Cross sales - Closer client connections

There are a number of products that sit comfortably alongside mortgages and brokers are ideally positioned to furnish their clients with everything they need from insurance to transactional accounts.

The banks have long recognised the potential in the broker channel to increase their distribution.

CBA was one of the pioneers of supporting cross sell via its Connect programme and it has seen a strong take-up from its broker network since the initiative was launched in 2004.

For the 2009/10 financial year, CBA successfully processed over 13,000 Connect referrals from its broker channel which resulted in 20,000 product sales.

The strong swing to cross sell experienced by CBA was also reflected in a recent straw poll conducted by The Adviser. The survey revealed 56.1 per cent of brokers offered at least two supplementary products above and beyond residential home loans.

There are a number of drivers behind the broker move to cross selling but there is little doubt that the economic turmoil of the past few years has played a major role.

Diminishing loan volumes combined with leaner commissions as a result of the GFC prompted some brokers to consider the merits of offering a broader suite of products such as insurance, personal loans and credit cards.

But while environmental conditions may have prompted brokers to take up cross selling, it is clear that it's now a mainstream proposition since the market has recovered.

Mortgage Choice broker Skye Hamilton says where loans can take up to six weeks to settle, cross selling provides additional sources of revenue that can help sustain the business over the short to medium term.

"I would say that cross sales are extremely important to our bottom line, and are probably as important - if not more important - than home loans," she says.

But it is not just the additional revenue stream that makes cross selling so important. Ms Hamilton says offering additional products can help improve a broker's relationship with clients.

"It encourages brokers to ask questions about their client's personal circumstances and better understand their goals," she says.

And even if clients choose not to take up the additional products, at least it gets them thinking about it: they are made aware of the services the broker provides, putting the broker at the forefront of their minds when they do decide to sign up for ancillary products and services.

REFINING YOUR BUSINESS MODEL

While some lenders offer a comprehensive range of non-home loan products, the type of products brokers choose to cross sell will differ, depending on a variety of factors.

According to ING DIRECT executive director, mortgages, Lisa Claes, the decision of whether to cross sell is up to the broker's individual service offering.

"At ING DIRECT we offer extensive deposit and transaction account products, and while we welcome cross selling by brokers, we do not mandate it," she says.

Cross selling typically requires the broker to gain competency in areas other than lending, and this influences what products are sold and how they are sold - whether through the broker or a partner, like a financial adviser.

"A broker's ability to cross sell a range of products and services ultimately depends on what their customers want and how it aligns with the broker's business proposition," Ms Claes says.

Afirm Financial managing director and consultant Leon Spadavecchia has added non-home loan products such as insurance to his business in recent years. Cross sell now accounts for around 20 per cent of his income.

He says being able to offer clients a wholesome financial solution to suit their needs is now more crucial than ever, with licensing and regulation on foot.

"Cross sell is an important part of an ever-changing industry," he says.

"I believe though that offering insurance products and protection to our clients not only benefits the client but adds credibility to us as a business as it shows we genuinely care."

TIMING IT RIGHT

When it comes to the mechanics behind presenting cross sell products to clients, Mr Spadavecchia says timing is essential.

"We advise the client very early in the conversation that we will be discussing protection for their loan and assets," he says.

By addressing the issue of insurance and asset protection at an early stage in the relationship, as opposed to tacking it on at the end of the transaction, Mr Spadavecchia says clients develop an expectation of the quality of service they can expect from their broker.

But that doesn't mean that all clients take up an offer through cross sell. In fact, while Mr Spadavecchia says most clients are keen to know about the non-home loan products on offer, only a quarter of his clients will go so far as to take them up.

For most clients, the main concern is cost, and while products such as loan protection or general insurance can be valuable to the client, there may be financial constraints on the client preventing them from taking it up at that time.

But Mr Spadavecchi handles this response from clients by simply making them aware of the benefits, should they change their mind.

"We advise them of the importance, create the need and then have a conversation with them to determine what products are suitable," he says.

"We reiterate the weekly cost to them and the importance of protecting their family, their credit rating and their major asset to live - their home."

CROSS SELL OR OVER SELL?

For brokers who are new to cross selling, the mechanics around presenting products can be tricky, as there is a fine line between cross sell and what clients may perceive as the ‘hard sell'.

Mr Spadavecchia says when he began selling insurance, his strong passion on the topic resulted in over sell on his part.

However, he soon learnt that his cross sell assessment and process needed to be consistent irrespective of people's situations.

"I worked out that I needed to allow my clients to make the decisions," he says.

Mr Spadavecchia says that came down to assessing his client's needs, looking at their budget and working out what was manageable in their circumstances.

And for Mr Spadavecchia, the commercial benefits of cross selling have been long-lasting.

"Having more products has helped put a ‘ring' around my clients," he says.