Getting investor clients through COVID-19

There is a major requirement for the finance industry in our society at the moment, says principal investment lending manager of ALIC, Mark Davis.

He says brokers have a real obligation to earn their trail by working hard to look after their customers and enable them to get through the current COVID-19 crisis.

MPA spoke with the AMA winner about the ways brokers can enable investor clients to maintain their positions throughout the pandemic and continue to grow wealth into the future.

Holding wealth throughout COVID-19

Davis says it is important for investors to make sure they are as cashed up as possible before October comes.

“They’re going to have to fend for themselves from October if the banks don’t capitalise interest moving forward,” he says.

“The government might not be there for allowances either.”

“Our job as an investment lending firm is to ensure our clients can get through this; that they understand their budgets, their cashflows, their full position between now and October where they can capitalise interest.”

He says ALIC is helping its investor clients focus on building up offset accounts in order to maintain their positions after October, until the vaccine comes in or the economy gets going again.

Taking advantage of a buyer’s market

He says, brokers can help to ensure property investors who want to make the most of a “buyer’s market” are ready to take advantage of the next great deal when they see it.

“This is the second buyer’s market we’ve had in 12 months, which is unprecedented. This is only the fifth we’ve had in 20 years – and we’ve had two in 12 months,” he says.

“So, it’s an opportunity to take advantage of the market and our job as an investment brokering firm is to get everybody ready for this market and these opportunities.”

He says upgraders could incur major opportunity costs if they aren’t ready with finance. For instance, a person selling a property worth $700,000 for $650,000 in exchange for the purchase of a $1M property that was recently worth $1.2M, stands to lose $150,000 in potential growth in the new asset.

“Now is the time when true investors know when to make money and how to make money and this opportunity can be seized if they have the particular risk profile needed to act in such a market,” Davis says.

Saving money by streamlining cashflow

Brokers can also enable investor clients to streamline their cashflows by saving them money on repayments. He says now is a great time to trim down expenses by helping the client consider lower interest rates and rebates where available.

“Take advantage of some seriously low fixed rates while rates are at their lowest time ever,” he advises.

“We don’t know this yet, but if there’s some kind of credit crunch and things get worse, money could actually become quite hard to come across.

“While they are low now it could be an opportune time, but we can’t advise to go fixed or not go fixed. We can give information about the reasons why you do and why you don’t for each individual, but the final response needs to come from the client.”

Value properties now to realise equity

Davis says there is a risk that property values will drop throughout the pandemic. For clients who need access to equity, he says, it is important to get valuations done now.

“Get valuations now just in case there is a serious drop in the property market and realise equity while you can,” he says.

“If it comes down and we value the place in a year’s time and the market is much lower, then you’ve lost the ability to utilise that equity.

“Whereas, if the valuation’s high, and we’ve already taken advantage of it and we’ve actually transacted while the valuations are high – we’ve done that transaction, we’re ready for the next one for the right type of client.”

He says he thinks valuers are already making decisions about what properties are worth based on what they are seeing in the media.

“Valuers are only supposed to use information on a property before it’s settled – not from an article they read that morning that made them feel nervous about the market dropping.”

Other risks in the market

With lending restrictions likely to tighten, Davis says it’s important to ensure customers are in a good position now.

“Money could tighten up as well. If money tightens up and smaller institutions can’t buy money that could cause quite a few issues for borrowers over the next six months.”

He says having a thorough understanding of the customer’s risk profile, as well as their asset position, cashflow position and life goals is essential to make sure you are structuring their finance in the best way possible.

“This is my passion. I believe in structuring for investors that, in turn, opens many doors for them.”

“We are very, very lucky that we are in the finance industry.”

“We’ve got an obligation to do our work – work hard, head down, bum up – and earn our trail by looking after the customers and making sure every one of our customers can get through this tough period.”