How do you diversify?

by AB13 Jan 2016

Kel Smith
Smith Finance Group

What areas have you diversified into, and why did you choose them?
What [Smith Finance Group] specialises in is commercial finance, so we have diversified into all other types of lending that our clients would require, such as their home loans, their leasing finance and their overdraft requirements. We want to capture all the business that our clients require. We want to meet all their needs.

We’ve been commercial finance specific from the beginning, but since FAST intervened and opened up other doors, and through some other gentle prodding from FAST, we have reversed the trend and gone more back into the role of the old-fashioned  bank manager where we look at all our clients’ needs.

What advice would you give to brokers looking to diversify beyond residential mortgages?
I would tell them to consult with someone who has been there and done it before, whether it be a fellow broker or more importantly the direct contact at their aggregator, like what we have done with FAST.

We have gone to FAST and said we have this deal or we have this style of client, can you recommend where we would take that deal and where we would take that client? I found that FAST were the best advocates for us to find the lender that would suit the client the best or the lender that would have the path of least resistance to get the deal approved.  

Brokers should talk to their aggregator BDM and suggest what areas they may wish to diversify into or where they think there may be opportunities for them, and get some guidance.

How has your aggregator aided your efforts to diversify your business?
FAST spend their whole time developing relationships with lenders; time that I don’t have to do that. So I can go to my FAST BDM – and every one of them has been excellent – right from the beginning and tell them I have this specific type of deal and I don’t know where to place it and they invariably come up with two or three options, and not only with the lender but also the contact at that lender. They will marry me up, they will specifically tell me who to speak to and they will make that introduction. It saves me a lot of bother with trying to shop the deal around town. It is also not good for the client when you shop a deal around town. They me to target a lender that is specifically capable of doing the deal.

FAST has also helped me develop the skills I need to diversify – anything from coming out themselves and showing us how to enter a deal or what specific requirements we need to understand when writing a different type of loan, to bringing the lender’s BDM out and allowing us to workshop different deals together, the three of us.

Why is revenue diversification important?
There are two main reasons. I think we need to grow and expand as the business opportunities arise from our existing client base. But also, as the economy goes through different cycles. There are cycles where, as we know now, residential lending is strong. That won’t last forever. There are cycles where commercial lending is strong. There are cycles where equipment finance is strong. There are many cycles in a broker’s life and if you can capture all your clients’ needs them you will be able to survive the lulls in residential lending, the lulls in commercial lending, and the lulls in equipment finance lending. It allows you to be more resilient to the economic highs and lows.

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