From the horse's mouth

Since early 2008, the founding directors of the Chess Wealth group have had a strong focus and belief in the need for brokers to incorporate financial planning (super, insurance, direct equities, managed investments, retirement planning and estate planning) into their business, as well as direct property advice where appropriate. Since early 2012, we have developed a structured program for brokers allowing them to easily integrate financial services into their client bases, and therefore provide a much more holistic service offering to a client who they have built trust with and, in most cases, have gathered 90 per cent of the required data to provide more complete advice. We work with both brokers and accountants and, while accountants have a certain place of trust in many clients minds, our experience is that a client’s mortgage professional is often better suited and trained to help the client take action and put a personal plan encompassing all of their financial needs in place. We have built a structured referral model, allowing brokers to trial the Chess Wealth approach to advice with their clients, with the option of moving to a fully owned franchise in time and once the licensing is complete.

What are the benefits of brining on a financial planner in-house?

Offering financial planning is a great opportunity to increase the service offering, dramatically increase the revenue from each client – which has an impact on the value of the business – and generally make the client far more ‘sticky’ and less likely to be exposed to other financial professionals for their planning, super and insurance needs. It is in the broker’s interest to value-add and provide more services for the client base, especially when the process is a very simple and structured one under the Chess Wealth program.

How does this differ from a referral relationship?

In most cases, referral relationships are ad hoc and loose arrangements that rarely work well. The ultimate aim for a broker is to properly add a financial planning and advice arm to their business through either becoming a broker themselves or through a franchise allowing all of the paraplanning and grunt work to be performed by a head office and the client-facing role being provided by the broker/adviser. What we have seen, however, is that a properly structured referral program where the two businesses have the same client value system and belief is a perfect place to start, and allows for the relationship to form and for the advisory process to be trained and developed over time. One of the major differences with a referral program versus planning ownership is the revenue kept by the broker. Under the Chess Wealth referral model, the broker receives the lesser percentage (20 per cent to 30 per cent based on volume) as opposed to the lion's share of the revenue when the business is fully owned in-house. A well-structured referral model is the best way to start, as there are no overheads, training and licensing issues to deal with, and it allows the client system to be seen and learned before deciding to bring the full planning model in.

How does a broker get remunerated?

Within our referral model, the broker receives a percentage of the financial planning revenue and is given all of the necessary tools to allow integration of the planning message to their clients. Should they decide to then move to a fully owned franchise and provide all of the client advice internally, we have a small royalty fee for providing paraplanning, training, strategy assistance, and the majority of all revenue remains with the broker inside their planning business. All clients, at that point, are transferred to the franchise including all trail revenue.

What are the benefits of adding a wealth offering to your broker business?

As someone who has been in the financial industry for the past 20 years, I have seen how transactional most brokers are and the danger they have of not really being seen by their clients as an 'adviser'. With the myriad of lending products being marketed directly at clients and the ease at which you can refinance, it is imperative for the small-to-medium broker to move away from the transactional model, become the provider of ongoing advice and have a reason to stay in touch with their clients on a frequent basis by being able to provide additional services. The reality is that many brokers have not seen or spoken with their clients for years because they have not needed any additional finance, and this equates to many suburban brokers believing they have a client base, when in reality they more likely have a database – and the two are not the same! By adding a financial services model like the Chess Wealth Partners program, there is an immediate need to contact all clients, educate them on the new potential services and integrate a larger offering, thereby providing a level of additional security over the database leaving the business. We have seen on many occasions additional finance being written because the emails and letters went out regarding the financial planning and investment services now available, and it reminded the clients that they needed to call their broker about lending matters.

Do you see more brokers coming into this field in the future? Why/why not?

Absolutely. It is a natural fit for brokers, and they are already gathering almost 90 per cent of what they need for the provision of financial and property advice. In addition, I also see that there is a real need ethically for the broker to temper the provision of more debt, with the need to protect and secure the client from risks and to show how that debt fits into an overall plan for the client. With programs such as the one we have developed, this becomes an easy additional service to offer and one that most clients are open to.

Although ASIC has yet to bring investment property advice under their rules, we believe that it is only a matter of time before financial planning and direct property advice are brought together. Under our process, we now combine these two areas within the statement of advice should the client and the referrer wish that to occur. This allows the broker to effectively provide [advice in] investment, superannuation (including SMSF), insurance, retirement planning and direct property all in addition to the finance solution and all within a simple, client-centred process that dramatically increases the broker’s overall value to their client and the client’s value to the broker.