Planning for tomorrow

Our decision to enter the financial services planning space using Vow Wealth Management as the vehicle is an example of this principle at work. It was launched in April and has the expressed aims of allowing our brokers to diversify their range of services and develop new income streams.

Our confidence in the strategy – and the fact it would appeal to some brokers – came as no surprise. As with any strategic move we did a lot of research with brokers, including surveys and focus groups, to identify what they wanted in a financial planning offering.

So what did they want? In short, the full financial services model, but, understandably, with a focus on property and risk-related services. From our perspective this approach will set them apart from other financial planners who often don’t offer direct property investment as part of their solutions for clients.

The model will offer brokers the capacity to either refer work or to qualify as a financial planner. For referral work, the broker is paid a percentage of the policies sold for the initial introduction.

For those brokers that want to become full financial planners, Vow will assist them with the necessary education and training. The brokers’ clients are quarantined and no other offers can be made to the client without their permission. If the clients require finance as part of the financial services review they are referred back to the broker for all funding requirements.

We estimate that about 10 per cent of our brokers will want to fully embrace financial planning, another 20 per cent will want to offer some financial planning advice, such as risk insurance, but not the full range of services (they will be RG146 compliant), and the remainder will limit their involvement to straight referrals, maintaining their focus on home mortgages.

Obviously, the introduction of a financial planning arm will place a greater workload on those brokers who decide to run with the concept. To ensure they can handle it we will establish a number of offices (known as “hubs”) to assist them in the transition to a more professional environment.

Many of our brokers are enthusiastic about this concept of hubs. In March, when surveyed about whether they would want to participate in a hub, 20 per cent expressed a “high level” of interest and another 38 per cent expressed “some interest” but wanted more information.

What has to be remembered is that a large proportion of brokers still work out of their homes (or even their cars), placing constraints on their productivity and ability to grow their businesses (similar to the life industry in the 1980s). Having access to professional office space will enable them to grow their teams, to better impart their skills to new recruits, and to exchange knowledge with colleagues.

We are not travelling down this path alone. Especially in the early stages, the strategy calls for non-exclusive joint venture partners, and to this end the first such agreement was signed with The Selector Group in April 2011.

The Selector Group was originally a mortgage broking business but changed its focus to start offering financial planning as part of its service. Today it generates 40 per cent of its income from financial planning with the remaining 60 per cent split equally between mortgage broking and property, commercial broking and equipment financing. From our perspective it made sense to partner with a group that had mortgage brokering as part of its background and understood how to help brokers to either refer business or, in some cases, make the transition to financial planning.

Offering financial services with property as its focus was always on our agenda. But when we realised there were brokers quickly wanted to get into this field to diversify their businesses and develop other revenue streams, the impetus to launch the new operation.

For some time, brokers have sat back and watched as financial planners have encroached on their territory, and have wanted their aggregator to put in place a strategy that will help them lock in their clients.

By: Tim Brown, chief executive officer, Vow Financial