The Adviser talks to Anthony Landahl from Equilibria Finance about his new business and how he balances relations between financial advice practices and their clients by servicing their broking needs. Here, Mr Landahl explains how a clear business plan helped him begin his business with confidence, how he's planning ahead to achieve his career end-goal, as well as his thoughts on the prospect of a 'best interests duty' imposed on the broking industry.
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James Mitchell: Hello and welcome to Elite Broker. I'm your host James Mitchell, editor of The Adviser, and we're joined once again by Annie Kane. How are you doing, Annie?
Annie Kane: Fine James. How are you doing?
James Mitchell: Good, thank you. And we've also got Anthony Landahl in the studio from Equilibria Finance. He's been working in and running financial services businesses for the last 15 years. And we're gonna have a chat to him, a little bit about his business and what he's doing in the mortgage broking space, and also a little bit on the financial advice side as well. How are you doing Anthony?
Anthony Landahl: Good, thanks James. Good, thanks Annie.
James Mitchell: So tell us a little bit about, I guess, your background in financial services. I understand you've been working in the space for some time, and it seems like Equilibria's quite a new business that you've launched. Tell us a little bit about the journey there.
Anthony Landahl: Yeah, so I've been running small businesses for about 20 years now, and a large portion of that's been in financial services.
So for the last six or seven years before I started Equilibria Finance, I was specifically a general manager at Principal Edge Financial Services, which is a boutique advisory practise in the eastern suburbs. We had a team of 17 and we built that to a good-size practise. Part of what we did in there was build a mortgage broking business in-house. So we saw an opportunity there to not only serve the existing clients by broadening that service offering.
But while I was at that particular business as well, we had a number of relationships with mortgage brokers, and I really got a good understanding of the mortgage broking industry, how mortgage brokers work with advisers, and I saw some relationships, for various reasons, that didn't work with advisers and brokers as well.
So last year I hung out my own shingle, and decided to start Equilibria Finance with a very large focus on building a service offering around working with financial advice businesses, and servicing their clients' - residential and commercial - mortgage broking needs.
James Mitchell: It's a funny one, the sort of relationship between brokers and planners, because there's some groups that have done it very successfully. There are some big groups like Mortgage Choice, for example, Yellow Brick Road. They've taken a little longer, I guess, to get things up and running. I see Mortgage Choice is now sort of broken a profit with their financial planning. But it's not something which is sort of like you hit the ground running with that relationship. I think with any referral relationship, whether it's with agents and brokers, or planners with brokers, there seems to be some interesting dynamic which needs to be teased out. But there's obviously some sort of formula. What have you learned in terms of the relationship between brokers and financial advisers?
Annie Kane: Yeah, you were saying that some of them didn't work. Could you just expand on that?
Anthony Landahl: Sure. So the main tension I've seen between brokers and advisers, and this isn't meant to be a generalisation by any stretch, it's ... When I haven't seen it work, the main tension has been around the difference in mindsets between the broker space and the advisers. The relationships that haven't worked have been where they haven't invested in the partnership up front. They haven't got to know each other's businesses. They haven't got to understand their ideal clients. Brokers, by their nature, are a little bit more transactional, instead of around the client relationship and the client experience.
Now, to flip that on its head, what can work is when both parties take their time and invest in the partnership. So we're very good at developing relationships with our clients, as advisers are. But advisers, accountants, real estate agents, brokers – no one's very good at actually having a business-to-business engagement process around the initial engagement, around the needs analysis with your referral partner, around the process with your referral partner, around how do you refer? What happens when an issue comes up? How do you resolve that issue? And then around the ongoing relationship.
So I'm very much building a structure around not only the business-to-client engagement to do the brokerage, but the business-to-business engagement with the partner practises I'm working with.
Annie Kane: So how does that relationship actually start? I mean, you were saying that about sort of doing needs analysis. Do you sort of meet up and say, "Okay, what are your ambitions and goals and here’s what ours are…?"
Anthony Landahl: Yeah, the first … My first point of call is to understand what's their objective as an advice business, because that's where I'm focusing. What are you looking for out of a lending solution? Is it that you're looking at building value for your business? Are you looking at building a relationship with someone to broaden your service offering to your clients? Or are you looking for a revenue stream? Or is it a combination of the three. I use a toolkit to really try and understand what are their pressure points? What are they trying to achieve in terms of the objectives of their practise, not only with the lending solution. Then how do I tie a solution in, or an offering to suit what they're actually looking for, rather than just starting to say, "Look… Actually I met someone the other day, I think he wants a loan, give him a buzz.” Much more of an engagement at the front end. So you then build a structured process around the business-to-business agreement you have, down to how do you refer a client? What's the most appropriate way to refer your clients and look after them through the process and communicate back to the practise?
James Mitchell: There's definitely a science to, I think, referral partnerships. And with a business -
Anthony Landahl: There is.
James Mitchell: - Like this, which is so involved in referral relationships. I mean that's what it's built on. It's really important to get it right. I was having a chat with one broker a couple of weeks back, and we were having lunch, and I was asking him, he's quite young, been in the industry about two years or so. And I said, "Where do you get your business from?" And he said, well he started out just by going on LinkedIn and asking people, "Do you need a broker? Do you need a broker?" Or "Can you flick me leads?" And that wasn't cutting it because he was one in a million who was asking that. When he actually started putting things forth and for what he could provide to them – that he could give them some business – then they were all replying to him. So I think it's definitely a give and a take.
Anthony Landahl: Yeah, it is. And look, it's just being up-front about what's the boundaries and the behavioural attributes to that relationship? Are they expecting … Are they looking for a referral partner to bring a bunch of leads back in? Now that may look different to someone who's looking at more building a joint venture and building value out, understanding them as your start point and developing an offering to suit their needs, and their client needs.
Annie Kane: And what was the actual triggers that you were saying that you obviously you sort of set up this own company? What was the sort of turning point for you specifically to actually do that?
Anthony Landahl: Well, there's probably a couple of things, I guess. I mean, I'm not getting any younger, so if I was going to start my own practise, I was probably getting to that stage where now is the time to do it. Where you've got a good … I've been in the industry long enough. I understand financial services. I understand mortgage broking. I understand financial advice. In five years’ time, it probably wasn't on the radar as much as it is now.
So I guess you get to a level of experience where you believe you can do something and you're able to back yourself that you've got a service offering that you can take to market, that adds value. As well as the fact that, yeah, I guess part of it was just the timing. I wasn't getting any younger and had to make a decision, "Do I remain where I am?" Which was a fantastic business, great team, we did some great things there. Or do I go and start my own business? And I stepped off that precipice and made the shift last year.
Annie Kane: Yes. So how long has it been up and running now?
Anthony Landahl: I started it latter part of 2016. So I took some time … When I started it I took a little bit of time out to build the foundations of the business. To really understand and articulate my value proposition, build my website out, really understand what offering am I taking to market. So I've built a three-tiered service offering that I've taken to my referral partner market, in terms of the advisers and accountants that I'm working with. And then I launched the business with my service offering with a really clear articulation and understanding of what I'm doing, who I'm doing it for, and the value I'm adding to them.
And yeah, it's up and running, it's going well. I've engaged with some really good referral partners, and I'm having some good conversations with other ones, and it's forming a much deeper foundation to build a long term business, rather than just start running fast from the outset.
James Mitchell: How competitive do you find the mortgage broking space in particular? But specifically with referral partners, because if you look at mortgage broking as you've got your mum and dad, or your customers who want home loans, obviously it's competitive in that space. But from a referral relationship perspective, how competitive is it there, where you sort of go to meet an accountant or a planner, and they're like, "Actually I've got relationships with six other brokers."
Anthony Landahl: Sure. It's a bit of a double-edged sword, that. It's competitive to the extent that a lot of, obviously a lot of those professionals have pre-existing relationships. And if they're working that's fantastic, because there's obviously a relationship working and they've got a good broker, and they've got a good relationship there. Often I'll have a relationship, and it's an opportunity to have a discussion with them about what's not working, as much as what is working. And it may be there's an opportunity for other brokers to then come in and give a more appropriate service offering for them.
The other thing that I'm finding in financial services is there's a convergence of professions and service offerings, driven by technology, by clients, by the need to add more value to a client, more revenue per client. So there's a massive opportunity out there. With a lot of advice practises, they don't have formal structured referral arrangements with brokers. They don't know how to do it, or they take and flick it to Bluey down the end of the road, who they haven't really … They don't really know, which is just what they used to do.
So there are some people with the pre-existing relationships, and that's a competitive market. There's others where relationships aren't working. And with this convergence of advice, broking, accounting, there's also opportunities there to build in to their service offering in a way that satisfies their clients' needs and their business needs to offer a more whole-of-service offering to their clients.
Annie Kane: Yeah. I know that there are a lot of mortgage brokers that are sort of increasingly looking at diversifying and looking at the financial planning space, but obviously there's a separate sort of category there, with different rules, different qualifications that you need. How do you actually sort of take the client from, this is the mortgage broking area, this is who you're going to be talking to, and if you've got financial advice then … Is it a separate person they talk to? Or is it just someone who's got, sort of, two feathers in their bow – in their quill? Don't know what that phrase is.
Anthony Landahl: So yeah, I'm not sure if I've got this question right. I'm not running an advice business as well. I'm just running a mortgage practise.
Annie Kane: But does that have advice in it, or is it just mortgage practise?
Anthony Landahl: No, I'm just residential and commercial mortgage broking. So yeah, I'm not running financial advice, and I made a decision I'm not going to because in effect I'm then competing with the market I'm playing in. So yeah, I'm very much just focused on the mortgage side of it. And part of that is the commercial. There's a big opportunity with a lot of clients in advice practises are professionals with small businesses, so I see that as a big opportunity as well.
James Mitchell: Yeah, for sure. I mean, we've been covering the commercial and SME space quite a bit. I mean, what are the sorts of clients either that you have, or that you're looking to, I guess, yeah yeah, attract or be of service to in that space? Would it be small business owners? Would it be SMSFs buying commercial property, for example?
Anthony Landahl: Yeah, it's a combination. A lot of advisers specialise in that SMSF space, and a lot of their clients are small business owners. And there's a pretty good synergy there around them potentially looking at a commercial property to run their business out of, for example.
But it's not only that, it's the small business owners who may need some cash flow to get their business up and running. Or who are looking at expanding their business and need a new powder coating plant for their manufacturing facility. So commercial is as narrow or as broad as you really want to take it. You've got your short-term financing needs around the business operations, and you've got your longer-term expansion needs.
So if you're in a position … If you're able to invest in educating yourself and understanding small business needs, then there's a great opportunity beyond just setting up the self-managed super fund with the advisor and investing in commercial property. There's all sorts of challenges that face small businesses every day that need to be addressed. And cash flow is one of the biggest ones, in terms of running their business.
Annie Kane: We've had a lot of talk recently, as well, about small business lending and how SMEs in particular are finding it hard to access finance, and trying to open up those channels. What advice would you have to a broker who's looking to sort of go into SME lending, but doesn't quite know where to start?
Anthony Landahl: The first start point is to get to as many educative industry events that are on, or look at, through your industry body, they might have a training program around the commercial space, or speak to aggregator. Get some underpinning foundations around understanding commercial space.
We're all running small businesses. If you actually step back from your own small businesses, a lot of the challenges we're facing as we're growing and expanding are the same challenges that the small businesses out there are facing. But really understand what that commercial space is, and take some time to understand where you're going to play in that space, because it's a very broad space.
So it may be you just want to focus on professionals: dentists, doctors, that sort of small business. As distinct from large manufacturing facilities who have a different- similar set of challenges, but different scale of those challenges. So understand your offering, educate yourself, and then start taking that out to the market that you're targeting.
James Mitchell: Yeah, for sure. I think finding a niche is always good advice. Obviously, there's brokers that specialise in the sort of agribusiness base or the medical space. And Beth Powell, who is a digital marketing expert who was speaking at the Better Business Summit this year. She speaks about this idea of finding a niche, you know what I mean, and how you can- and in terms of marketing and how you can attract business that way.
One of the things I wanted to talk to you a little bit about, and I guess it's quite relevant in terms of the convergence of mortgage broking and advice, to a degree, is that obviously ASIC's come out with its review of broker remuneration. Annie was actually at the ASIC forum and there was sort of a bit of a discussion going on about the sort of FOFA best practise stuff and the mortgage broking, which is quite interesting…
Annie Kane: So yeah, they were suggesting that maybe brokers should have best interests duty imposed on them like the financial advice side does, and what the arguments for and against that would be. And quite a few people on the panel were sort of suggesting that actually already brokers do that as a matter of course. It's not that people are setting out to find a loan that's just not unsuitable; they're already trying to find something that's in best interests. How you actually define that, obviously, is the next step and sort of puzzle if they want to go down that route. Do have a sort of – thoughts on whether or not that should be imposed on brokers, or do you think you're already doing a pretty good job without having, sort of, regulation behind it?
Anthony Landahl: Yeah. I mean, regulation's a tricky space because over-regulation ends up bogging businesses down in compliance and red tape and there's an element of that, that happened with FOFA. But there was also some aspects of that, that took out conflicts and changed the behaviours of advisers, so they're good outcomes. So I think in the broking space, similarly, they've got to be very careful around what's the objective and regulating for the sake of regulating. My experience, and from what I've seen has been that at the end of the day generally, brokers are running their own practises, their brands are on the line, and they're acting in the best interests of the clients. I've seen some brokers do a hell of a lot of good work around that space.
If there's a conflict of interest, then, or behavioural aspects of any industry that can be influenced by unfair outcomes or monetary reasons, then they're the sort of things that, sure, I don't think anyone would argue, should be looked at. But at the end of the day, I don't think there's any brokers who aren't acting in the best interests of their clients, at the end of the day.
James Mitchell: It's an interesting one because obviously this report started, it was born out of the Financial System Inquiry, and then it took a long time running, in terms of them gathering their information, over a year. It's now come out, and it seems like they've done a hugely comprehensive study, over 250 pages in this review.
Annie Kane: 243.
James Mitchell: There you go.
Anthony Landahl: It's good sleeping material.
Annie Kane: Oh no, it's riveting. Keeps me awake!
James Mitchell: But the, I guess, the aim of it was to find out if remuneration had any impact on customer outcomes. But that whole idea of good customer outcomes is a tricky one because- and that's another thing, I guess, that they were discussing this week at the ASIC forum. How do you define a good customer outcome, you know what I mean? Is it a happy client? Is it a client who owns their own home eventually? It's a tricky one so it's an interesting the sort of conversations going on at the moment, because I don't think you can put a FOFA lens onto mortgage broking because the money's flowing in different directions for a start. And it's something which I've chatted to with many people in the industry about, over the last few years. But I think ASIC and the government probably have quite a task on their hands, in terms of trying to-
Anthony Landahl: Well, I think we've got to be careful as well. A lot of the advice legislation was driven around- Say in the insurance side, that was driven around up-front commissions being paid at 110, 120 per cent, and work just getting rewritten for, now, arguably, reasons of churning, rather than the client's best interest.
Now, we're not seeing that in mortgage broking. We talk about clients being happy. Well the broking- mortgage brokers are now doing over 50 per cent of market share. I think that speaks volumes to the work that mortgage brokers are doing.
James Mitchell: Absolutely.
Anthony Landahl: And that customers are obviously referring, and being advocates for the mortgage broker. Now I think that speaks fairly highly of the role mortgage brokers play in the industry, and the fact that the consumer sees them as a more independent, and a more- than say a banker line broker, without any disrespect. But the privately-owned mortgage broking firms, and that's growing to over 50 per cent of the market.
James Mitchell: Good point. And I think, a little bit like what happened in the UK. When more regulation happened there, it actually increased the third-party channel, all the use of intermediaries in the UK. And I was having a chat with Peter White from the FBAA, and he believes that 70 per cent broker mortgage share can easily be achieved the next couple of years.
Anthony Landahl: That's right. The thing with small business, as well, is that there's always gonna be change, and you just have to be agile. There was changes that came out in financial advice five or six years ago and everyone said it was the end of the world. Business models transitioned. Revenue models transitioned. Service offerings transitioned.
There's always gonna be change. They've just got to be careful about over-regulation and making sure that the reason for the change is valid, and that it is in the consumer's best interests at the end of the day.
James Mitchell: Very good point. I think that's just about all the time we've got today. But before we let you go, I just wanted to, I guess, ask what are some of the … What's your main goal for your business? Obviously, you launched it late last year, it's up and running. What's the sort of end goal for you in this industry, or for your own business?
Anthony Landahl: I'm building the business very much with how I want it to look in five years in mind. So I'm coming at it from a … Not only from a mortgage broker's perspective, but from a … I've run small businesses for five or 10 years, so I'm very much building a business for how it wants to look down the track, which is: be the expert in working with financial advisers, and with the service offering I've developed, have a team of brokers servicing those professional practises I'm working with, and an administrative team delivering on those services. So I'm not looking at being a one or two-man broking house, I'm looking at building a business that's well run, has good value proposition for its clients, and delivers a good outcome for the partner practises and the clients that we're working with.
James Mitchell: I guess having all that experience over the years, 15 or more years running businesses in this space has sort of … It's definitely good to harness that and leverage off that for your own business, so it's exciting times.
Anthony Landahl: Yeah. Busy times ahead.
James Mitchell: Good stuff. Well thanks very much for taking the time.
Annie Kane: And the best of luck with the new company.
James Mitchell: Yeah, and we'll have to catch up with you down the line and see how things are going.
Annie Kane: Yeah.
Anthony Landahl: No worries. Thanks for having me.
Annie Kane: Thank you
James Mitchell: No worries.
Anthony Landahl: Cheers.
James Mitchell: I've been your host, James Mitchell, and that was Elite Broker. Definitely join us next time and of course, in the meantime, do check out all the latest news, insight, and analysis on theadviser.com.au. Catch you next time.
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