Why brokers aren't higher on the list of trusted advisers

Only 3.3% of SMEs named their broker as their main trusted adviser, but this doesn't mean they aren’t highly valued

Why brokers aren't higher on the list of trusted advisers

A recent survey by ScotPac found that more SMEs were likely to turn to a trusted adviser in 2021 than they were four years ago. While brokers are crucial in delivering guidance around debt and funding solutions, the lender’s latest SME Growth Index has revealed only 3.3% of SMEs name their broker as their main trusted adviser.

According to ScotPac senior executive Craig Michie, this is more representative of the way the term ‘trusted adviser’ was broadly defined in the survey rather than having anything to do with the value that SMEs place on their finance brokers.

“If you have a look at the results, the top of the list was a family member,” he told MPA. “We all talk to family members about all sorts of things as opposed to just finance. If we limited it to trusted adviser around banking and finance options, I think we’d find that’s a much higher number (brokers as trusted adviser).”

Since business owners seek advice on a wide range of things, from staffing issues to new markets, advice around debt and funding make up just one of many areas SMEs could seek guidance on, he explained. In fact, he believes brokers would have come much higher on the list if the question was limited to finance considerations.

“We would believe that would be a growing thing, but we’ll get more clarity on that as we continue to ask the question in future surveys,” he said.

According to ScotPac data, four years ago four in 10 SMEs had no trusted advisors – a figure that has since dropped down to less than one in 10. Michie said this change had much to do with the uncertainty of a once in a lifetime pandemic as well as changes in compliance and a range of other issues.

“The environment for business owners is constantly changing these days with technology, different markets, different opportunities, different challenges,” he said. “Look at the wine industry for example. They’ve had to find different export markets.

“There’s so much change and when there is change people start looking for advice.”

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The growing need for advice and guidance represents real opportunity for brokers, said Michie.

He said brokers could take advantage of this by potentially expanding their remit and adding as much value to their relationships with clients as possible. Diversifying across both commercial and residential finance could enable brokers to provide advice across a much broader range as a “one-stop shop” for customers.

“So they (clients) know they just need one number to call when there is anything finance related,” he said. “Brokers are so important in this space because they are the ones that are up to date. They’re constantly talking with financiers. A great example of that is the Bounce Back fund that we launched recently.

“That’s something that most SMEs aren’t going to easily come across because we haven’t got it in the paper or on TV, but we’ve got that information out there to the broker network.”

ScotPac recently launched an SME Bounce Back Fund, which enables eligible SMEs to borrow up to $1 million with a 0% interest-free period for the first three months of the facility. On Thursday, it launched a suite of property-secured lending products including a home loan for business owners.

Read more: ScotPac launches home loan

Not only could brokers help their SME clients by making them aware of all the finance options in the market, they could also provide education around the best way to structure funding as the needs of their businesses change with the times.

“Brokers need to be able to expand their remit, they need to be across all types of finance,” said Michie. “Australian business owners particularly tend to mix their business and personal finances more than others. Some businesses are prepared to use their personal assets to support cashflow, some think it’s their only option.

“If you’re a broker that can provide options, provide the ability to separate business and personal assets to secure working capital or other finance facilities, you’re going to be better placed, your customer is going to be better serviced and hopefully they’ll be better positioned to move the challenges that they constantly seem to have to make these days.”