Clients are taking on historic levels of debt, which means loan protection is becoming more important. MPA and ALI Group explore how to protect your clients whilst growing your own business
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Clients are taking on historic levels of debt, which means loan protection is becoming more important. MPA and ALI Group explore how to protect your clients whilst growing your own business
One perk of being a broker is seeing your clients at their happiest, whether that’s through achieving home ownership or starting an investment portfolio. But what about clients at their worst? Of course brokers make ‘reasonable enquiries’ to ensure a customer can cope with debt, but when tragedy strikes, all those calculations can become meaningless.
To see just how bad things can become, pay a visit to ALI Group’s website. Their testimonials section includes tales of cancer diagnoses, heart attacks, accidents and other tragedies that have befallen the clients of many award-winning brokers you’d recognise from the pages of MPA. Fortunately, all of those clients had loan protection cover arranged by their brokers, which protected them and their relatives from the debt.
In his 20-year broking career, Angelo De Pasquale has provided loan protection to more than 1,000 clients, yet in that time, “not one person has ever asked me about personal insurance,” he says. De Pasquale’s Victoriabased brokerage, Waterstone Finance, is part of the Henley Construction Group, which means De Pasquale deals with clients of all shapes and sizes. Whether the client is a young first home buyer or an older upgrader, De Pasquale asks one simple question: “You’re taking on a lot of debt – do you have enough insurance to cover it if things go wrong?”
With first home buyers, many simply don’t know. Older buyers are likely to point towards their superannuation, but De Pasquale says they rarely know its value. Many superannuation policies cover borrowers in the event of death, but rarely for the income lost due to trauma or serious illness, explains ALI Group CEO Huy Truong. Super also takes time to accumulate, meaning most Australians are underinsured by it alone.
A financial planner could put protection policies in place, but younger and less wealthy clients are less likely to have access to a planner. That leaves a “gap in the middle” for general advice tied to a product, such as a mortgage, Truong says. “Whoever’s providing that loan transaction is well placed to provide that general advice: ‘If you’re taking out a $400,000 loan, I can provide $400,000 worth of loan protection to you.
The 10-minute mark
Loan protection insurance works best for brokers when it’s seamlessly integrated into the loan application process. Getting accredited with ALI Group requires a 20-minute online training module and a sitdown with a BDM. “The BDM can help them understand how they can embed this within their business,” says national sales manager Gabrielle Moscati.
Loan protection is well integrated into Waterstone Finance’s process, and as such, “it takes longer for me to walk to my car than it does to apply for loan protection insurance,” De Pasquale says.
The five-to 10-minute loan protection application process has been designed with brokers in mind, Truong explains. “We need to be realistic about the time requirements of brokers; they can’t be sitting there asking 25 medical questions.”
Nor does ALI require clients to undergo medical checks – all the information brokers need, they can get on the spot by talking to the client. Brokers should be aware, however, that ALI only offers insurance to clients aged 18 to 59 who have taken out a loan in the last 12 months.
If a broker makes the application before close of business, they should receive a confirmation by the next day, Truong says, and then the client’s cover will be active. ALI will also call the client and explain the specifics of the policy within 30 days.
In fact, the broker’s ongoing role is minimal. Clients generally get in contact to ask a question, to make a claim or to expand their cover, all of which are better served by going direct to ALI. If a client makes a claim, ALI does ask their permission to inform the broker of the client’s new situation.
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Additional revenue stream
Loan protection can also help make clients stickier and more likely to recommend the broker, Moscati says, because it demonstrates the care taken by brokers. Where loan protection does have concrete and lasting relevance for brokers is in commission. Loan protection pays upfront and trail commission, as well as ‘reward points’ in ALI’s case. An average broker writing an average policy would earn around $350 to $500 per deal, according to Truong.
However, the impact on a broker’s business is better viewed on an annual basis. For many brokers, loan protection accounts for 10% to 20% of revenue, but as it has no extra costs, it accounts for 30% to 40% of
income. That extra revenue stream can be used to build your business, Truong explains. “Many brokers use the income they receive, say $40,000 to $50,000 [a year], to hire a personal assistant,” he says.
For De Pasquale, remuneration is less relevant, as he’s a salaried broker. For him, loan protection is part of a duty of care he has towards each and every client – he’s arranging the debt, so he needs to get them covered. “It feels good to protect people,” he says. “I see these people when I walk down the street.”
One perk of being a broker is seeing your clients at their happiest, whether that’s through achieving home ownership or starting an investment portfolio. But what about clients at their worst? Of course brokers make ‘reasonable enquiries’ to ensure a customer can cope with debt, but when tragedy strikes, all those calculations can become meaningless.
To see just how bad things can become, pay a visit to ALI Group’s website. Their testimonials section includes tales of cancer diagnoses, heart attacks, accidents and other tragedies that have befallen the clients of many award-winning brokers you’d recognise from the pages of MPA. Fortunately, all of those clients had loan protection cover arranged by their brokers, which protected them and their relatives from the debt.
In his 20-year broking career, Angelo De Pasquale has provided loan protection to more than 1,000 clients, yet in that time, “not one person has ever asked me about personal insurance,” he says. De Pasquale’s Victoriabased brokerage, Waterstone Finance, is part of the Henley Construction Group, which means De Pasquale deals with clients of all shapes and sizes. Whether the client is a young first home buyer or an older upgrader, De Pasquale asks one simple question: “You’re taking on a lot of debt – do you have enough insurance to cover it if things go wrong?”
With first home buyers, many simply don’t know. Older buyers are likely to point towards their superannuation, but De Pasquale says they rarely know its value. Many superannuation policies cover borrowers in the event of death, but rarely for the income lost due to trauma or serious illness, explains ALI Group CEO Huy Truong. Super also takes time to accumulate, meaning most Australians are underinsured by it alone.
A financial planner could put protection policies in place, but younger and less wealthy clients are less likely to have access to a planner. That leaves a “gap in the middle” for general advice tied to a product, such as a mortgage, Truong says. “Whoever’s providing that loan transaction is well placed to provide that general advice: ‘If you’re taking out a $400,000 loan, I can provide $400,000 worth of loan protection to you.
The 10-minute mark
Loan protection insurance works best for brokers when it’s seamlessly integrated into the loan application process. Getting accredited with ALI Group requires a 20-minute online training module and a sitdown with a BDM. “The BDM can help them understand how they can embed this within their business,” says national sales manager Gabrielle Moscati.
Loan protection is well integrated into Waterstone Finance’s process, and as such, “it takes longer for me to walk to my car than it does to apply for loan protection insurance,” De Pasquale says.
The five-to 10-minute loan protection application process has been designed with brokers in mind, Truong explains. “We need to be realistic about the time requirements of brokers; they can’t be sitting there asking 25 medical questions.”
Nor does ALI require clients to undergo medical checks – all the information brokers need, they can get on the spot by talking to the client. Brokers should be aware, however, that ALI only offers insurance to clients aged 18 to 59 who have taken out a loan in the last 12 months.
If a broker makes the application before close of business, they should receive a confirmation by the next day, Truong says, and then the client’s cover will be active. ALI will also call the client and explain the specifics of the policy within 30 days.
In fact, the broker’s ongoing role is minimal. Clients generally get in contact to ask a question, to make a claim or to expand their cover, all of which are better served by going direct to ALI. If a client makes a claim, ALI does ask their permission to inform the broker of the client’s new situation.
“It takes longer for me to walk to my car than it does to apply for loan protection insurance” Angelo De Pasquale, Waterstone Finance
Additional revenue stream Loan protection can also help make clients stickier and more likely to recommend the broker, Moscati says, because it demonstrates the care taken by brokers. Where loan protection does have concrete and lasting relevance for brokers is in commission. Loan protection pays upfront and trail commission, as well as ‘reward points’ in ALI’s case. An average broker writing an average policy would earn around $350 to $500 per deal, according to Truong.
However, the impact on a broker’s business is better viewed on an annual basis. For many brokers, loan protection accounts for 10% to 20% of revenue, but as it has no extra costs, it accounts for 30% to 40% of
income. That extra revenue stream can be used to build your business, Truong explains. “Many brokers use the income they receive, say $40,000 to $50,000 [a year], to hire a personal assistant,” he says.
For De Pasquale, remuneration is less relevant, as he’s a salaried broker. For him, loan protection is part of a duty of care he has towards each and every client – he’s arranging the debt, so he needs to get them covered. “It feels good to protect people,” he says. “I see these people when I walk down the street.”
