Searching for gold

Achieving this can be done in several ways, including leveraging your existing client database, chasing referrals, maintaining business relationships and networking.

We investigate how to tap into the SMSF market.

The benefits of writing SMSF loans

Brokers should consider writing SMSF loans for several reasons.

Aaron Upcro , CEO at More Group, emphasises that buying property within SMSFs represents a whole new financing opportunity – particularly given the love that Australians have for purchasing property.

In addition, it means that new relationships can be formed with accountants and financial planners who operate in this space.

“It’s a massive end of the market,” says Rael Bricker, managing director at House + Home Loans. “When the laws changed in 2007, everyone was a bit nervous about the Australian Taxation Office changing their minds about the handling of SMSFs.

“That's what took so long to get the momentum – everyone was hanging around waiting. I also think the cost of setting up a compliant SMSF has come down. In those days the costs for setup were $10,000, but now you’re doing it for $3,000.”

Ross Le Quesne of Aussie Parrama a adds that the obvious benefit is dealing with people who have an interest in investing in property.

“If they invest in their personal name then they’re likely to invest in a self-managed super fund,” he says. “It’s a chance to build relationships with different referral networks that you wouldn’t normally work with.”

Getting qualified 

While there are no regulatory or industry requirements for bokers who want to work in the SMSF lending space, individual companies may stipulate training. Mr Le Quesne says Aussie brokers are required to undertake an accreditation process before writing an SMSF product – and a course is run by the MFAA.

Mr Bricker, however, believes there should be a formal qualification. “I think it’s really hard because we cross this threshold – at what point does it become financial advice and at what point does it become mortgage advice?” he says.

“I think there needs to be some sort of qualification; however, super fund law becomes so complicated and the course that financial planners have to do to give advice on super funds is six months. Meanwhile, we’ve got industry qualifications you can do in an afternoon. It’s a bit of a disparity.

“I think it’s really up to the individual lenders to run accreditations so that the brokers are up to speed with their products. I think the industry bodies should come up with some guidelines as to what advice can and can’t be given in terms of SMSFs, and I think that might solve the need for any formal qualifications.

“I think a qualification similar to the AML (anti-money laundering) would be good – at least 20 or 30 questions so the broker knows the basics. You tread a lot into financial planning when you’re doing SMSF loans.”

According to Mary Sartinas of Affiliate Finance & Property, it also pays to stay on top of industry news and legislative changes.

“It is imperative to have a thorough understanding of the legislative requirements, the legal structure and lender policy, without which we can’t be effective in our roles as finance brokers,” she says.

Referrals and existing database

Tapping into your existing database, as well as making the most of referral partnerships, are two of the most effective ways that Mr Upcroft recommends for establishing yourself in the SMSF market.

“Marketing to your own database is the easiest and simplest way to start doing this business,” he says.

According to Mr Upcroft, brokers also need to skill themselves in what is involved in these processes and to understand which are the best products out in the marketplace.

They should then position themselves as experts, skilled in writing SMSF loans.

“Because lots of brokers do not know the space, you can stand out from the crowd simply by doing the work to understand the market and the associated products,” he says.

“Also, most importantly, pay a referral commission. All planners I know want a cut of the commission, so be prepared to pay them (a er proper disclosure has been made to the client, of course).”

According to Mr Bricker, responses also come from making contact with existing customers who might not have considered SMSF borrowing yet. “When I start an email to our database asking if they have considered buying property through an SMSF, I end up getting 20 enquiries every time,” he says.

While many brokers will skip over information about superannuation, he adds, it’s worth checking up on.

“When someone says they’ve got $120,000 in super and they’re interested in buying an investment property, that should be a red flag to the broker that they should consider an SMSF.”

According to Ms Sartinas, because SMSF lending is such a niche area, it doesn’t take long for the word to get out and the referrals to start coming in, especially once you gain recognition that you are an expert.

“Our key referral partners are accountants and financial planners,” she says. “However, we also receive referrals from solicitors who know that we specialise in this field. These professionals are already working very closely with clients, so a referral is a natural step when they are discussing SMSFs with their clients.”

Working with existing referral partners with whom you have already built up a rapport would be an ideal starting point.

“If they happen to be accountants and financial planners, you need to prove that you understand the legislation and legal structures, not just the suite of loan options that are available, as this will form part of your conversation during the course of the process," Ms Sartinas says.

“Once you get through a few deals and can prove yourself, the referrals should start kicking in from there.”

Other ways to attract customers

While making use of your existing databases and referral partners are effective ways to tap into the market, there are also other methods brokers can use.

For Mr Bricker, it’s all about communication: “The way we do it is constant communication with our clients, talking to them about super and how it works,” he says. “AMP have brought out a booklet that explains it very well.”

Not many clients seek out an SMSF loan of their own accord, he says; seminars, however, are an effective way of making clientsaware of their options. “At a seminar, Ihad about 80 people there and a lot of them are getting their SMSFs sorted now,” he says.

Mr Upcroft agrees, but says that getting attendees at these events will depend on how engaged your database is. “We prefer the webinar approach these days as it is more convenient for the attendee and far cheaper for the broker to put on,” he says.

According to Mr Upcroft, the most effective way to engage an audience is by marketing to your own database via phone and email, along with getting engagement from your referral network to do the same with their
own databases.

Mr Le Quesne believes education is the key. “Brokers have to be careful about how they go about [working in the SMSF space],” he says. “At the end of the day, we’re not qualified to give financial advice, so I see it being more about getting people who can educate [clients] to make informed decisions.

“Get the clients educated so they can ask questions and understand it, and understand the roles and responsibilities they entrust in the SMSF,” he says.

“A lot of people think they want to buy property in it, but they don’t understand it. Not everyone can be trusted, if they’ve got a bank account with $200,000 in there, not to touch it. So they’ve got to understand the risks and get educated.”