By increasing the range of products on offer, brokers can improve client relationships and increase revenue. In this special report, The Adviser investigates cross selling as a simple way to expand a broker’s offering
The mortgage broking industry is evolving, with the transactional broker who offers nothing but finance slowly disappearing – to be replaced by a new breed of broker that provides a much more holistic financial solution.
Under the National Consumer Credit Protection Act (NCCP), brokers are now required to make reasonable enquiries of both the “consumer’s requirements and objectives and their financial situation” in determining what financial services to provide. It means brokers have to consider their clients’ needs beyond simply their home loans.
This isn’t to say every broker must offer every product or service; most brokers have identified what they can offer themselves, and what they can refer to others. But while several factors, including the size of a broker’s business and their own skill set usually determine what a broker chooses to offer, it is now well established that broadening your business is best practice.
There are many ways to bring additional services to your business. For example, brokers can choose to employ additional staff to specialise in different areas, or they can undergo further training themselves. Alternatively, brokers can form referral partnerships with like-minded professionals such as financial planners and accountants in order to increase their offering. This method is simple, effective and allows brokers to provide a full service to their clients without a large investment. However, like any method, it can have drawbacks.
It is absolutely vital to choose the right referral partners. They should be professionals you can trust to serve your clients to your own high standard – and that’s not always easy to find. Often, a better solution, and usually the first step towards a more diversified business model, is working with lender partners to cross sell non-mortgage products.
There are a number of complementary products and services that a broker can very easily offer alongside a home loan product. These additions, such as income protection, offset accounts, credit cards and general insurance – all offered by a large proportion of lenders – can vastly improve the broker’s value proposition to clients.
Tim Brown, CEO of Vow Financial, says the cross-sell model makes sense – it’s a very easy chance to provide clients with a more encompassing service.
“There is no better time than when a client is buying a home or upgrading their home to talk to them about their other financial needs,” says Mr Brown.
A broker’s duty
A mortgage is often the biggest financial commitment a person will make in their entire life and as such, it’s a time when they usually take stock of their entire financial position. Many within the industry, including Mr Brown, now consider it a broker’s duty of care to at least discuss complementary products with their clients.
“For example, if they don’t have adequate insurance cover then it may be neglectful or irresponsible if the broker hasn’t at least spoken to them about protecting those assets and protecting themselves,” says Mr Brown.
“When you are sitting down and getting all of the assets and liabilities of a client, and you’re getting an overview of their insurance cover, you can quickly asses things such as if their insurance cover is going to protect their assets. I believe it’s a duty of care to then ensure the client is at least advised that they need to review their options.”
It is important to recognise the difference between needing to offer a product and needing to sell it. Not all mortgage brokers need to begin writing insurance or providing any other products, but all should have systems and relationships in place that allow them to somehow cater for their clients’ needs.
“If you have the product offering, even better, but if you’re not writing the product yourself or you’re not qualified to offer a certain product then refer your clients to a specialist to at least get them catered for,” Mr Brown says.
Cathy Anderson, a mortgage broker from Smartline, says she believes offering just a home loan is no longer enough. Ms Anderson cross sells additional products through her lender partners and also employs a financial planner for more complex advice and products.
“We make it our business to have relationships with all of our lenders so we can offer the lender's adjuncts to a loan, and then we have that in-house ability [with our financial planner] as well,” she says.
“I think all brokers need to have that. If they are not doing it themselves in their own businesses, they need to at least have the relationships to be able to refer their clients to the necessary area; otherwise you’re definitely not doing your duty of care.”
Referral relationships set up between brokers and other professionals are subject to the participants’ terms and conditions. Depending on the specific relationship, these may or may not include referral payments.
Referral relationships with lenders are usually more structured because the broker joins a lender referral program. For brokers, these formal programs have several benefits.
Lenders often provide training and support to help brokers better offer the additional products. The training can keep brokers up to date with all offerings, while the structured support allows the broker to track the entire process through their lender representative.
Another benefit of entering a referral program with a lender is that most pay cash rewards. Different products generate different payments to brokers and different lenders offer differing incentives, but these programs can be good ways to generate additional revenue.
Sam Boer, general manager broker sales at the Commonwealth Bank, says their cross-sell program, CONNECT, offers cash rewards for all successful product sales.
“These commissions are paid on a set rate per product, and all details are available on our CommBroker website.
“CONNECT is adding real value for our mutual customers, the bank, and our brokers. It’s a true partnership solution for successful cross sell,” he says.
The cash incentives offered by lenders can be appealing to many brokers, particularly as they are paid up front, but Ms Anderson says it can’t be the main reason to cross sell. While she says the payments are an encouragement, it’s not why she cross sells; it is the improved client relationships that drive her.
Building better relationships
Providing a more complete financial service can have many positive effects on a broker’s business, but perhaps most importantly, by fulfilling more of your clients’ financial needs you build a stronger broker-client relationship.
Ms Anderson says in her experience, increasing your offering can massively increase your customer retention. By cross selling more products, Ms Anderson says her clients have become stickier than ever.
“The customer experience becomes closed off because besides from doing the finance for somebody, you’re basically putting a circle around that client by making sure you provide more than a loan – you provide a lending solution.
“My clients have not just received a loan, they’ve received a whole banking service through their broker, so it absolutely strengthens my relationships,” she says.
Belinda Bradshaw from North West Finance agrees, saying that catering for more of her clients’ needs means they see her as a solution provider, not just a mortgage broker.
Ms Bradshaw works closely with her lender partners to make sure her clients walk away with all the right complementary products, making the home loan process less stressful.
“The benefit is that it links the client to the bank as well, so the client then knows they are a client of the bank and that we all work together to make sure they’ve got all the products to meet their needs, not necessarily just their mortgage,” she says. A real positive of this strategy is that a satisfied customer is much less likely to refinance or go somewhere else.
“Our motto is looking after people, so it’s part of looking after them,” says Ms Bradshaw.
The referral relationship is so effective in improving better client relations because it allows the broker to focus on the finance while still offering a holistic service. By focusing on the finance, a broker can establish themselves as the expert, whereas those attempting to offering everything themselves may be susceptible to the old ‘jack of all trades’ perception.
“Our focus is the client and predominantly their mortgage. The branch picks up the other extra stuff, so it’s a win-win for all involved,” says Ms Bradshaw.
A bank you can you trust?
For some brokers, introducing their clients to the lender may seem daunting. Many brokers fear creating a strong and direct relationship between client and lender may lead to channel conflict in the future.
In the past, many brokers have been stung by lenders offering their clients refinancing behind their back, but according to Ms Anderson, this is no longer a real problem, particularly in a cross-sell situation.
“The major lenders are now very aware of where the business is being written from – in the broker world – and you wouldn’t necessarily bite the hand that feeds you, would you?” she says.
Ms Anderson has built relationships with her lender partners and their cross-sell representative, which she says ensures the process is beneficial for all involved. She uses the Commonwealth Bank’s CONNECT program regularly to provide her clients with complementary products and says the support she receives is second to none.
Reliable communication is the key, she says, with her CONNECT representative keeping her informed of any changes to her client’s situation, so they can work together to provide the best outcome.
“The CONNECT representative that I deal with is very proactive in letting me know if one of my clients calls her for something, so in that way we are really all together ensuring that the client doesn’t make a mistake,” she says.
The easy sell
While cross selling additional mortgage products is for the benefit of clients, not all will see it that way from the start – so it’s important to do it right. If a client comes in for a mortgage, they can be resistant to having other products proposed to them, so brokers need to be careful about how they approach the cross sell.
Brokers should integrate the cross-sell conversation into their dealings with clients early on in the piece, clearly demonstrating the value of the additional products, Mr Boer advises.
“We’ve all experienced a salesperson who tried to sell product insurance almost as an afterthought. Don’t be like that,” he says.
Cross sell should be about identifying clients’ needs, he says, and there is no better time to do that than during the home loan application process.
“Once the needs analysis phase has been completed the true cross-sell opportunity is uncovered,” he says.
“For example, if during the loan interview the client mentions they work in the building industry, you would certainly recommend they speak with a risk adviser around the benefits of income protection insurance.”
It’s important to go through the needs analysis process in order to identify your client’s specific requirements, but also to demonstrate value and trust, he adds.
“If trust is established and the recommendations are clearly linked to the customer’s stated needs and goals, then there should be no problems in making successful sales of related products,” says Mr Boer.
Maree Imbruglia from Australian Financial Innovations says she initiates the cross-sell conversation by getting to know her clients and says it’s not a matter of pushing anything, but solving problems.
“My main conversation with them is dependent on what sort of job they have, what sort of superannuation they have and if they know if they have any cover within their super,” she says.
“That’s when you talk about if something goes wrong, if you break your leg and you’re off work for six weeks how are you going to pay the home loan? That’s about as far as I need to take the conversation, then I just say ‘Would you like to speak to someone about how they can help you do that?’”
With confidence in a referral partner – whether a financial planner, an accountant or a lender – a broker is able to happily cross sell and offer their clients a better service. Choosing the right partner can be the most important step, since both parties need to have aligned business goals and the same passion for customer service. Once the right partnership is in place, cross selling becomes a simple process.
“Initiating the conversation is easy if you have confidence in your referral partner,” says Mr Boer. He warns bad referral partners can reflect poorly on your business, diminishing your client’s experience and that’s when cross selling can become difficult.
“Referral partners who don’t return calls can reflect poorly on the broker for making the recommendation in the first place.”
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