For convergence to work both parties need to have “skin in the game”, says ING Direct’s executive director of distribution Lisa Claes.
As many firms start to offer other services to their clients, the industry is seeing a range of different models of convergence, said Claes. While pure referral models do work, they are inconsistent, often risky, and rely entirely on “the energy and preparedness of the individual", she said.
“The ultimate, but definitely the most complex and largest investment upfront, is where you have the one entity with dual licenses. The more intertwined and inextricable they become from an ownership perspective, the better they tend to operate because people have got skin in the game.”
IMFS director Janine Carpenter says the company looked at a number of different convergence models before settling on one that worked.
Initially IMFS had relationships with a variety of different insurance brokers and financial planners before settling on a group that became their permanent referral partners.
Once both parties were comfortable with the proficiency of the other, the relationship advanced to referral commissions, and IMFS is currently finalising the creation of a separate entity to oversee a joint venture between the parties.
“In doing that it becomes about referring the client on in such a way that they are comfortable that they need to go and get this advice and make this decision.
“We provide a warm introduction because the insurance broker is actually sitting in our office and can meet the clients after we’ve seen them. There’s got to be that real commitment to the relationship in making clients feel comfortable that these people are part of our business, they know what they’re doing and we wouldn’t refer them if they didn’t.”
Mortgage Solutions Australia opted to develop a financial planning arm in-house, and broker Sandy Joseph says the decision was made to ensure clients received the best possible financial advice.
“Each of our clients is given the opportunity to have a health check done on their insurance and their risk from our financial planning arm, because I do believe that we have a duty of care when we’re increasing somebody’s debt to make sure that they‘re aware of those risks, that their insurances may need a review.”
The problem with standard referral relationships, says Joseph, is that many clients will be so caught up in the mortgage process that they won’t act on a suggestion to contact a financial planner.
“Often they’re so excited that they’ve got their home that they don’t actually do anything about it. In this case they actually get a phone call and an update. I think it’s a really responsible part of what we do.”
Mortgage Solutions also has a strong and long-standing referral relationship with a group of real estate agents, many of whom are also shareholders.
“Therefore by referring through Mortgage Solutions they obviously want to get the added service, but they also have an interest in the company as well."
Maintaining robust, mutually beneficial relationships with a number of trusted parties not only helps to increase revenue, says Joseph, but allows for better service to your clients.
“It becomes an all-round service, rather than just choosing the right home loan and the right lender you’re actually providing that full service, rather than just looking at that one aspect of what you need to do.”
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