Your convergent future, according to Claes

by BN11 Jul 2012

ING Direct’s Lisa Claes sees a future for mortgage brokers that embraces closer ties with financial planners, therefore avoiding the risk of ‘treading water’

I had the benefit of travelling around the country recently speaking to brokers and aggregators in all capital cities and many regional centres in between.

While promoting the benefits of our recently launched Broker Partner Program I gained greater insight into the industry as it stands today and the potential opportunities looking ahead. These insights confirmed some of the developments I had been seeing emerge in distribution - both within our Australian business and with ING Direct businesses globally.

Some of the brokers I spoke to are questioning whether they are doing enough to create long term sustainability. They were inevitably working hard and writing good home loan business but there was a nagging doubt among some about the longer term future.

Nothing surprising there, we all worry; I know I do. But on reflection and in the context of these emerging trends some of the areas of concern present some of the greatest opportunity.

 Broking in the 21st Century

Narrowing margins, a sluggish credit growth outlook, added compliance, rising costs and NCCP are all cited as potential impediments to longer term sustainability.But at the same time a customer’s desire for reputable information on mortgages from a trusted source, with whom a relationship has developed independent of banks, has never been stronger.

Although this strong customer preference augurs well for brokers, many are treading water, getting by, and remain very concerned about the future.

There are, however, a growing band of brokers who are embracing these forces to build a stronger business. For them, the penny has dropped; the decision by a customer to buy a home occurs relatively early in the financial life cycle and more importantly prior to the phase of wealth creation.

Most of us follow the same financial journey. We save, transact, borrow for a home, invest and then retire.At this formative stage within the financial lifecycle customers seek out a mortgage broker for tailored personalised advice. This is the time they’re yearning for advice, reassurance, education and direction as they make one of the biggest financial decisions of their lives.

What an opportunity.

A broker must capture a full financial snapshot of the client to comply with the NCCP requirement - that the credit assistance a broker provides is suitable to their specific needs.

The fact finder and the interactive process experienced by broker and customer delivers a platform to the broker to become the financial “go-to” person for their customer now and into the future.

I understand that a broker cannot offer financial advice without proper authorisation under an AFSL and that is an option some are embracing, but there are other ways in which to become part of the broader customer financial life cycle.

Brokers are doing this in various ways. Time will stress test these models emerging in the market and determine and those which will prove most resilient profitable.

However, this truth remains. The information gleaned throughout the fact finding process not only guides the broker on providing robust credit assistance but should also be leveraged to partner with the customer on his or her journey through the various financial phases. Irrespective of whether the customer chooses to indulge in the more exotic product offerings within the realms of SMSF, property investment or margin loans, the inevitability of these phases provides the opportunity to add future value to the more mainstream financial activities whether it be refinancing, upsizing or downsizing, taking out insurance, investing in managed funds platforms, direct shares, or superannuation offerings.

 Your model converged

 The most simple way to test the waters is to develop a referral relationship with financial planners located in areas mirroring the demographic of your client base.

The ideal referral relationship is built on trust. Both parties are expected to perform to the satisfaction of the customer, thus ensuring positive feedback to the referral source, instinctively creating a loyal referral base and increasing their respective customer bases. This referral exchange often flourishes without referral fees.

However this system of sending customers to an outside source has its sceptics.

Another and potentially more sustainable approach is to co-locate and brand under the one roof. Pitching the brand in a manner that telegraphs a more holistic financial offering has proven to enhance success in businesses locally and overseas. The model operating beneath the brand can be an integrated one or with two distinct operations. There is appeal to customers to know that their broader financial needs can be serviced all under the one roof. Some businesses take the extra step of matching employee and customer within the respective planning and broker businesses using personality profiling tools or a common recruiting agency to shore up consistency of customer experience within the conjoined brand.

Then there’s full convergence where the entity running the business holds both an AFSL and an ACL.

CEO of Acceptance FinanceDaniel Di Conza for example runs a converged model and is convinced it’s the way of the future. The group has three financial planners piggy backing off 12 mortgage brokers. Ultimately, Daniel believes that the ratio of two mortgage brokers to one financial planner will eventually be about right. His brokers and planners remained specialised but they operate as a one stop solution for the customer under the one brand.

Of course the other advantage and challenge with the fully converged model is one of scale. Scale is necessary to defray the costs of establishing and maintaining dual licensing, but the benefits of the diversification of income and greater share of customer wallet far outweigh these.

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