'Do your homework', warns diversified broker

by Mackenzie McCarty11 Oct 2013

Yesterday’s article on Mortgage Choice broker franchisees diversifying into financial planning sparked some harsh comments from many readers, with one even comparing the group to the ‘McDonalds of broking and financial planning’.

However, Jamestown-based broker and financial planner, Phillip Dibben, who isn't affiliated with Mortgage Choice, says marrying the two industries has proven highly successful for his own business – and that the concept behind Mortgage Choice’s diversification is inherently a good one.

Dibben spent 30 years in the banking sector before moving into broking and financial planning and says balancing both isn’t for the faint-hearted, but can have fantastic results for those willing to put in the hard work.

“I guess the disadvantage is that I need to prepare a statement of advice for each lending deal that I do. It doesn’t matter if it’s commercial, consumer or equipment finance, so my speed-to-market is slowed significantly by the compliance requirements of satisfying the financial planning side of things. That being said, I find it suits me to provide a more holistic advice approach to my client.”

While Dibben believes the fact that many of his clients are rural-based and thus don’t have access to the plethora of financial professionals based in larger metropolitan centres, he’s also found that his urban clientele is growing as a result of his business model.

“You’re not just looking at one individual aspect and I think that’s what’s missing in a lot of this, particularly with remote clients. They don’t get to see their advisers as regularly and they really appreciate that face-to-face aspect of the relationship that I offer… But I think it’s transferable to the more populated areas as well. I’ve got a growing demand in the city, purely because people are looking for a more personal relationship.”

However, Dibben encourages brokers to ‘do their homework’ before branching out into financial planning. Aside from the additional training involved, he says, there’s a significant amount of administrative juggling. He believes this is where groups like Mortgage Choice might, in fact, have an advantage.

“If you’re providing a particular service today, certainly there are lots of benefits in adding the financial planning bit to your business – but be aware, there is a lot of compliance and your speed-to-market will change significantly as a result…You can be loading some of the information three or four times, so there’s a lot of duplication,” he says.

“I guess that’s where perhaps Mortgage Choice’s type scenario, where they’re looking at marrying the two together if they’re going to have them both on the same IT platform, that might be an advantage for them. I’m guessing that they’re not going down that path – but they know their business, not me.”

COMMENTS

  • by Country Broker 11/10/2013 10:50:17 AM

    I can understand why they need to do this , I simply Finance/Mortgage Brokers should be that just Finance / Mortgage Brokers. I am in an office with affiliated Financial Planners and Accountants and it works really well .
    I thinks joint ownership of both possibly causes conflict of interest problems ( Think SMSF Applications and impartial advice for one) and possibly PI problems that could go with that. If they can overcome this perceived risk good luck to them. It is not for me.

  • by Old Broker 11/10/2013 11:29:37 AM

    Country Broker
    The PI, SMSF issues are covered by the fact that you require separate entities, PI cover etc to operate a planning business.
    The advice issue with clients hasn't come up in fact clients think it is a good idea and mine have certainly embraced it
    It has added to my service to clients and so far at least no client has refused to take up the advice offered when also completing a mortgage either purchase or refinance

  • by Steve McClure 11/10/2013 4:05:34 PM

    Here's a question, with the greatest of respect, because I admire anyone who can carry on more than one profession.... If, in your capacity as a financial planner, your client proposed a property investment, requiring borrowings (and under your broker hat, you can easily arrange that) but by all objective measures that investment had less merit than an alternative, that might not require your services as a broker. Would you recommend they not proceed? Just because you can recommend SMSF property and do the loan as well, does that suddenly make property a better investment? Just wondering.