introduction 04 / branching out Breakin new gr Story / Jessica Darnbrough
Moving into new areas might be a daunting prospect, but product diversification can have very significant business benefits for brokers Old-schOOl brOking was about residential mortgages – transactional rather than relationshipbased – and brokers were less advisers who took into account a client’s overarching financial situation and more processers of loan applications. But things have changed. To be successful in an increasingly competitive lending environment, brokers generally need to be more to their clients than document processors. To do that, they will need to look seriously at breaking into new areas – diversification – and providing products and services that complement their residential mortgage expertise. According to Vow Financial’s chief executive, Tim Brown, diversification is crucial to the success of a broker’s business. “At Vow, we have always supported diversification,” he says. “We believe that in the current environment it is more important than ever for brokers to diversify. “The property market is flat – there’s no denying that. So, with less residential mortgage business coming through a broker’s door, it is important that they look for other business opportunities. By g ound diversifying their core offering, brokers can generate more income from each and every client.” The global financial crisis and the National Consumer Credit Protection Act (NCCP) have cemented the value of a diversified broker offering. The crisis put borrowers on edge, the majors reaped the benefits of being perceived as a safe haven and many lenders slashed broker commissions by up to 30 per cent. Meanwhile, under the terms of the NCCP, brokers are now required to get a picture of the “consumer’s requirements and objectives and their financial situation”. While this fact find should guide the broker as they review the most suitable financial products, the requirement also opens the door to cross selling. “Under NCCP, brokers are required to meet with their clients and complete a detailed clients’ needs analysis, which includes several questions about insurance,” Mr Brown says. “Where, as previously, brokers felt as though they had to sell insurance to their clients, today it is part of their due diligence. “NCCP has made diversification a lot easier for brokers.” Strengthening the propoSition Of course, brokers should not stop at insurance, says Mr Brown. “The client needs analysis opens the door for brokers to offer a lot more than insurance and a residential mortgage,” he says. “In fact, when a client is transacting a mortgage it is the perfect opportunity for brokers to look at all of their needs around all of their assets. There are some obvious areas that brokers can easily diversify into, including general insurance, home and contents insurance, financial planning and wealth. “But when they are looking at all of their assets they should also discuss wealth management, selfmanaged super funds, equipment and leasing finance – even commercial property.” “Diversification helps brokers earn more money, and from every client – it is an easy win,” Mr Brown continues. Secondly, brokers who diversify can also expect branching out / 05
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