A top broker has warned that diversifying for the wrong reasons can leave brokers as mistrusted as dodgy cars salesmen.
Mario Borg, director of Master Brokers Group, said despite the diversification hype, brokers need to approach the issue with caution.
“The whole thing about diversification is bandied around a fair bit - that it’s the best way to increase your revenue. It’s all about revenue, revenue, revenue,” said Borg.
“But at the end of the day, if you specialise at what you’re good at, I find that clients do respect that and do value the fact that you’re not trying to be all things to all people.”
Diversification can work and can bring in more profits, said Borg, but only if it is done in a way where the clients’ needs are top priority.
If brokers allow themselves to be distracted by revenue possibilities, they run the risk of losing client trust, he said.
“If you’re coming at it from a selling angle, if your priorities are around how many dollars you can squeeze out in terms wallet-share for each client, you might get away with it for a while, but most people aren’t silly. They can see if someone is being genuine versus somebody that’s all about trying to make a dollar.”
NCCP requirements have made it easier for brokers to have conversations with clients around risk, insurance, and broader financial requirements, said Borg, but that doesn’t mean brokers should try and sell these things to every client.
“If you’re looking at someone’s statement of financial position and you see a genuine need, you do need to talk to them about this. The next step then is deciding who is the best person to assist with that.”
More often than not, said Borg, that means a referral. Trying to offer a range of financial solutions in-house, while great in theory, is “virtually impossible” in practice, he said.
“If you’ve got para planners and administration support it makes it easier, but to try and do it all yourself? I don’t see how you can do it well. Paperwork in mortgage broking has increased significantly with NCCP, let alone dealing with everything else.”
“If you went out to buy a car and you walk away having spent two grand more than you need to because someone told you you needed to have tinted windows and a bigger boot or whatever, do you think you’re going to go away and recommend him to your friends?”