A top broker has warned that diversifying for the wrong reasons can leave brokers as mistrusted as dodgy cars salesmen. Despite the hype, brokers need to approach the issue with caution, says Mario Borg.
A top broker has warned that diversifying for the wrong reasons can leave brokers as mistrusted as dodgy cars salesmen.
Mario Borg, director of Master Brokers Group, said despite the diversification hype, brokers need to approach the issue with caution.
“The whole thing about diversification is bandied around a fair bit that it’s the best way to increase your revenue. It’s all about revenue, revenue, revenue,” said Borg.
“But at the end of the day, if you specialise at what you’re good at I find that clients do respect that and do value the fact that you’re not trying to be all things to all people.”
Diversification can work and can bring in more profits, said Borg, but only if it is done in a way where the clients’ needs are top priority.
If brokers allow themselves to be distracted by revenue possibilities, they run the risk of losing client trust, he said.
“If you’re coming at it from a selling angle, if your priorities are around how many dollars you can squeeze out in terms wallet-share for each client, you might get away with it for a while, but most people aren’t silly. They can see if someone is being genuine versus somebody that’s all about trying to make a dollar.”
NCCP requirements have made it easier for brokers to have conversations with clients around risk, insurance, and broader financial requirements, said Borg, but that doesn’t mean brokers should try and sell these things to every client.
“If you’re looking at someone’s statement of financial position and you see a genuine need, you do need to talk to them about this. The next step then is deciding who is the best person to assist with that.”
More often than not, said Borg, that means a referral. Trying to offer a range of financial solutions in-house, while great in theory, is “virtually impossible” in practice, he said.
“If you’ve got para planners and administration support it makes it easier, but to try and do it all yourself? I don’t see how you can do it well. Paperwork in mortgage broking has increased significantly with NCCP, let alone dealing with everything else.”
While cross-selling commissions may be tempting, the benefits of good referrals can be far more rewarding in the longterm, he said.
“If there’s a dollar in it for a broker, great, but what’s more important is keeping your client sticky so that you’re seen as a trusted contact point for these things: You specialise in one area but have the right contacts in others.”
This kind of trust relationship leads to higher client retention and ultimately more business as clients feel compelled to refer you to their friends. No matter how good a broker is at cross-selling, said Borg, if the client spends more than their needs require, they’re unlikely to refer.
“If you went out to buy a car and you walk away having spent two grand more than you need to because someone told you you needed to have tinted windows and a bigger boot or whatever, do you think you’re going to go away and recommend him to your friends?”
In a difficult market, many brokers are looking to diversification as the path to profit growth, but a good specialist is sometimes more valuable than a ‘one-stop-shop’, said Borg.
“It’s a bit like going to a GP, a GP has a general knowledge of all areas of medicine, but if you’ve got a specific problem in your knee or your ear or something, they’re going to refer you to a specialist.
"It doesn’t mean that that specialist doesn’t have a good business and doesn’t earn a lot of money because he only does one thing, it just means that he focuses on it and knows it better than anybody else.
“If you know your craft very well you’re seen as a real asset to your client, instead of being all things to all people because you’re trying to earn a few extra dollars.
“I get those people that say ‘Unless you offer two or three products and diversify, your time will be up very soon’. I don’t agree with that whatsoever.”
