity strategy?

2008-09-16T20:44:00.000-07:00

Its a constant issue to give the details to clients and alliances of your point of difference, and there are many ways to convey this. One thing that many corporates are taking on is Charity. Whether this is motivated by PR or an honest desire to make our world a better place depends on the organisation and the marketing department.

I believe that by being in business, you have a corporate responsibilty to make a change in the world around you. By implementing a charity strategy, you have brought your business into moral ground that can not only gains ground with clients, but gives you and your staff a 'higher reason' for doing the work you do. By building a charity strategy into our business, it motivated our staff and clients by being part of a greater cause. In our case it's Watoto children's charity, which is based in Uganda.

Be careful though, on which charity you choose. Do your research into the charity and make an effor to ask the organisation for a phone interview on who they are, what they do, and what they stand for. Tell them what you are looking at doing, as they will be more than happy to accomodate.

By putting a charity strategy in place, you may want to have a specific percentage or amount that will be given to the chosen charity. With Mortgage Shield, we've committed at least 5% of annual premiums to be given to Watoto from Mortgage Shield applications. The reason we've done this is that we have a committed amount for a specified product. Our staff and clients know exactly where we stand on charity. Now, the reasons behind our committment to Watoto aren't for PR purposes because we've dealt with them for many years prior. Our main objective for letting others know of our alliance is to generate interest for Watoto from other businesses, but as a side issue we've had many people relay their appreciation of what we are doing.

No matter how small the contributions you make, it doesn't matter. We can't do everyting, but we must do something. If everyone would do something small, the world would be a better place.

If you would like to find out more about Watoto, please visit www.Watoto.com

The Broker High series was a great success!

2008-09-16T19:05:00.000-07:00

We have just completed our Broker High series with Mark Blundell and it has been a great success.
Those who attended have conveyed the message that this was a practical seminar that helped them identify new 'structured' processes to maximise their strategic alliances.

The main reason we partnered with Mark is to invest into your business so you can become more profitable. We will be running more seminars with Mark in the future to current brokers with Mortgage Shield. We want our brokers to be knowledged in many different areas with an aim to becoming more successful than their competition. Our strategy behind this is the more successful our brokers are, then the more successful you will write Mortgage Shield.

If you are already a broker who uses our services, you would know of the marketing support we give you free of charge. If you are looking at joining Mortgage Shield and are wondering what service you will receive when you are on board with us. Because we have been successfully working specifically in the Insurance industry for over 8 years, we have proven marketing resources to give you the tools to succeed.

Some of the resources we have for brokers are:
Pre-approach letters
Printed flyers
Example premiums for clients
Articles for your newsletter and website
If there are other resources you request, we will be happy to accompdate.

All that is needed to become a Mortgage Shield broker, you can email us at brokers@mortgageshield.com.au or call 1800 MSHIELD and we will organise an agreement to be sent to you.

With a simple agreement and some training if needed, you can contact me at brokers@mortgageshield.com.au for a copy of the agreement.

Sickness & Accident / Income Protection - What the insurance companies won't tell you!

2007-10-23T03:18:00.000-07:00

There is a difference between Life Insurance companies and General Insurance companies with their sickness and accident policies. Many people look for cheaper alternatives when it comes to their Income Protection or Sickness & Accident policies and go ahead with a policy with a general insurer such as NRMA or GIO, etc.
These companies have good reputations and there is nothing bad about them, however, if you take up a sickness & accident policy and you have a claim in a few years, more often than not, they will NOT renew the policy at the next renewal date. This is something that the insurers won't tell you.
The other thing is that if you wan to claim, with general insurers, they require you to be unable to do any type of work whatsoever regarding your usual occupation. If you were to use a Life Insurance Company, they will guarantee to use your policy each year, regardless of whether you have a claim or not. They also only require you to be unable to work in '1 of your normal duties' to have a claim paid.
I believe that these are extremely important issues that insurance companies usually don't tell you as they really only want your premiums. So next time you are looking at getting an income protection policy, make sure you ask about these issues to save yourself a fortune!