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Planning for the future

financial financial
Francesca Krakue 13 minute read

The relationship between mortgage broking and financial planning is well-established. Each can inform the other, and offering both as part of your business can enhance your customer service proposition. However, it can take a number of different forms. The Adviser investigates…

According to a recent straw poll by The Adviser, when it comes to offering financial advice to their clients, 28 per cent of brokers refer their clients to an external company, while just over 21 per cent refer to a financial planner colleague.

Meanwhile, almost 13 per cent are currently qualified to offer financial planning to their clients.

And while more than a quarter (25.4 per cent) say their business does not include financial planning, almost 13 per cent aim to do so in the future.


The results go to show that brokers do value what financial planning can offer their clients, but that there is still a notable proportion of loan writers who don’t yet offer it.

PLAN Australia CEO Anja Pannek highlights that financial planning services can help brokers improve client satisfaction by providing clients with a more integrated financial services offering while diversifying their business’ income.

“It becomes quite time consuming and challenging when [customers] are looking to solve some of the problems they've got or if they have questions on their financial life and they have to go to multiple people to seek advice,” she says.

“[B]ringing the two together can only improve the ultimate client experience and outcome.”

So, what are the different options available to brokers when adding financial planning to their offering?


Partnering with a planner

Entering into a referral relationship with a financial planner is one way of expanding your business’ repertoire to encompass financial advice.

When Mortgage Choice launched its own financial planning arm a few years ago, mortgage broker Lindon Reed, who runs a franchise in Manunda, Cairns, got on board.

“We weighed up the cost of putting in our own financial planner or if should we just do a referral type thing for our clients,” he says. “And we elected, because we are in Cairns, and knowing that other brokers and bankers have struggled finding quality financial planners, to do the referral method.

“I talk to my clients, and while doing their home loan set-up, I explain that it's part of the process; we've got a Mortgage Choice specialist who deals with reviewing their superannuation and their associated life and income protection.”

Initially, Mr Reed’s brokerage would pay for the financial planner’s flight up to the Gold Coast every six weeks for three days at a time, and put him up in a motel.

The investment has paid off though, he says, adding that the biggest benefit of the relationship has been increased client retention.

“We get up to 50 to 60 per cent of our clients in front of a Mortgage Choice financial planner. And that Mortgage Choice financial planner converts 80 per cent of those clients into some kind of revenue product,” Mr Reed explains.

“I might do 10 loans, I’ll put five clients in front of him and of those five clients he converts four to an insurance policy or whatever it may be.”

But while referral partnerships may be beneficial, PLAN Australia’s Ms Pannek stresses the importance of having a sound business plan in place beforehand.

“In thinking about entering into financial planning, it's really important to understand why. What are you looking to get out of this? How will financial planning add to your existing client base and your ability to grow your client base going forward and to the value you can bring to your customers? How does it align with your core value proposition? And how can you integrate it?

“It’s very, very important because, at the end of the day, you are dealing with your clients and someone else's clients. So, ensure you've got an alignment of values and business plans and outcomes you're seeking.”

The franchise model

There are a number of options for adding financial planning to a franchise, as Adam Youkhana, general manager of Yellow Brick Road (YBR) Wealth Management, explains.

“If they can afford it? Get a dedicated adviser. But a lot of franchisees would say, ‘I'm not there yet. The income is coming through but I'm not ready yet to sustain an adviser.’

“Option two: we hire a number of advisers that work in our head offices in Sydney, Melbourne, Queensland, South Australia and Western Australia. So, where a franchise does uncover the need for [a planner] … and they don't have an adviser in the branch, they will call one of our head office advisers and they'd liaise with them, schedule an appointment and the head office adviser would go out to that branch to do the appointment.”

The third option for franchisees under the YBR model are ‘wealth hubs’ that just focus on wealth, rather than credit needs.

“We could provide general advice on loan protect, general advice on general insurance and then it could be personal advice around financial planning,” Mr Youkhana explains.

However, choosing which option would work best for you involves a range of considerations, Mr Youkhana adds.

“I think operating income plays a big role. But you also want to consider the type of business you want to provide for your clients. Work out what's best for you and then, what is sustainable as a business model? A lot of franchises will say: ‘I'd love to get involved in financial planning. But there's a lot of work involved’. There are many aspects to consider from a business model. Capital is one. But is it the right fit for the franchise at that location at that time?”

Mr Youkhana points out that a franchise model can be a helpful method for brokers seeking to add financial planning as it includes foundational features such as brand, equity, logo, marketing and leads.

“There are a lot of individuals that are very well networked,” he adds. “So when they do break out on their own they have very good relationships with real estate agents, solicitors, all centres of influence.

“If you're good at that, and can form those agreements, go for it. But if you're willing to pay a little bit more for a franchise model then absolutely, consider that.”

Becoming a financial planner

The final option requires the most work, but taking the leap to become qualified as a financial planner can generate significant rewards for your business, according to Tony Bice.

The mortgage broker and financial planner from Finance Made Easy explains: “Because you're restricted as a mortgage broker, all you can do is bring up the importance of risk insurance for example, but you can't advise them… [so] most clients probably wouldn't see the importance of it and then it's basically not taken up at all or as much as it should be.

“When you go a step further and become a financial planner in your own right, providing full advice, you take control of the transaction, you control where it goes, your advice is what becomes critical to assist the client in making that decision, and your strike rate is somewhat higher.

“You’re able to give your client advice that they probably haven't thought of themselves, and you can get them on the same page a little earlier,” he says.

For brokers who might baulk at the thought of extra studies, Mr Bice emphasises that it can ultimately boost your remuneration and grow the value of your business.

He does suggest, however, that it’s a good idea to hire administrative staff to help with the extra processing that financial planning involves.

“The documentation takes a lot of time to put together. If I had to do it myself as well as be a mortgage broker, I'd probably sink,” he acknowledges, “So, I outsource it”.

“Outsourcing the structure of a statement of advice, for example, has been one of the shrewdest moves I've ever made in the financial planning space.”

He offers brokers a key piece of advice when embarking on the path to becoming qualified as a financial planner: “Go with a friend. Get another like-minded broker and do the course together. You'll get through it with a bit of fun.”

What are the qualifications?

According to CPA Australia, before you can provide advice that could influence a client's decision to purchase a financial product, you must:

  • Hold an Australian Financial Services (AFS) licence, or be authorised as a representative of an AFS
  • Meet both initial minimum and ongoing training standards as defined in ASIC's Regulatory Guide 146 ‘Licensing: Training of financial product advisers’
  • There is no specific qualification required in financial planning advice. However, you should ensure the course you choose is listed on the ASIC training register

However, the corporations amendment (professional standards of financial advisers) bill 2016, which passed the Senate on 9 February 2017 includes compulsory education requirements for both new and existing financial advisers, supervision requirements for new advisers, and a code of ethics for the industry. It also mandates an exam that will represent a common benchmark across the industry and an ongoing professional development component.

The new professional standards regime will start on 1 January 2019, whereby new advisers entering the industry will be required to hold a relevant degree.

Existing financial advisers will have access to transitional arrangements allowing them two years, until 1 January 2021, to pass the exam, and five years, until 1 January 2024, to meet the education requirements.



Case study: The Local Financial Planner
Kylie Platt and Susan Lepidi, who have a combined 32 years of experience in the finance and mortgage broking industry, established fully-diversified business The Local Financial Group a few years ago to offer clients a holistic financial service. The Adviser caught up with them to find out more about the ins and outs of introducing financial planning into the mix…

How did you start the company?

Ms Lepidi: Probably about two or three years ago, Kylie and I started talking to each other, around how we operated our businesses. The more we spoke, the more we realised that the way we wanted to run our businesses and what we wanted for the future were aligned. We decided to put our businesses together, because there would be more strength in the two of us working towards the same goal.

We came together in January 2015, and started under The Local Loan Company, then we added The Local Car Finance Company, The Local Financial Planner and we recently added The Local Financial Coach. They all sit under the roof of The Local Financial Group.

Why was it important to you to have a diversified business?

Ms Lepidi: For us we like to empower and educate our clients, and part of that is being able to offer them all aspects of finance. We don't want them to go elsewhere looking for products or services or advice for that matter, we like to think that they will come to us for everything that they need and we treat them like family.

Ms Platt: I think the point is that clients come to us naturally to ask us about all financial questions. So, for me, that's what drove me to get my financial planning diploma, it made sense. Often, I've been asked a question, I knew the answer but I couldn't legally give them the answer. I tried to outsource to different people, it would start well and then it would sort of lapse. So, Sue and I had this common feeling, even before we joined, why would we want to outsource when the clients are coming to us and we are trusted by the client?

How have you integrated financial planning into the business?

Ms Lepidi: Kylie is qualified as both a mortgage broker and financial planner but is mainly working as a broker right now. I am also qualified for both but I am mostly giving our clients advice as a financial planner at the moment.

Our team of brokers ask the questions anyway when they are doing their research on our clients. We ask, ‘Do you currently see a financial planner, do you have life insurance, do you have income protection insurance?’ And with the answers to those questions, it's really easy to introduce financial planning to the client.

What do you find are the benefits of having financial planning as part of the business?

Ms Platt: It just strengthens your relationship with your clients. And having it all within the same house, we have people who are like-minded and treat their clients the same way that we do, so anyone that works for us has to have the same philosophy that we do, and that philosophy then extends out to our clients.



Planning for the future
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