23rd June 2014

Beyond the big four

There are alternatives to the big four

So many of us love to hate the major banks, but like a long-term relationship that we find difficult to break, we continue to stick to them.

The big four banks have approximately 84% of the mortgage market and we still choose these banks, even those borrowers who had tried to resist, thanks to post-financial crisis takeovers.

There are the regional banks and customer-owned organisations hoping that the dominance of the big four will come under scrutiny by the financial inquiry system soon.

However, in the meantime if you are ready to look elsewhere, there are alternatives which we will discuss. Of course, with each alternative, you will need to consider your circumstances and undertake some further due diligence to meet your needs before proceeding.

Peer-to-peer lending

Peer-to-peer lending (P2P) has recently entered the Australian market.

It is one of the UK’s fastest-growing alternatives in the finance market, which has expanded from almost nothing before the financial crisis to lend out close to £1 billion (Financial Times, June 2014).

Many of the P2P services are automated, the intermediary companies can operate with lower overheads and can provide the service more cheaply than traditional financial institutions, so that borrowers may be able to borrow money at lower interest rates and lenders may be able to earn higher returns. Compared to stock markets, P2P lending tends to have both less volatility and less liquidity.

Customer-owned organisations

Customer-owned organisations –10 mutual banks, 7 building societies and 83 credit unions – are promoting far better rates and conditions than the major banks. Why? They don’t have to satisfy external shareholders. As customer-owned organisations, their focus is to deliver value to their customers.

Christine Long mentions in her article (The Age, 14 May 2014) that the major Banks’ main focus is on profitability for their shareholders where as customer-owned organisations focuses on profitability within sensible limits. Christine Long states in her article that you would be $200-$300 better off if you’re with a mutual organisation than with one of the major four banks.

Community Banks

The “Community Banks” were introduced in 1998, when the major Banks were closing branches. Each branch is locally owned and operated. Each branch keeps a share of the profits and ploughs it back into the community. Christine Long mentions that a Community Bank in Mount Waverley took three years to achieve the required financial support to open its branch. Twelve years later and it has become a $145 million business with 3,000 customers and an old-school approach to banking. Since opening, it has given $644,000 to community projects, including $110,000 last financial year.

Another Alternative – La Trobe Financial

La Trobe Financial has been in the mortgage industry for over 60 years. Today, it is one of Australia’s leading bank independent credit specialists and has distribution capacity located throughout Australia with average annual asset origination volumes circa A$2 billion.

We are focused on residential and commercial assets. We offer credit and investment solutions for prime and alternate income verification consumers that mainstream providers don’t accommodate. Referrers gain direct access to our front line senior credit decision makers to make the path to settlement easy and clear. Our product criteria are the most understandable in the market, combined with fast service and a fair and reliable commission structure with no clawbacks.

Our success has been built in three core principles.

First, that residential and commercial property remains the central form of personal wealth creation and the base from which thousands of businesses like La Trobe Financial are founded each year. By providing finance to under-serviced borrowers, we are assisting many Australians achieve access to financial independence and freedom.

Secondly, that we have been specialising in this asset class for over 60 years and we are one of the most successful mortgage funds in Australia. Our Fund did not freeze during the global financial crisis and has only become stronger and stronger in continuing our focus in this asset class.

Thirdly, that we do not want to be “all things to all people”. That we stick to what we know best and deliver superior service. And when it comes to a credit specialist team, we have an experienced team that will deliver personal and immediate service. We always look to improve and deliver the best outcomes for our customers. The benefits to our customers is to give even better service, faster turnaround times and improved capabilities.

... 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

The following awards and ratings were given to the Pooled Mortgage Option within the La Trobe Financial Mortgage Fund and may be viewed on our website

Ratings And Awards

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Commercial SMSF Video, Paul Wells, Division Head of the Asset Origination & Credit Team
Investor Call Briefing Q3 FY2014, Chris Andrews, Head of Funds Management
Australian Broker speaks with La Trobe Financial’s Chief Investment Officer, Paul Wells, about our views on commission clawbacks in the specialist lending market and the value to brokers of Australia’s niche credit specialist market.

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^ Depends on risk grade of Borrower

All loan applications are fully assessed to ensure the loan is not unsuitable and that we meet our responsible lending obligations in accordance with our usual underwriting requirements. All features and interest rates are current as at the date of publication. Conditions, fees and charges apply. This message, together with the La Trobe Financial website (www.latrobefinancial.com.au) and all its contents have been prepared for general information only and should not be taken as legal or financial advice, and as such the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the La Trobe website. La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you. The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may be lower than expected. Investors risk losing some or all of their principal investment. The investment is not a bank deposit.

La Trobe Financial Services Pty Limited - Australian Credit Licence Number: 392385
La Trobe Financial Asset Management Limited - Australian Credit Licence Number: 222213

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1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit www.latrobefinancial.com.au The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
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