How can you increase client referrals and revenue by partnering with mortgage brokers, without stepping on each other’s toes?
While some mortgage brokers are looking to incorporate financial advice into their own business, they remain a rich source of client referrals.
According to Loan Market’s Mark de Martino, many mortgage brokers prefer to refer to a trusted professional, rather than bringing a financial planner on board or becoming a financial planner in their own right.
“This is a new concept for our industry and only a small percentage of brokers have embraced it so far. The most important question a broker should ask themselves is, ‘should I do it myself or engage a business partner as the expert?’ For most brokers the answer is to engage an expert within their business to perform this function,” said Martino.
“Having a trusted business partner allows you to continue to focus on what you’re good at whilst giving the customer the ultimate experience with someone you know and trust in a different field of expertise. Additionally the heavy compliance and administrative burden can be shared between business partnerships.”
Meanwhile, according to Ballast’s Frank Paratore, size really dictates whether a mortgage broker will decide to recruit a financial planner to their business or go down the referral route.
“What we’re finding is that larger groups see the validity in bringing in a financial planner. The isolated broker who is working from home – that doesn’t really make sense so they’re using the referral mechanism.”
Referral opportunities
When it comes to aligning mortgage brokers and financial planners, Advantedge has started facilitating the referral process. After a successful six-month pilot of its Partner Planner model in Western Australia, it recently announced it would be rolling out the program nationwide.
“Advantedge’s Partner Planner model aligns individual self-employed financial advisers with brokers. Typically, the financial planner will work with six broker firms to provide comprehensive financial planning advice to their clients. Remuneration is shared between the broker and the planner, and ownership of the client always remains with the broker,” says Craig Saville, head of Advantedge Financial Solutions.
According to Saville, in addition to providing increased revenue and greater client retention, its model also provides quality service and advice to clients.
“Advantedge sets high standards when it comes to recruiting and matching financial planners to brokers. All of our financial planners are authorised representatives of MLC's financial services licensees and must be fully qualified, trained and adhere to strict ongoing compliance criteria.”
And if you’re worried about mortgage brokers training themselves up as financial advisers and stepping onto your turf, then news from Vow Financial may provide some relief.
It has revealed that only around 10% of brokers in its network will undertake to become financial planners, while 20% had indicated they would want to offer limited financial planning advice – such as risk insurance – but not a full range of financial planning services. The remaining 70% of Vow mortgage brokers were likely to use the company’s wealth management arm for straight referrals.
“We offer advice in this space. So when someone is ready to make that decision we normally sit down with them, have a look at where their business is at, so whether it’s a small business or bigger business and whether their business could potentially afford a financial planner, or whether they’d want to become a financial planner themselves,” said Vow CEO Tim Brown. “We’ve got a project manager who deals with each of those individuals and helps guide them through that initial period.”
He added that the task of qualifying as a financial planner as well as a mortgage broker is “a big ask”.
“I think that’s why we offer both models in our practice. There are brokers who are very well organised who do have the ability to do both. I think also that you would have to specialise. I don’t think you could be all things to all people,” he said.
“I think offering risk and life and potentially going out and offering self-managed super is probably as far as most people can go if they’re offering mortgage brokering as well. I think to get into equities and investments is a step too far.”
“More beneficial to the planner”
There are dissenting voices within the mortgage broking industry, however, who don’t believe that partnering with financial planners makes financial sense.
Wealth Today’s Michael Stephens, for example, argues that referral arrangements disadvantage mortgage brokers.
“The alliance between brokers and these two groups [advisers and accountants] is probably more beneficial to the planner and the accountant than it would be to the broker. There are normally low rates of client referrals back to the broker, and revenue sharing arrangements will heavily favour the financial planner or accountant, who make their money on the ongoing relationship of any clients referred. We have also seen planners and accountants creating in-house capacities to do the broking as they find these relatively easily accessible,” he said.
Australian Capital Home Loans principal Barry Parker added that not only is it possible for a mortgage broker/financial planner to wear the two hats effectively, but the client really benefits in the long run.
“Home loans aren’t rocket science. And if you’re going to do a financial plan for someone – doing it all at once, sure, that’s a big ask, but in the long term is has such positive effect.”
Are mortgage brokers potential partners or threats? Have your say by commenting below?
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