Innovation

FirstMac's Kim Cannon has managed to survive and thrive in the home loans business by evolving with the times.

If necessity is the mother of invention, then the mortgage industry - particularly the non-bank/mortgage management sector - is just around the corner from making a major discovery.

Somewhat of a Godfather in the non-bank sector, Kim Cannon, managing director of FirstMac, believes the industry is undergoing a real period of innovation.

"It's in times of adversity that the greatest innovation takes over," he says. "In the last recession in the early 90s, a bunch of us that were in commercial lending suddenly had no funding, so off we went and started the home loan business and that's the innovation that came out of it."

Cannon is no stranger to reinvention. He started as a lease broker, then moved into commercial lending. In the early 90s he became a mortgage manager using the broker channel, but later broke from that strategy to start a retail lending business. Cannon moved back into the broker market again at a later date, and eventually turned FirstMac into funder in its own right. FirstMac started using securitisation as a vehicle in 2002, but Cannon says its time to look at something new.

"We believed for years securitisation was a great thing, but nobody ever looked at it and said 'are we overexposed to that sector?' And you know that you are when the market isn't there."

Cannon added that FirstMac is now looking at managed investment schemes and acquisitions to stem the company's 100% exposure to the securitisation market.

"People like myself just reinvent themselves every six or seven years. We might be in the same business, but working in a different sector. My business has grown because we innovate and reinvent."

Cannon says that of the dozen or so mortgage managers that opened shop in the early 90s, only two or three from that 'first generation' are still around.

"The others were probably out on the golf course and they were making good money and things were rolling along, but now the world's gone to shit," Cannon says. "They've been so out of touch with the business, and they think that what they did 15 to 20 years ago is going to work again and it won't."

"A lot of these guys have got to wake up to the fact that the world has changed and they need to address a high volume, high service, low margin business of the future and that means they can't do everything in house. They're going to have to change their business model."

The problem with both mortgage managers and brokers, Cannon concludes, is that there's an over-reliance on one-product.

"I think that our industry as always been a one-product industry and the next round of innovation for us will be expansion into other products. We're already looking at credit cards at the moment," he says, adding that others such as Aussie John and his move into insurance, are doing the same.

Another innovation is the fee-for-service model - love it or hate it - Cannon says it's just another example of evolution in the industry.

"We had 17 years of great home loan lending - it was boom times. But it got a bit stale out there, it was the same-old, same-old. You can't just be a salesman doing the same thing all day everyday all your life."