Business outcomes - Advice you can bank on

Residential lending will obviously always be the industry’s bread and butter; however, many brokers now appreciate there are significant benefits that come with adding new strings to their bow.

Offering financial services, for example, helps a broker diversify their income, mitigates the negative impact of reduced commissions and helps them foster deeper relationships with their clients.

Nine of The Adviser’s top 10 Elite Business Writers said they offered more than just a home loan. In fact, each of these writers wrote an average of $110 million in other business – independently of their residential mortgages.

While a majority say they are diversifying into insurance, financial planning is also fast gaining traction. Almost 90 per cent of the nation’s top writers say they have “considered” becoming a financial planner in a bid to drive their bottom line and strengthen their client relationships.

Being able to develop a sound financial plan for a client will help make them ‘stickier’ in the long run, boosting the opportunities to secure repeat business.

BECOMING A FINANCIAL PLANNER

So, what exactly does it take to be able to offer financial advice professionally?

Brokers who want to become a qualified financial planner need to be aware there are some preliminary educational requirements, says the Financial Planning Association’s (FPA’s) head of professionalism, Deen Sanders.

All planners must complete an accredited course, such as a Diploma of Financial Services (Financial Planning), or an undergraduate degree offered by universities and other accredited educational institutions.

To be able to give financial advice, they also need to comply with the Australian Securities & Investments Commission’s (ASIC’s) Regulatory Guide 146 (RG146).

ASIC stipulates that financial advisers must demonstrate nine core skills, including being able to identify client needs and objectives and develop a sound, long-term financial solution.

Once a broker has completed the training needed to become accredited, they can then opt to continue their studies and become a Certified Financial Planner (CFP).

CFPs need to have met rigorous educational requirements, completed examinations, have relevant, approved experience and adhere to a code of ethics.

Newly-approved planners are also required to complete a certain number of Continuing Professional Development (CPD) hours each year.

Brokers should not be put off by the requirements, the FPA’s Mr Sanders says: “The CPD point requirements are in place to make sure planners are constantly operating at a high standard, which is something mortgage brokers are already comfortable doing.”

“Most planners exceed the number of CPD points required without even trying,” he adds.

But while the two industries have much in common, they also have important points of differentiation.

Brokers tend to deal with a niche area of a client’s life, such as their current financial arrangements; a financial planner looks at the client’s past, present and future financial situation before developing a solution tailored to their needs.

“By combining financial planning and mortgage advice, brokers can build a deep relationship with each and every client – a real benefit to a broker’s bottom line,” Mr Sanders says.

“The more products and services a broker can offer their client, the more likely they are to secure the client’s repeat and referral business.”

TREAD WITH CAUTION

Despite the benefits of diversifying their revenue stream, brokers should approach the move with care, according to Mr Sanders.

“I expect to see significant growth in the number of brokers offering both services because both professions complement each other so well,” he says.

“That said, I believe it is incredibly challenging for brokers to be successful in both areas. There are so many compliance obligations that brokers need to make sure they are really ready and willing to take on the challenge.”

One broker who was both ready and willing is Anthony D’Alessandro of Required Financial Services.

After launching a dedicated mortgage broking business, he and co-owner Frank D’Alessandro soon realised there was merit in broadening the business capabilities to include financial planning.

“We had a few clients suffer because they did not have the right insurance cover,” Mr D’Alessandro says.

“To stop this from happening again, we decided it was necessary to push the business to the next level and offer insurance.

“It just seemed like the natural progression. That then opened the door for us to offer more than just a home loan and house insurance. We decided to take the plunge and become licensed financial planners.”

While Mr D’Alessandro admits it can be difficult for brokers to successfully work across both areas, he believes the reward is worth the challenges.

Australians are notoriously time poor and if they have the option of saving both time and energy, they will inevitably take it.

“They want a one-stop shop,” he says. “They want to know they can not only get their mortgage, but also their insurance and life cover from the one place – which is what we endeavour to offer.

“If they trust you with their mortgage, they trust you with their other financial services. So mortgage brokers are perfectly positioned to offer financial advice as well.”

The only downside to becoming a financial planner, according to Mr D’Alessandro, is that it is a time consuming practice.