24 February 2014

The Lighter Side of Lending

In the last few years, we have seen scores of new brokers and lenders come into the market, in the hope of becoming the “next big thing” and then many fade away. Those who could do things the way the clients wanted were successful and remained. The others went away. As soon as the market cooled in 2008-2009 head offices closed many local franchises or branches, leading to the perception that newly arriving companies lack commitment. Either way, a good amount of expansion occurs without sufficient thought or research. A number of new lenders expanded in recent years without anticipating the pitfalls of funding from short term focused global capital markets.

Blazing trails into new markets or niches within any market can be quite hard but your business model to be trusted must be consistant and open to market. As the old saying goes..."When in Rome, you should do as the Romans do."; When you determine your business model you should always make certain you’re speaking a language your clients understand.

Speaking of Rome, there is an old tale about a Pope of centuries ago having a religious debate with a learned Rabbi. In St Peter’s square, with a vast audience present, the two men sat facing each other to decide an argument on whether the rabbi’s people would be allowed to stay in Rome. The Pope began by raising three fingers in the air. The rabbi looked back and solemnly raised his index finger. The Pope moved his index finger in a circle about his head. The rabbi pointed to the ground in front of him. The Pope thought for a moment, then presented a wafer of bread and a cup of wine. The rabbi reached into his pocket and pulled out an apple. The Pope sighed and stood up, saying, “You win. Your people may stay in Rome as long as you like.”

Later, the Pope explained to his cardinals, “First I held up three fingers for the Trinity. He held up one finger to remind me there is one God. I waved my finger around to show that God is all around us. He pointed to the ground to say that God also was right there. I pulled out the wine and bread to show that God absolves us of our sins. He pulled out an apple to remind me of man’s original sin in the Garden of Eden. His responses were so learned and appropriate, I was deeply moved.”

Across town, the rabbi was explaining to his people. “First, he said to me that we had three days to leave the city. I told him that not one of us was going anywhere. He then told me the whole city would be cleared of us. I pointed to the ground saying we were staying right here. Then he pulled out his lunch and I pulled out mine.”

No one ever knows exactly what is on another person’s mind, and assumption is a dangerous game to play. In international markets, for example, language barriers come into play, and you don’t have to go far for this to be an issue. Your message can become easily garbled in translation, and this can be embarrassing, and sometimes funny, in the extreme.

Even large, highly sophisticated companies have fallen victim. Coors put its slogan, “Turn it loose,” into Spanish language advertising without accounting for idiom, ending up with “Suffer from diarrhea.” In Chinese, KFC’s venerable and descriptive "finger-lickin’ good" became, “Eat your fingers off.” And Ford quickly changed the name of the Pinto in Brazil when someone told them the car’s name was slang for “tiny male genitals.” If anything were to inspire you to double-check the accuracy of your foreign language marketing material, those would be the ones.

Innovative marketers constantly see opportunities stretching out before them; gifted marketers make them work. Good companies don’t expand hastily or overextend themselves financially, something which, in this climate of constantly improving technology, is very easy to do. There is always a new computer, a gee-whiz peripheral, or a new piece of software that sets the mouth to watering – but probably isn’t needed to carry out the primary mission of the company, which is to originate loans. Focused marketers size up their opportunities carefully, and then go after them with high energy and resolve. They do, however, need to take care that they are addressing their innovation properly to an unbelieving marketplace.

Putting the entire marketing budget on a new loan or single product line which you are convinced will take the industry by storm may be a mistake. Even if it is a great idea, the public may not be ready for it – unbelieving, in effect.

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... That's Lending

Best regards,
Paul Wells, Chief Investment Officer
La Trobe Financial Asset Management Limited



La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 123 staff and has managed over AUD$10Billion covering over 100,000 investment grade assets since inception in 1952.

Copyright 2013 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

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