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Why brokers need to rethink their self-employed clients

by Reporter6 minute read
re-think their self-employed clients

Brokers are potentially opening their businesses up to “massive risk” by missing out on the business needs of their self-employed clients, the head of commercial broking at a major bank subsidiary has said.

Speaking at the 2018 Industry Commercial Masterclass in Sydney on Thursday (26 July), Malcolm Withers, the head of commercial broking at St. George Bank, told delegates that many brokers are missing out on business by thinking about their self-employed clients as just home loan borrowers.

Mr Withers suggested that 40 per cent of the average broker’s database comprises self-employed clients, but that only 12 per cent of them use brokers for business lending.

“That means they are therefore going somewhere else for their business lending needs. And that becomes a massive risk to your business,” Mr Withers said. 


The head of commercial broking added that one way brokers could ensure they are the first port of call for these clients is by rethinking the way they approach self-employed clients.

He said: “When I think about what is happening in the industry and where we need to go and what needs to change to get there, it primarily rests in the way in which brokers operate and the way they think about clients.

“When I talk to brokers and I ask them to tell me about their business, their customers and how they run their business, they often tell me they have PAYG and self-employed clients for whom they do owner-occupier loans and investment loans. This is the problem.

“Business bankers don’t think about their customers as self-employed and PAYG; they tell me they have business customers and home loan customers. They, fundamentally, look at their clients differently.”

He continued: “When you start thinking of your self-employed customers as business customers, you start to look at them differently and understand them on a deeper level. You start to move away from being a needs-based supplier to being a relationship supplier.”

Mr Withers gave the example of one of his brokers securing a self-employed client with a home loan where a broker had secured a home loan, credit card and offset account for a self-employed client and their PAYG partner.

“The broker created a great outcome for them for their home loan, their needs were met, the customer was happy,” Mr Withers said, “but when I went out to see the customer with the broker and started talking about their business, how they did business, who their customers were, where they got their product, there was so much more there that could have been done.”

The head of commercial broking said that by talking to the client and understanding what the self-employed clients’ business and future plans were, a more comprehensive finance strategy could have been formed.

Outlining that the client was a tile wholesaler that imported tiles from India and China and distributed tiles to major retailers, Mr Withers noted that they were renting a warehouse, had some vehicles and equipment, were paying insurance premiums and had trade accounts.

Mr Withers said: “When I looked at it as a business customer, I started to see that they have a lot more we could have been helping with… Questions you should be asking yourself could include: Do they have income protection (because they are a key person risk in that business)? How are they paying for their $60,000 insurance premium? How do they manage that cash flow? How do they receive payments from customers? How do they pay their suppliers? What period of time do they have a cash flow gap?

“When we started to bring that together for the broker, we showed that although they fulfilled the need of a home loan and thought they had a relationship with their customer, it could have been a lot deeper. There is an opportunity to help with the business side of things, too.” 

According to Mr Withers, by having conversations with the client, they found that the business could increase turnover by a $25,000 net profit by buying a commercial property and could take on more business by buying larger trucks to deliver the tiles in.

“The client hadn’t thought about it,” the head of commercial broking said.

He concluded: “When I talk to brokers about their business, they are passionate, they talk about how they started, where they want the business to go, what the future looks like.

“A lot of brokers don’t have those types of conversations with a lot of their self-employed customers because they are thinking about their next property purchase or whether they want to refinance. 

“But you can have a vast and quality conversation with the customer about what their future business plans are and have a deeper relationship with that client when you start evolving from dealing with ‘self-employed clients’ to thinking about ‘business customers’.”

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