Is financial planning your next move?

The introduction of the NCCP Act in 2010 highlighted the importance of providing insurance to clients. Since then, the conversation has evolved and we are now seeing some of the mortgage industry’s biggest players dipping their respective toes into the wealth space.

Mortgage Choice, for one, launched its financial planning arm last year and looks set to have 60 advisers by mid next year.

Wealth management group Yellow Brick Road, led by mortgage industry stalwart and Wizard Home Loans founder Mark Bouris, has also been championing the convergence piece.

But you don’t need to be a branded broker with a large group to break into planning – many have done it themselves to great success.

There are typically two schools of thought when the topic is brought up: those that say a broker must remain a broker and those that see the synergies – and the opportunities.

In March, The Adviser published its inaugural 2014 Financial Services Convergence Report, which gave key insights into the area.

The report found that 30 per cent of surveyed brokers intended to integrate financial planning or risk advice into their business within the next 12 months. More tellingly, 49.5 per cent have already added financial planning to their service proposition over the past five years.

“It is absolutely viable for mortgage brokers to add planning to their business,” YBR chief executive Matt Lawler says.

“I think mortgage broking is actually a sub-segment of financial planning,” he says, adding that, when viewed through the client’s eyes, a mortgage is just one product in a whole suite of products that could benefit them and meet their financial needs.

People are increasingly looking at their financial situation across the board, not just at one product, Mr Lawler says. “They probably don’t have the time to deal with four or five different specialists.

“They want to deal with one and they want that person to know their situation and to take care of things for them right across the board,” he says. “That is why I would say it is viable, because a lot of that demand is coming from the clients that we are dealing with.”

When dealing with a client and collecting their personal information, if you know that client really well, why wouldn’t you then talk to them about things other than a single product offering?

Why wouldn’t you form a deeper relationship that will not only benefit them but also your business?

From a strategy point of view it makes a lot of sense. But from an implementation point of view it takes effort.

Brokers can be deterred by further education and training, or reluctant to make time to find a trusted financial planner they can bring into their business. Or the perennial question – will the significant cost impost of moving towards planning actually pay itself back?

The challenges

Becoming a financial planner is not easy. Your workload will essentially double once you decide to take on a second profession.

Integration is difficult and requires both brokers and planners to think differently, with a total focus on the client and their needs.

Some say trying to do both spreads a broker too thin, that to excel at either profession requires specialisation – by bringing a planner into your business, rather than doing it yourself.

There is certainly a good argument in being a specialist rather than a generalist. After all, while similarities can exist, they are entirely different industries and should be treated as such – whatever your decision.

Diversified financial services companies recognise this and understand that brokers can’t be all things to all people, that having separate specialists is the key to success.

Mortgage Choice, for example, recognises that diversification is the way of future, but rather than developing a program that would see its brokers transition into planning, it has set up a separate franchise model to sit beside its well-established broker network. 

Tania Milnes, general manager of Mortgage Choice Financial Planning, says both businesses will be expanding going forward.

“The big difference under our model is the fact that our mortgage brokers and financial planners can’t wear two hats,” she says. “They need to be a specialist in their own area.”

Many smaller brokerages have adopted this model. By bringing in a partner to handle the planning side, the company can offer diversified solutions under one roof without overburdening itself.

Michael Pesochinsky co-founded Full Circle Financial Group with his brother Garry in 2005. Originally a broker, he made the decision to leave the credit industry to become a financial planner in 2007 and hasn’t looked back.

Garry handles the mortgages as Michael believes both roles cannot be done effectively by one person.

He says that becoming a financial planner isn’t always more profitable than being a broker.  “It is a different sell to the client, because it is a fee-for-service model, as opposed to a broker being commission based,” he says.

“It’s a different type of conversation you need to have with a client when you are charging them an upfront fee.”

Which direction do you head?

There are different options available for brokers keen on expanding their offering. According to The Adviser’s convergence report, more than 24 per cent of respondents said they will personally qualify with the appropriate licensing and qualifications in order to offer integrated services, while over 37 per cent opted to form an in-house partnership with a planner.

The first step any broker must take once they decide to become a planner is to get qualified. Under the Corporations Act, individuals wishing to provide financial product advice to retail clients are required to meet initial and ongoing educational requirements as outlined in ASIC Regulatory Guideline 146 (RG146).

The RG146 is your ticket to begin practising as a financial planner.

This is just the start. From here, new planners will need to find a dealer group, continue with their training and education and ideally find a mentor to coach them through the process.

“The thing is you do need to immerse yourself in it,” FBAA chief executive Peter White says. “You can’t be casual or relaxed about it.

“It is a skill set in its own right and to do it half-heartedly will probably be worse than not doing it at all,” he says. “So doing it properly is the key.”

The FBAA fully supports the idea of brokers becoming qualified financial planners and even provides discounts for its members looking to qualify from a list of preferred education providers.

Once fully qualified and up and running, brokers can expect to see some significant advantages to running a fully integrated business.

Not only will the added product offering boost your bottom line, but clients tend to become stickier once they discover that you can accommodate all their financial needs.

The opportunities

If you’re an independent broker running your own business you have the benefit of being able to transition into planning in your own time, says Finance Made Easy director Tony Bice.

A broker for more than 12 years and a planner for the past six, Mr Bice says wearing both hats was the best decision he ever made.

With his own AFSL, Mr Bice says he is the preferred choice for prospective clients, even if they are just looking for a good broker.

“I find with a lot of my clients these days, as soon as I mention that I’m a broker as well as a planner, there seems to be this reaction of ‘Oh, this is good. I’m going to be able to talk to this guy about a few different things’,” he says.

“If I’m up against another broker from Aussie or PLAN or AFG, the minute the client tells me they’ve spoken to one of those brokers I ask them ‘Is your Aussie broker a financial planner as well?’ And they always say no.

“I win every day because the client sees the beauty of what I’m offering – product knowledge on their mortgage, as well as covering off on their risk requirements, property investments and superannuation.”

The move towards financial advice by brokers is a reaction to the changing needs of customers.

It is no longer feasible to continue repeating the worn adage that a broker is there to ‘help their clients achieve the dream of home ownership’.

Clients want more than that now. They want home ownership through investment, possibly in an SMSF, and they want a professional who can advise them on their financial future.

Home ownership is the biggest financial commitment most people will make, but it is also an asset to be leveraged, a debt to be considered alongside a comprehensive financial plan. Clients want more than just mortgage options – they want advice.

“If you look at the market we are in now with interest rates being so low, the borrowers out there are generally the ones who have more stability in their employment.

“These are the investors, the ones who are going to be looking for that extra bit of advice, rather than just picking a bank and submitting an application,” Mr Bice says.

From a business perspective, the additional services can more than double your bottom line.

As a planner looks to diversify their client’s investments, so too must a broker diversify the revenue stream of their business.

After six years as a broker-planner Mr Bice is seeing the rewards.

This year Mr Bice wrote a staggering $208 million in volumes in the financial year to June, including $52 million in home loans and $149 million in other business, namely insurances.

“I have three trail books now, not one,” he says. “I have a mortgage book, a risk book and a planning book.

“When I decide to sell my business and retire, rather than just selling a mortgage broking book with a multiple of maybe 1 or 1.5 times value, I’ve got three different books that can be worth three or four times as much.

“That’s the benefit of it.”