A top mortgage broker has explained how he diversified his business after learning that one of the big four banks had slashed its commissions.
Speaking on The Adviser’s Elite Broker podcast this week, Finance Made Easy’s Tony Bice revealed that Westpac’s decision to cut broker commissions back in 2008 prompted him to look at new sources of revenue.
“Westpac actually slashed the upfront commission from point seven down to point five overnight. And I remember it clearly. It struck me as a broker that we had no control over, at that stage, what the banks could do with regards to our remuneration,” Mr Bice said.
“I remember speaking to a senior mortgage broker at the time and I said ‘if Westpac can do this, what's to stop CBA from doing it or ANZ or NAB or Macquarie Bank?’ and he said ‘yeah, you're right’. Mr Bice asked the broker what he was going to do, to which he replied that he was simply going to have to write more home loans.
Thinking there had to be a better way, the elite broker began searching for new revenue streams that would complement his product suite in residential mortgages.
“That's when I started to gravitate towards risk insurance,” Mr Bice said. “I remember thinking to myself, becoming a financial planner - that sounds really scary. I don't know whether I was up for that. All I did was buddy up with a friend of mine and we went and got our diploma in financial planning, which took us about six months at the time,” he explained. “Having a buddy made it easier to do the course and then we basically stumbled through it together with regards to finding a dealership and getting all our accreditations with the insurance groups.
Almost a decade later and Mr Bice has a thriving brokerage and financial planning business.
“In the last five years, I’ve more than doubled my monthly remuneration by bringing financial planning into the business,” he said.
With growing speculation that banks could change their commission structures in light of the ASIC and Sedgwick reviews, Mr Bice’s story shows how some brokers can turn a potentially negative situation into a positive outcome and transform their businesses in the process.
“I've been playing around in this space for nearly 17 years now. I don't worry too much about all the noise that happens within the industry, Sedgwick report and who's leaving the business, all this sort of stuff, because you can't control it. If a mortgage broker sat down and freaked out about every piece of industry news that's going across their table, they’d be a nervous wreck,” Mr Bice said.
“What I tend to do is just push it to one side and keep going with what I'm doing.”
[Related: Major bank branch undercutting broker rates]