Brokers should think long and hard before diversifying into this area, says Educated Finance's Tony Inglis.
Educated Finance’s Tony Inglis and his business partner Kevin Allen run a truly diversified business suite. As well as residential mortgages, his team also offers leasing, commercial finance and financial planning, and he’s even added a real estate agency to his stable of enterprises. But, as he tells MPA, diversifying in this manner isn’t for the faint-hearted.
MPA: Tell us how your business evolved to become what it is now.
Tony Inglis: Originally when we started the brokerage, myself and my business partner Kevin Allen had backgrounds in residential finance. From there it was a natural progression to do leasing.
We’ve been doing leasing for eight years, and that’s an easy add-on, because clients that want finance for houses often want finance for cars as well.
As well as that, we moved into commercial finance: originally just commercial finance where we had commercial property as security and then, as we developed contacts with the banks, we moved into other areas of commercial finance not secured by real estate, such as invoice financing
and finance to fund your business.
Two years ago we also got our diplomas in financial planning. So we offer a financial planning service, but we don’t focus on investments as such – that’s not our niche. It’s simply a case that we got that qualification so that we can offer risk insurance for our clients.
MPA: Where do leads for your diversified business streams come from?
TI: I think the majority have come from our existing base, but then as your name gets around you will get referrals and people who will come to you out of the blue. If they walk in the door they can’t miss the sign that’s going to tell them what else we do. So we just make sure that that’s front and centre, so that they’re aware that we don’t just do finance.
MPA: How do you deal with administration and compliance?
TI: We try and specialise to a degree. So I do the financial planning and risk insurance. We’ve got another broker that we took on two years ago and we give him all the leasing. He does residential lending as well, but we give him all the leasing so he can keep on top of rates, who’s got the best deals and the back-end processing. Because if you’re not doing it all the time, if you’re not living it, it’s hard to go in and keep up with all of that.
Kevin also does residential home loans, but he also does a lot of the commercial as well. I don’t do as much residential lending as the other guys, because I also do financial planning, SMSF loans and reverse mortgages – which requires its own accreditation and licensing.
MPA: Is residential lending still your business’s main source of income?
TI: Residential has always been the bread and butter, and we’ve been doing that for 10 years now. You build up a good-sized book and a good trail income from that, so that’s still the vast majority. Commercial is about 10% [of the lending side of the business]; leasing is about 5%; SMSF lending, which is new, is only contributing about 3%. The financial planning is run as a separate division.
MPA: Tell us about your real estate agency.
TI: Kevin and I are both licensed real estate agents as well. Two years ago we set up a real estate business, which we run as a separate entity, and we have someone else who’s also a licensed agent who runs that business. It’s more boutique; it’s never going to be a volume business, but we’ve had so many clients buying and selling over the years and we’ve sent them away. Now we can mention to them that they’re comfortable with Educated Finance – did they know that there’s also Educated Property?
MPA: Is it part of your mortgage broking business?
TI: It runs from the same premises, but it’s a separate business run by a separate person. And in that way we can do transactions at arm’s length, and avoid any conflict of interest. And it comes down to giving clients full disclosure so that they’re aware that we have an interest in this business as well, but it’s run by another person. If they’re comfortable with that, we often have clients who are looking at selling their property that list it with Educated Property.
Obviously, when you do that you can expect not to have such an open-door policy with other agents in town. So you forgo referrals from real estate agents, but if you can back yourself to develop enough business then you can offset that.
You’ve definitely got to back yourself, and you really need someone that you’re going to go into business with to run the real estate agent side, because you can’t wear both hats. ASIC are already looking at it now, but they’re going to come in and regulate property as well. Property will become a financial product, and therefore ASIC will want to regulate that like they’ve already done with financial planning and now finance. So I think all those businesses are going to become more intertwined.
MPA: What advice can you offer on diversifying successfully?
TI: If you’re a one-man band I would think long and hard before you thought about diversifying into financial planning, because you really need a lot of time on your hands to be able to do it right.
With my situation we’re lucky; I’ve got other people working around me so I can forgo some of the workload in the finance space to give me time to do the financial planning and keep up to speed with that.
