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How financial planning can add another string to your bow

by Demii Kalavritinos23 minute read
chris bates wealthify financial planning

In this episode of Elite Broker, the founder and managing director of Wealthful joins The Adviser team to talk how he’s married mortgage broking and financial planning to provide a diversified offering.

Tune in to learn how Chris segregates mortgage broking from the financial planning side of the business, how technology will impact financial advice in future, his social media marketing strategies and its benefits, and his advice to mortgage brokers thinking about offering financial advice.

You will also find out:

  • His thoughts on fee-for-service vs commissions
  • How he manages his clients and the stresses behind the role
  • How to build strong relationships
  • How he overcame the difficulties he has faced




Did you like this episode? Show your support by rating us or leaving a review on iTunes (Elite Broker) and by following The Adviser on social media: FacebookTwitter and LinkedIn. If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email This email address is being protected from spambots. You need JavaScript enabled to view it. for more insight!

Articles of interest:

Grow and diversify your business with Reverse Mortgages
ASIC on broker remuneration and ‘good consumer outcomes’
REA lacks ‘competitive advantage’ in broker channel
Opinion: Commissions are great for consumers


Full Transcript

Speaker 1: Welcome to the Elite Broker podcast. This is your host, Annie Kane.

Annie Kane: Hey everyone and welcome to this week's episode of Elite Broker. This week we're joined by Chris Bates, the founder and MD of Wealthful, and as always, I have my colleague James Mitchell, managing editor of The Mortgages, and I'm Annie Kane, editor of The Adviser.

                Today, Chris, we just want to find out a bit about your background into how you went sort of from the financial planning space into mortgage broking and how you've been finding that offering as a whole sort of wholistic financial service. I know that based off what I've read off Wealthful-

Chris Bates: Wealthful.

Annie Kane: Wealthful website ... It seems to be quite a lot about actually educating your clients on not just how to get a good home loan, but also then how to manage and service that along the way and improve their sort of financial literacy too.

                What was the starting point for you? How did you get into this industry? Then can you just give us a lead up into how and why you launched Wealthful?

Chris Bates: Initially when I left school, I became an accountant for a year and quickly realised that wasn't where I wanted to head. Then I thought I would try funds management, so I went and joined Platinum and realised that the investment banking world was not really the right place either. Then I met a financial planner and that was, I guess excited me because I was actually doing a bit of a trial day with him and got to see what it was like actually seeing people, helping people, and getting a really good taste of what financial life was about.

                Then I decided to move to London and got a job when I was probably the youngest planner in the country; I was 19, or actually I just turned 20, and I got a job at a retail bank over there, which was Santander, and then that was my initial way into financial advice. The first five years was ... The UK market is completely different to Australia, it's all around investment into investment funds. Property investments seemed like the real wealthy; it's not something that the middle class really do.

James Mitchell: Yeah.

Chris Bates: Yeah, so a lot of my work was with clients in their 60's, 70's, 80's, 90's-

James Mitchell: Oh, wow.

Chris Bates: ... sometimes. When I moved back to Australia, my initial company I joined was still in that space. It was all around superannuation, etc, and a lot of older clients, and then I thought, right, need a new job, and luckily at that point I had a few options. I joined a company called Property Planning Australia and that was a bit of a, probably a leap of faith, I guess. I didn't know anything about property and these guys thought they knew a lot about property, and I thought I don't know anything about it, so why don't I join these guys?

                That was my ... A huge flip into my direction. I went from working with a lot of older clients to all young clients. Since it started in 2012, it's all been working with clients in their 30's, 40's and 20's. I was probably lucky because I joined a company that had extremely strong property ethics, and in terms of the type of assets they would recommend to clients, and the type of relationship they looked to have with clients was much more than just a home loan, I guess.

                That was my exposure to mortgage broking. I was doing joint meetings with mortgage brokers as a financial planner and we'd run these what we'd call property plan meetings, and through that came very versed at the mortgage discussion. After about 12 months I said hang on a second, I might become a mortgage broker as well, and that's where I shifted.

                With their blessing ... They always knew I was gonna go open my own business, and so about three years ago I opened Wealthful, which was a wholistic financial advice business that was mainly built for 30 and 40 year olds, and property ... Because property is the biggest problem for 30 and 40 year olds, it has a huge element in it.

James Mitchell: Fantastic. Well, what's the sort of split in terms of running a business? You know? In terms of revenue and that sort of stuff, where would this ... What would the split be on a percentage basis between the mortgages and the financial advice?

Chris Bates: From a revenue point of view, due to up-front commissions, it looks like a huge portion, so it's probably like 70% to 80% of the revenue comes from mortgages.

James Mitchell: Yeah.

Chris Bates: That's mainly because a lot of my focus is on that kind of younger client.

James Mitchell: Do you charge a fee for-

Annie Kane: You keep stealing my questions.

James Mitchell: Sorry, sorry. Were you going to ask this?

Annie Kane: Both of these questions were mine.

James Mitchell: Oh, were they?

Annie Kane: Yeah.

James Mitchell: Oh, sorry. You stick to the script.

Annie Kane: No. I have them written down. I'm just like you're saying them before I even get them out.

James Mitchell: Fee for service?

Annie Kane: Yeah. Fee for service or commission, that's the next question, yeah.

Chris Bates: For mortgages or for?

Annie Kane: Yeah, for enterprise mortgage broking, so obviously financial planning most people would charge a fee, but I would assume with mortgage broking you wouldn't, but I just wondered what your role is or what your ...

Chris Bates: Yeah, so with mortgages it's like every other mortgage broker; same structure. I don't go down a fee route, and I guess there's challenges with that model, whether that ever comes in or not, I mean it's a different thing. Financial planning is definitely moving towards that way completely. It's only a matter of time before the whole industry loses all its type of commission, and it's FOFA is kind of the first round of that. In five or ten year's time I think across all products it will probably be gone, and whether it does the mortgage broking is a different industry I guess.

James Mitchell: One thing I did want to ask just about the sort of FOFA stuff, because I was working on our wealth titles, Investor Daily, and IFA, and stuff as the FOFA thing was happening, and now it's been a few years on. I speak to some people and they say that actually back when commissions were there, more people ... financial advice was available to more people, but then obviously they were ... commissions can be abused and so maybe it's a safer environment now, but you've got to pay upfronts, and sort of like a total comprehensive package, which is a lot more expensive. So it's sort of like this exclusive thing now, that financial planning. A comprehensive package of financial planning services is only available to those that can afford it.

                What are your thoughts in terms of somebody who obviously works with people who are looking to build wealth, and they're younger, and the access to financial advice I guess?

Chris Bates: I think technology in the next few years is going to rapidly change and getting access to financial advice will be much simpler, and it will be much more digitalized, and there'll be ways of engaging with platforms that don't really exist right now. They're already in development, and there's lots of people doing it, and I think ... So getting financial advice will be actually really cheap, and free, and you'll actually almost be able to do it online. For the majority of the population there will be a digital advice solution that won't be too far away.

Annie Kane: Do you envisage that being a sort of chat bot thing, or in terms of actually a person behind an app or a website?

Chris Bates: The interface might be a chat bot experience, which makes sense because most digital platforms are moving that way, but behind that will be an advice engine that will go through a decision tree, and analyse your situation, and we'll be able to give you practical kind of insights, and things, and takeaways that you should be doing, i.e., get rid of your credit cards, move it to a ... refinance your home loan, get yourself a better rate, put some more money into your super, etc. There's no reason why that can't be done by a computer, and so within the short-term the majority of the population will be able to get pretty good financial advice digitally.

Annie Kane: I was going to ask as well, like in terms of you sort of saying that you don't charge a fee for mortgage broking, but you do for financial planning. Is there any sort of confusion when you say to a client, like oh, I need you ... if we're going to offer advice, we need you to sort of talk to our financial planners, and there's going to be a fee alongside that. Is there any sort of confusion there in terms of people being like well, wait, why am I paying for that and I'm not paying for the other, and how do you justify that?

Chris Bates: Yes. You have to be really careful, because when you have got two licences you need to be very clear what licence you're operating under.

Annie Kane: Yeah.

Chris Bates: When I'm looking at on a mortgage broking side of the conversation, I'm saying that this is fitting into your overall picture and we kind of understand what you're doing, but I'm not acting as a financial advisor here because I'm not actually giving you actual strategies on other things like other investments and things like that. So we're talking about their overall plan, but they're the ones who are driving the decision behind it.

                The financial planning side, I move them towards that when we're looking at everything, and we're like managing an investment portfolio, or managing super, and then we start moving into fee paying services. Insurance as well. I'm saying look, I'm no longer acting as a mortgage broker; I'm now acting under financial advice licence and we'll, so etc. You do have to be careful. I do think mortgage broking, in time I think there will be a fee for service offering for the more skilled ones that should be charging a fee, especially if commissions do get reduced for any reason, so I think having a value proposition more than a mortgage is a smart move.

James Mitchell: Just as someone who's worked, obviously, in both camps and does work in both camps, in terms of the work involved ... because this is something I think which often gets ... there's misconceptions about it in the mainstream press and in some of the stories that come out about mortgage brokers who have become a bit of a target at the moment.

                In terms of the work that goes into helping a customer, bringing a customer onboard, going through that whole process from first inquiry all the way through to settlement. What were your initial perceptions of it when you first came into broking?

Chris Bates: Not in an arrogant way, but more just being ignorant, I guess, I underestimated mortgage broking. I thought it would be easier than it is. It wasn't until I started to lodge my first few deals and started to like ... Well, if this isn't going straight through, and I've got to ask questions, I've got to chase this up, and the client's getting annoyed, and to go through that experience and actually understand the stresses behind it, and I guess also managing the client, because it goes from a very ...

                Financial planning world you can do it at your own pace. Setting up a super fund if it takes a few weeks, it takes a few weeks. If you want to set some insurance up, if it takes a month, it takes a month. With mortgage broking you've got to get it done.

Annie Kane: Yeah.

Chris Bates: You need the pre-approval, you need the ... and the client's on your back. Kind of that world is completely different to financial advice, and I think a lot of advisors when they step into mortgage broking don't understand that, and if anything over the last three ... I've been doing it for four years. In the last two years, bank policy has completely shifted and it's much more technical, it's much more ... To actually select the right loan you actually have to get your thinking cap on and actually diligently pick the right one. Whereas before, one rate, all the banks; it was much simpler.

                The conversation I think ... Yeah, clients are more savvy I guess, so you've got to manage that. I would say that definitely I underestimated it, and managing two hats isn't as easy as it sounds.

James Mitchell: Yeah.

Annie Kane: In terms of actually ... You were mentioning there about most of your clients being between 20 and 40, and previously you'd been working with an older generation client. What sort of main differences you're seeing in sort of people coming through your doors? I mean obviously some are looking at super and some are looking at home loans, but in terms of actually the differences in people just looking for a home loan, is there a generational thing where it's sort of like, I don't know, 20 year olds are looking for fixed rates, and maybe 40 year olds are looking for interest only? Is there anything like that, that you're seeing in terms of trends?

Chris Bates: Yeah. The ones who haven't got property are chasing their towel, and they're stressed, and they're looking for ... they're unsure what to do. The ones who have are usually in a pretty good state, so they're looking to invest; they're looking to take advantage of the opportunity.

James Mitchell: Equity and stuff like that?

Chris Bates: Yeah, and so it's a really have and have-nots. The ones who haven't are stretching themselves, putting themselves into big mortgages, or going rent-vesting. They're the two options they're looking at, so they're pretty much giving up on home ownership, and they're saying look, I'm just going to focus 100% on investing and deal with all the challenges of renting, or they're going to buy a family home that's affordable and they're just kind of throwing all their eggs into that basket. The next ... They're probably the two stages that I'll help clients is either the ones looking to get their first home, or someone who has done really well over the last probably five years and he's looking to take that next step.

James Mitchell: What I think is a bit sort of, I hate to use the word unfair, but in terms of APRA, what APRA's done, and the regulation, and the tide of credit from the banks, and all this sort of stuff, is that basically up until five years ago or three years ago when all this stuff happened, you had looser lending policies, or definitely not as tight as they are now, and you also had the beginnings of this sort of a bit of property boom.

                So the people who got in, going great guns. Obviously all that's tightened now, and then you've got people who want to get in now, and the market's at its sort of peak in Sydney and Melbourne in particular, and credit's a lot tighter, and then you've got the government talking about things like affordability. Nothing's really working in their favour at the moment, is it?

Chris Bates: Yeah, 100%. It's a double-hit really.

James Mitchell: Yeah.

Chris Bates: You're paying more than ever for the property and you're paying ... I mean yes, interest rates are lower than they've ever been, but you're still taking out that huge debt and you can't borrow as much.

James Mitchell: Yeah.

Chris Bates: It is a double-hit, definitely.

Annie Kane: And wages aren't going up with that, so ...

James Mitchell: No. That's nuts.

Annie Kane: And recently we've heard from ANZ sort of putting some post codes of restrictions down on an apartment, and loans, for example, even in markets where ... You know people think Sydney and Melbourne is difficult, but now Brisbane and Perth are also sort of a bit harder for apartment loans. Are there any things that you're seeing that's changed over the last 12 months in terms of what the lenders are doing? Have you found any difficulties placing loans?

Chris Bates: Yeah, 100%. Servicing I think is 30% if not 40% lower than it was. I haven't done any exact calculations, but I'd be surprised if you looked at someone's situation three years ago and then today, it's probably 30% or 40% lower. Even today I was chatting to a client. He's got $2 million of debt, he owns $250,000, wife isn't working ... he can't borrow as much as he could. He can't refinance his loans, they're all low-interest only, it's not going to be long until they all go principal on interest ...

Annie Kane: Yeah, yeah.

Chris Bates: And so how is he going to be able to afford it, and he can't refinance, so there's going to be consequences like that coming.

Annie Kane: I guess that's where the financial planning comes in quite useful; you can really advise around that, like ...

Chris Bates: Yeah, so a lot of what ... In his situation, he's got three properties, they've all done well, but two of them aren't growing assets long-term. So, two of them are kind of newer units, they're in big development, they're in areas where there's already an influx of more supply coming. The question for him is whether he keeps those assets or not, or whether he cashes in, and so the advice to him might be, in time, will be well, let's cash in on those properties. We know that the growth prospects are limited at best. We're in the top of a Sydney market, and does he reduce his home loan debt?

James Mitchell: Yeah, yeah.

Chris Bates: And then look to re-borrow potentially when his wife goes back to work? We do ... It moves much further on than just how we pay these loans down.

James Mitchell: One thing just I guess before we sort of wind up, but I wanted to ask about this. It was about social media, because actually how I found out about you and about your business was through LinkedIn, because I'm on LinkedIn quite a lot. You do a lot of posting on there and it seems like you get a lot of interaction, you get a lot of comments, you get hundreds of likes on your posts; they're interesting. I just wanted to I guess find out how you developed that sort of strategy in terms of posting good content which people want to read, and obviously it's liked and it's shared, and if you've seen a bottom-line benefit as a result to the business.

Chris Bates: Yeah, 100%. I've been doing it for 2.5 years. The first year was writing lots of long-form articles and it was probably I just heard about content marketing, started a new business, wanted to attract new clients, needed to kind of get people to know who I was, so I decided to just start writing blogs. LinkedIn had just released an option called Pulse, so you could actually write articles. I didn't get any engagement. A couple hundred views, a couple likes. It wasn't going anywhere.

                I then just shifted my content and I just said look, I'm going to stop writing about financial stuff. I'm just going to start writing stuff that I'm passionate about, and things that I'm interested in, and I'm just going to do short-form because it's more digestible, and I put a picture, and then the engagement started to happen. Over the last probably 18 months gone from maybe 2,000 connections to like 16,000. Last year I was probably only getting four to ten inquiries a month off it and it would kind of come in little waves, but then this year I don't know what's happened, but obviously the volume of connections has gone up quite a lot, and now I'm probably getting that per week.

                The powerful thing out of it is that clients are coming to me, and so they're saying, "Chris, I want help," rather than I'm going to the client and saying, "I can help you."

Annie Kane: Yeah.

Chris Bates: And so when they come to me, the way of filtering it is I'll have a 30 minute phone call and have a really good chat, and I say the first step is always throughout this really good chat. You can very quickly understand where they're at, what position they're in, are they taking this seriously, if so, can I really help them, or if not, can I help them on that phone call, and then I'll have a meeting. I guess that's kind of ... It's definitely working at the moment, yes.

James Mitchell: Nice, fantastic.

Annie Kane: And just to sort of round up. If there are any mortgage brokers listening who are thinking about maybe offering financial advice or partnering with someone to do their financial planning as a referral basis, is there anything they should be looking out for or thinking about when trying to form those relationships?

Chris Bates: Yeah, 100%. Most planners don't get it that mortgage broking is a huge part of financial advice. What a financial advice client should generally do is go to a mortgage broker first before a financial plan is even written to figure out where their buying capacity is, to figure out what their equity is, to figure out what position they're in. The only way to do that is actually to refinance their loans, get evaluation on the property, etc. That then facilitates the financial plan. The first thing if you are speaking to a financial advisor is it probably should be ... The first thing your financial advisor should be doing is getting a mortgage broker involved, but they just don't understand that.

                Secondly, financial planners generally don't know much about property, because A, they've never been paid to recommend it, which is a good thing, and sometimes I build relationships with people that I probably shouldn't build relationships with. If you're a mortgage broker and you understand how the property market works, and you're the one out there with good relationships within the property market, you're a huge value add to financial planners, but you've got to understand your value proposition to them and where you fit into their process. That would probably be the advice is to actually sell yourself as a value add to what they're doing.

                Then the easy one to build trust and repertoire is you should be asking questions around insurance, and every time you do a loan make sure that they are at least sitting in front of another advisor to actually make a call on whether they need insurance or not. I think that's part of your responsibility as a broker is to make sure at least they get in front of a decent financial planner to look at their insurance. Yeah, I mean that's an easy win.

Annie Kane: Good. Good advice as well.

Chris Bates: Yeah.

Annie Kane: And interesting to hear it from someone who kind of went from that world into mortgage broking rather than the other way around.

Chris Bates: Yeah.

Annie Kane: Well, thank you so much for your time for coming in today, Chris.

Chris Bates: Pleasure.

Annie Kane: And thank you, James, for your time as always.

James Mitchell: Sorry for stealing your questions.

Annie Kane: That's all right. I'll let it go. If you’re interested in establishing yourself as a trusted SME broker or just want to learn more about how to capatalise on the opportunity, then why not attend The Adviser’s SME broker boot camp in association with principal partner NAB. Its visiting Sydney on the 14th November, Melbourne the following day, Brisbane on the 23rd and Perth on the 28th of November, and it’s a free to attend one day boot camp which will answer all your questions and broaden your professional horizons. For more information visit theadviser.com.au/bootcamp-sme-broker. For all of the news, features, and social media related to mortgages, please do visit www.TheAdviser.com.au and find us on Twitter, Facebook, and LinkedIn. Catch you next time.

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