Branching Out - Resimac

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