The debate over the convergence of financial services has yet to subside, but ING
Direct’s Mark Woolnough says much of the conversation has missed the point.
As a mortgage broker these days, it’s near impossible to escape the heated debate raging over the need for diversification and the convergence of financial services. On one side, mono-line providers argue that brokers need to stick to the main game. On the other side, proponents of diversification argue that it’s the only way to ensure a steady income. But the focus of the entire debate thus far has been off, according to ING
Direct’s Mark Woolnough.
Woolnough, the bank’s head of third party distribution, said the debate over the inevitability of convergence in financial services has focused more on the headaches it could cause for brokers than the benefits it would deliver to consumers.
“In this whole convergence discussion, there’s never any discussion around how it benefits the consumers. There’s often discussion around how it won’t work,” he said.
Because much of the debate has centred on the difficulty of implementing the model rather than the end result it yields for clients, Woolnough said many brokers are in a quandary over the idea of convergence.
“We’ve got a lot of brokers at the moment who are unsure of what convergence really means to them and their business. They’re receiving conflicting feedback and advice from within their peer community and often even from their aggregator. That’s because there’s rarely any focus or attention on what the benefits are to the consumer.” Woolnough said.
With this in mind, Woolnough believes it’s time to re-cast the narrative in terms of what convergence means for the consumer.
“Convergence of financial services should allow customer interaction and engagement to be far more holistic and add deeper layers of value and engagement between the trusted advisor and the customer,” he said.
That’s not to say convergence won’t deliver benefits to brokers as well. Especially in a tough environment beset by weak demand and increased regulation, Woolnough said the integration of a holistic financial services model can help brokers hedge their bets.
“We’ve still got flat credit growth despite the low cash rate, and consumer confidence and consumer sentiment remain low. Mortgage brokers need to look beyond just mortgages in terms of maintaining a sustainable and profitable advice model for the customer. That’s what we’ve found in financial planning. They’ve moved away from product focus and more into strategising around the client’s needs.”
And apart from just providing additional revenue, Woolnough said the model deepens the client relationship. He pointed to ING
Direct’s recent trial distributing its Orange Everyday transaction account, saying that a transaction account in addition to a mortgage vastly increased the probability of gaining primary bank status with a customer, leading to a longer loan life and – ultimately – better remuneration for a broker. And a variety of offerings can lead to this deepened relationship, he said.
“If I’m a mortgage broker and I’ve just given a customer a mortgage, that’s great, but 80% of Australians don’t receive any form of financial advice from a trusted adviser. It’s the perfect time to ask, is the customer taken care of and represented with superannuation, with insurance? If the customer needs to look elsewhere for those needs, does that make them question the relationship with their broker?” Woolnough said.
The focus on the end result for customers is all well and good, but what about the practicality of incorporating a converged model in a broking business that has traditionally concentrated on mortgages? Woolnough offered advice for brokers looking to implement a more holistic model.
“Probably the easiest way and the best way is to look at surrounding themselves with quality representatives from that side of the industry. Maybe they go into a co-branded model or a co-office arrangement. But there should be a relationship beyond a simple referral relationship,” he said.
In going beyond a traditional referral relationship, Woolnough said brokers could consider hiring a financial planner, sharing an office or even a co-branding arrangement.
“That’s what you can achieve through a deeper and more rigorous agreement. I may have Mark’s Mortgage Broking and someone may have Caroline’s Financial Planning, but for the purposes of when I refer a customer to Caroline, it’s under my brand, and when she refers one to me it’s under her brand.”
And when it comes to branding in general, Woolnough said brokers should consider what their brand is saying to consumers.
“For a brand that solely refers to loans or mortgages, it may be the best time to take a look at how best to position that brand to communicate to the customer that you can provide holistic financial services and meet holistic needs,” he said. The most important aspect in the convergence conversation, though, comes back to client outcomes, Woolnough said. Along with this comes a changing set of client expectations.
“We’re seeing the attitude and expectations of clients changing. They’ve moved away from wanting a trusted adviser to do it for them, and they’re now more educated and want an adviser to do the process with them.”
And Woolnough argued that, as financial services inevitably converge, mortgage brokers will have to put aside the commentary of the naysayers in the industry.
“We should not necessarily let ourselves be guided by the part of the broker community that wishes to ignore the emerging trend,” he said.
“The nature of the broker industry where you have a lot of islands in a big ocean, if it didn’t work in one business, it’s often deemed not to be worthy for the whole industry. That’s not a sensible message.”