How 3 leading brokerages bring clients back again and again

Astute, The Loan Arranger and Let's Finance talk post-diversification tips

There’s nothing like learning from the best. Maya Breen went out to the pioneers and leaders of diversification in the broker space and asked them how their different brokerages bring clients back again and again.

It’s fair to say that diversification can add far more to your business than just revenue. While profit avenues may or may not be your initial choice for leaping into new territory, they probably won’t be the reason you keep on going down the diversified track.

Diversification veterans have seen the effects of branching out extend to every corner of their companies, from happier clients that stay with you longer, to increased management efficiency, to recruiting new staff.

In this feature, three of those veterans share their wisdom gained from launching into the unknown, combined with their many years in the industry. How did diversifying change their businesses for the better? What happens after it’s all set up, and how did these well-oiled machines fire up their diversification engines back at the starting line?
A Message from Our Sponsor

Brendan Wright
No longer just a buzzword, diversification has well and truly carved its place into the modern-day vocabulary and businesses of mortgage brokers across Australia.

And it’s certainly not a case of all talk, no action. Diversification has proven its worth as an invaluable business strategy, and there is clear evidence that more and more brokers are moving to embrace the opportunities it presents.

Whether you’re a broker looking to grow a stickier client base, better service your clients’ broadening needs, or just grow your business through new revenue streams, diversifying your service offering is an obvious way to amplify your income to capitalise on opportunities that may be right in front of you.

At FAST, more than 60% of our brokers offer at least one additional service outside of residential finance. The outstanding results of diversified businesses speak for themselves – over the past 24 months our brokers’ businesses have recorded, on average, growth of over 30%.

Undeniably, moving into new areas of business requires focus and commitment. However, at FAST we are steadfast in our belief that diversification represents an exceptional long-term opportunity for brokers who are up for more ways to delight their clients.

What’s more, diversifying doesn’t have to mean diving in at the deep end. There are plenty of ways for brokers to make their move into new revenue streams, and clients are starting to expect broader solutions to be offered by their brokers.

As a firm advocate of diversification, FAST is proud to partner with MPA to bring you this dedicated report on diversification, and I hope you find it valuable and useful to your business.

Brendan Wright

Diversification veterans

The three brokerages that have made diversification look easy are Astute Sydney City Central, The Loan Arranger in Adelaide, and Let’s Finance way out west in WA. All three have diversified in different ways, and recognition hasn’t passed them by.

Astute Sydney won the Australian Mortgage Award in 2014 for diversification, which company director Moshe Moses credits to their platform diversifying not only products and services but people and profits too. Their network of offices spans from Sydney to Adelaide and up to Queensland. Astute’s city central office has six brokers who don’t need to worry that their particular skills have to match a client’s needs.

“At the end of the day, [the broker] can take down and gather all the information and then utilise the people skills here in the office to ensure that we are successful in writing any deal,” says Astute company director Moshe Moses. With access to SMSF lending, asset finance lending and property development, Astute can look after mums and dads, house and land packages, mortgage insured loans, and professional high-networth individuals.

After nearly 20 years in the industry, The Loan Arranger has won numerous awards for diversification, including being listed as one of MPA’s Top 10 Independent Mortgage Brokerages for 2014. The brokerage is recognised in SA as a very experienced group and valued partner of the banks.

The Loan Arranger principal Steve Marshall says the value of diversification is in the client. “The more you can do for the one client, they become stickier and you get to keep them. There aren’t that many businesses that have been able to get over a billion dollars in funds under management, even on a national basis. For us to do it in Adelaide, where the loan body is a lot lower than the eastern seaboard, speaks volumes for the amount of business that we actually process through here,” he says.

Let’s Finance is all about being a ‘one-stop shop’ for customers. General manager Scott McCartney says, “Diversifiers [can be] really isolated in WA, but it depends on your aggregator and what support you’ve got.”

The brokerage covers everything from first and next home buyer finance, to Key Start (state government assistance loans) and car and boat loans, to investment finance, superannuation management, wealth creation and property appraisal.

Which direction to diversify in?

The decision as to which area you should diversify into is a tricky one. FAST CEO Brendan Wright says some brokers are very clear about what they want to expand into, and only look to the aggregator to facilitate it, whereas others are just looking for where they should start.

“If a FAST broker is dealing with a medium to large enterprise, they are pretty well advanced in their strategy to diversification. It’s more around the brokers who are starting to do it or wanting to take it to the next level, where we help steer them in the right direction.”

FAST has spent a significant amount of time getting an understanding of brokers’ strategies and where they’re trying to take their businesses, which Wright says is important for sustainable success in the marketplace.

“Small business owners are time poor, looking for help, guidance and advice. Brokers are small businesses as well, so they get it,” Wright explains. “There’s the opportunity to help small businesses get what they need around financial services advice and how they can be successful in their business and their personal needs. So it’s a really unique opportunity for brokers, and it’s as simple as this – brokers are sitting on a customer base, and they’re really sitting on gold.”

Financial services is an area that Astute has excelled in, having originally tested the waters via referral relationships, as it currently does with accounting. In 2012 the company’s Adelaide-based partners moved under the Astute banner, diversifying their presence in SA and allowing a permanent financial planner to come on board in Sydney.

Astute now has a heavy balance of financial planning in Adelaide, with a broker based there, and a heavy balance of lending in Sydney, with a financial planner on hand. “We wanted a private-bank feel, so obviously needed lending and the financial services side, and we knew the income coming straight from home loans was not one that was going to be sustainable,” Moses says.

He says the banks kept telling brokers not to rely on home loan commission, and that they should diversify, but perhaps didn’t anticipate such an enthusiastic response. “Now banks have realised they’ve created an industry which is now self-sufficient, and they want to control that industry. But it’s now where the broker, if they’re smart enough, is not driven by just home loan commission.”

But McCartney says banks can see that it’s cheaper for them to have a loan put together by a broker than by an employee in a branch, and are encouraging people to use brokers, with many branches closing up shop.

The Loan Arranger also has a financial planner dedicated to the brokerage through its aggregator. Starting with just four people straight out of the banks, it has grown to a team that is 20 strong. From day one the brokerage offered home loans, commercial loans and equipment finance, and although it had the experience to cover everything else, it lacked the licence at the time to offer financial planning. Instead, it covered that base and the insurance side through referral groups.

In-house services vs referral partnerships

The Loan Arranger’s referral partnerships are on an individual basis, not a company basis, as past arrangements with its partners were too generous, so the brokerage has pulled back over time.

“In-house is always better,” says Marshall. “Referral partnerships generally want money out of it – even banks are paying referral fees directly to agents to refer business.”

The only referral partnership Astute currently has is in accounting, Moses says, and although it’s a slow process, bringing accounting in-house is the “last piece of our puzzle”.

Astute covers the full smorgasbord of financial services in-house, from financial planning and volume management to risk insurance and direct shares.

“Our philosophy is that we want to have a private bank outside of a bank. There’s nothing that a private bank can do that we can’t do,” Moses says.

At Let’s Finance, everything is in-house, including its financial planner. Only the investment properties on the east coast are referred, and even then through a very controlled process.

“To maintain high customer service we have a very good relationship with referral partners, making sure they have the same ideologies as us,” says McCartney.

However, the strength of the core business must still be maintained, Marshall cautions, as it’s unlikely that, in The Loan Arranger’s case, insurance or commercial or equipment finance would overtake this. “These other areas, even though they’re lucrative and you can certainly have them as additional sources of income … to me you’ve really got to maintain your focus on what’s got you to where you’ve got to.”
Do brokers need a name change?

Moshe Moses of Astute says the term ‘broker’ is misleading and not as palatable these days, since other industries have been tarnished. While the MFAA now refers to brokers as ‘credit advisers’, Moses argues this philosophy now needs to be extended across the whole industry, not just the one association.

“When people use [the term ‘broker’] they associate it with all different aspects rather than that these guys are as professional if not better than those people that you’re dealing with at a bank.”

Clients and ‘the sell’

McCartney saw from the client research done by Let’s Finance that having trust in the broker was key to diversifying successfully, and it was the number one thing people said they were looking for in a broker. “Once the relationship with the broker and client is established, we can look after everything and the client can get on with their life,” he says.

People just don’t know where to start, McCartney says. These days when everyone is so time poor, the last thing they feel like is calling around making individual enquiries and figuring out the best deal. “When I got my first home loan when I was 21, I wouldn’t have had a clue what I signed,” McCartney recalls. He says it makes it easier for the customer and helps them work out what they need.

“Having that trust with your broker … once you have that trust and have broken down those barriers, they’re very open,” McCartney says. “You’re still going to get the odd one who’s a little bit uneasy, asking ‘what’s the catch?’”

Moses says often mum-and-dad clients are hesitant when new products are offered, but requirements by ASIC present a good opportunity to introduce them. For example, if debt is being negotiated, the client must be asked whether they have risk insurance.

“There’s always going to be the push factor with any additional product that you offer, other than your first-line product. As long as you’re able to sell it, which is everything that we’re about, and make it interactive in terms of how it benefits the client, that I think is the most important,” says Moses.

“If they see the fact that they only need to go to one place to get it organised, again you’re offering the private-bank experience, and I think for what we do it far exceeds what a private bank would do in a bank.”

The Loan Arranger is more reactionary than proactive when it comes to introducing new products to its clients. Marshall says he’s been in the business so long that, if he became too proactive with the 1,500 to 2,000 active clients that he has access to, he wouldn’t be able to handle the business.

“What we offer and provide as a service to our client base, what’s testament to that is the fact that we seem to have clients that are still with us that we did original loans for back in the ’90s. It’s not unusual for 10-year clients to come back to us saying, ‘You helped me 10 years ago. I need your help again’.

“I always say that, from a scale point of view, we, as a broker group, and brokers in general are always going to offer a better service than the banks can, because we’re more micro and they’re macro,” says Marshall.

McCartney says every customer presents an opportunity, and much of the outcome lies with the personality of the broker. He makes sure when recruiting a new team member that they have the right skills to spot those opportunities during conversations with a client, and then trains them to reach a high level of product knowledge.

“You might not be able to help the customer today with a house loan, but you might be able to help them tidy up their superannuation, tidy up their insurance, and tidy up personal loans.”

Moshe, McCartney and Marshall all stressed that getting diversification going was actually not the hard part, but what you do afterwards.
Tips from the Experts

Scott McCartney

“Keep referral partners really close to you – don’t have too many, as you can lose control over and confuse your client base.” - Scott McCartney

Moshe Moses

“Once you’ve set yourself up to diversify, the most important factor is the client and the management of that client.” - Moshe Moses

Steve Marshall

“Take the pressure off referral partnerships by focusing on customer satisfaction – clients refer you for free.” - Steve Marshall


You’ve diversified… Now what?

“I don’t think we found diversifying a problem,” says Moshe. “I think it’s once you are actually in it, it’s maintaining it. We’ve got 22 people all up in Sydney, Hunters Hill, Brisbane and Adelaide, and that in itself you’ve created a reasonable monster.”

Marshall has seen many businesses find themselves out of their depth and treading water they have no experience in.

“It’s about simplifying it, not overcomplicating it,” McCartney says. “We’re really customer-focused, so it’s more about doing it cheap and as cost-effective as you can for the customer.”

He says of course there will be some revenue raised out of it, but making sure it’s the right thing for the customer takes first place.

“I’ve seen customers being hit with big superannuation insurances – you know, $5,000–$6,000 – and you think, ‘Hang on. Is that the best thing for the customer?’ And we’re picking up the pieces.”

When asked what advice they would give those looking to diversify in the near future, Marshall recommends finding referral partners that have the same ideologies and the same expectations, and he says it’s important to remember that their customer is your customer as well.

This article originally appeared in MPA magazine 15.04.