A positive outcome from the banking royal commission will be that customers will increasingly turn to, and have a greater appreciation for, mortgage brokers, an elite broker and wealth adviser has said.
While the financial banking royal commission report was unfavourable to the mortgage broking industry, with commissioner Kenneth Hayne’s recommendation to ban lender-paid commissions threatening the livelihood of brokers, there is a silver lining, according to the director of Keystone Financial, PJ Patterson.
Speaking on an episode of The Adviser’s Elite Broker podcast, Mr Patterson said there is a confluence of factors impacting credit availability and accessibility that makes the lending environment even more difficult for customers to navigate, compelling them to consult brokers.
He observed the increased level of interrogation of loan applications, admitting that he has been having “different conversations” with loan assessors.
“Things that I as a professional would say, [such as] ‘Well, this is easy. This deal is going to fly over the line’... All of a sudden, now I’m having different conversations with assessors. They’re asking more questions. That’s probably off the back of the royal commission and the [other] concerns that are maybe floating around about Australia’s property market,” Mr Patterson said.
“But it doesn’t dissuade me or discourage me from wanting to do the job because I know that the value I bring to the transaction, the client will really see that. They’ll see how hard I have to work now to get the deal done and to help them.”
He continued: “If anything, this environment’s going to build, for the good brokers out there, more appreciation amongst [our] client base for the job that we do and recognition for the job that we do.”
Mr Patterson, who is also the chair of Independent Financial Brokers Forum’s (IFBF) committee, said one of the main conversation topics among brokers has been the importance of diversification so that they are able to cater to more of their existing and future clients’ needs and protect their income from future shocks to the industry, especially if the government legislates radical changes to the broker remuneration model.
“We’ve always had this niggling attack from government and from regulators trying to maybe close the walls around our business and what we can actually do. So, diversification has been a big topic of ours. Having relationships with financial planners, other asset brokers, other people that we can bolt on to our business and have additional income streams and revenue streams coming in,” the Keystone director said.
Reflecting on his own experience in growing KeyStone Financial, Mr Patterson, said initially 100 per cent of his revenue was generated through mortgage deals, largely residential. Then he started earning income through asset finance deals.
Today, between 60 per cent and 65 per cent of Keystone’s revenue is related to financial planning and fund management activities.
“So, if you were coming to see me and we were sitting down, regardless of whatever initiated the conversation – if it was a mortgage or a financial planning conversation – I know that there is a range of services that you need from a professional like me. That’s why I went out and got all those licenses,” Mr Patterson said.
“Once we built a rapport… I could have conversations around personal risk insurance, around your superannuation, around investing, around estate planning, around your debt, around maybe buying an investment property or whatever that conversation is.
“[The way] I positioned myself with clients [is by saying], ‘If you have a question about debt, about equity, small business lending, anything, I’m the guy that you should pick the phone up and talk to because I will either know the answer and can help you, or I will know a professional in my network that I can bring in to assist with this transaction or give you the knowledge and the assistance that you need’.”
The Keystone director’s other advice to brokers is to be in regular contact with clients, particularly through e-newsletters. He attributes this practice to his “very low run-off rate”.
“I do regular market updates. I have embraced the microphone and the podcast and everything else. So I provide now regular recorded content for my clients… We don’t know when a client is going to need us, so we have to almost always be [top of mind],” Mr Patterson said.
“I will often get a client who has forwarded a newsletter email to someone else to say, ‘This is the guy you should talk to.’ I think first and foremost, you need to have some regular communication.”
However, he suggests brokers pay a third-party to prepare newsletters or use existing tools, such as Connective’s My Marketing.
“Don't kid yourself that you're going to write some newsletter every Friday or every month. Pay someone to do that,” Mr Patterson said.
To find out more about how PJ Patterson grew his firm, listen to the full Elite Broker podcast here.