MPA meets three innovative brokers taking diversification to a new level and asks how you can follow their lead.
Brokers have undergone several name changes over the years. In the beginning there were ‘mortgage brokers’, followed by the ill-fated and confusing MFAA label ‘credit advisers’, and latterly ‘finance brokers’.
Yet the number of services now provided by brokers has made even the label ‘finance broker’ too restrictive. We’re now reaching the next stage in broking’s evolution, with the emergence of the ‘group brokerage’; an organisation that can provide for almost every need in a consumer’s financial life cycle.
The ‘group brokerage’ might be an abstract term, but it’s the logical conclusion of brokers diversifying their businesses, which in turn has been driven by economic trends. In this article we feature three group brokerages that have taken diversification to this level: AMA Brokerage of the Year – Diversification The 500 Group; MPA Top 10 Independent Brokerage Green Finance Group; and AMA finalist Cube Central. We’ve also spoken to FAST CEO and long-time diversification advocate Brendan Wright.
These brokerages are set up to off er much, much more than the humble home loan. Daniel Green started Green Finance Group in Hawthorne, Queensland, as a spare-room operation in 2010. Now the group has separate divisions for commercial finance, equipment finance, home finance, insurance and financial planning, in addition to multiple offices. The 500 Group also has a number of arms: Mortgage 500, Business 500, Wealth 500 and Lease 500, all based in Victoria. Finally, Cube Central, which is headquartered in Brisbane, has 12 different brands, covering finance, wealth, insurance and a variety of ancillary services.
A MESSAGE FROM OUR SPONSOR
Whether you’re a broker looking to grow a more engaged client base, or to better service your clients’ broadening needs or simply 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.
Commercial or business lending settlements have grown on average by 50% per annum in our business, and in 2015 FAST brokers settled more than $4bn in business lending alone. This year we are well on track to settle more than $6bn.
These statistics confirm the significant opportunities to be reaped from diversifying outside of mortgages. And for brokers looking to take their business to the next level, looking beyond residential loans can lead to some powerful results.
To put a long story short, residential loans and commercial loans needn’t be mutually exclusive. As we say at FAST, ‘more than mortgages means more mortgages’.
As an advocate of diversification, FAST is proud to partner with MPA to bring you this dedicated report on diversification. I hope you find it valuable and useful to your business.
Brendan Wright
CEO, FAST
How these brokerages developed
Building such complex brokerages obviously required a proactive and strategic approach, but their impetus for diversifying came from customers and the economic environment. “We started with home loans in 2005,” recalls Cube Central founder Scott Beattie. “When the GFC hit we didn’t get paid for three months, and we realised that we had to diversify, and diversify quickly. We couldn’t be solely reliant on mortgages.” Beattie started experimenting with other services and has never stopped. The latest success has been in health insurance. “No brokerage that I’m aware of has really seemed to dabble in it before, and we were pleasantly surprised; people were really interested in getting a quote,” Beattie says.
In essence, brokerages like Beattie’s have expanded to fill the needs of clients. As Daniel Green explains, most clients will have several diff erent needs. “Business owners have home loans, investment properties, cars and, more often than not, a family that they are the primary provider for … Clients are definitely receptive to having all their fi nance needs catered for in a ‘one-stop shop’ situation; it simply removes that perceived barrier of having to make another appointment or share their personal fi nance records, again!”
There are different approaches to building a one-stop shop. Cube Central is a more traditional example. Beattie and his wife Jo have gradually added on services, initially through referral agreements. According to Beattie this approach has kept things simple. Apart from creating new logos “we haven’t had to get any more staff on, and that’s the great part; there’s been very little if any financial impact on us, apart from the initial time to integrate those services”. One exception to this policy has been their recent acquisition of an accounting practice.
Making the initial steps into diversification is also becoming easier, according to FAST CEO Wright. “Lenders and aggregators are investing in brokers being able to lodge business and asset finance loans in the same way they do home loans,” he says. Lenders have previously highlighted the ease with which sub-$2m secured loans can now be applied for; spot-and-refer models can provide a starting point for involvement in asset finance and other areas. FAST has now updated Podium to integrate business details and tracking, Wright adds. “There’s lots of work being done right across the industry to make that easier for brokers … it’s exciting times.”
Some clients are, however, reluctant to deal with what they regard as a ‘jack of all trades’. Mindful of this, Green took a different approach when building his brokerage. “Our policy has been to recruit experienced finance professionals, experts in their own fields, who work as a team to help our clients to protect, manage and grow their wealth,” Green says.
Recently the group took on Mick Hall to head their Sydney office and Pravesh Daya on the financial planning side; together they have almost five decades of combined experience.
Hiring specialists and keeping all services in-house does of course take considerable investment and effort. It also requires a shift in mindset by the proprietor, notes Green. “The financial investment is one thing, but I think the investment of time, both in integrating new staff into the existing team, establishing referral procedures and generally making myself avail-able in a mentoring capacity is far greater.”
When diversifying, it’s also important to consider your brand, insist Steve Dodd and Greg Peirlot, brokers at The 500 Group. “You need to have a well-established brand with strong creditability and the financial strength to carry through your diversifi ed plans.” The services you add to the business have to complement this brand and each other, they add. “Synergy and competency needs to exist between the services you provide so that the diversifi ed brands can support and reinforce one another … the services provided must complement each other to help support the client.” Insurance, for example, naturally complements the process of buying a home, as it is usually required under the terms of residential mortgages.
What do clients want?
These brokerages are all success stories, but diversification does remain a gamble. Unlike the banks, brokers don’t have well-staffed research divisions to work out what clients want, or the marketing resources to promote their new offerings. Clients might want a one-stop shop, but the broker still needs to go through the process of educating the client that a broker isn’t just about mortgages – and as in Dodd and Peirlot’s example, this generally starts with the mortgage itself.
“Most of the business we do is generated from mortgages,” explains Beattie of Cube Central. “We have a welcome pack which goes out to every client, and it asks the question: ‘Do you have this product in place, and do you need a review?’” Beattie then uses the client’s answers as a prompt for his interview with the client. As Cube Central mostly depends on referrals for leads, mortgages continue to be a starting point, although Beattie has had an increase in enquiries for health insurance through social media, boosting the brokerage’s database.
Finding out a client’s needs before starting the interview has another benefit: if it emerges that the client isn’t ready to take out a mortgage, it means Beattie won’t necessarily go home empty-handed. “They might need to get their savings together or whatever the circumstances may be – but in the interim they might want to get a health insurance quote, or hadn’t thought about life insurance. So sometimes it can create an income opportunity where there wasn’t one until the loan actually settles.”
With commercial clients, the scope for additional services is wider. Green aims for a long-term partnership with clients, so it’s easier to move the conversation beyond commercial and residential property to areas like insurance and equipment finance. Moreover, he’s finding that, with the help of Facebook and LinkedIn, these ancillary services are actually bringing clients through the door. “Our new car-buying service, established late last year, is really gaining traction both with existing and new clients … People are much more comfortable with outsourcing these days. They understand the value of their time and appreciate that there are professionals out there that can do it better.”
This idea of saving people time on smaller tasks also applies on the residential side. “One of the most powerful services we off er is Cube Connect,” explains Beattie. “After I do your loan, chances are when you move into your new home you’re going to need phone, electricity, gas; we arrange all of those things for you … it has probably the least effect on income generation, but it’s the thing we’re getting the most positive feedback from … chances are my competitors aren’t doing it.” In other words it’s not bringing people through the door, but it’s giving people a good reason to call Beattie first.
What Green and Beattie are doing might seem quite old-fashioned: they’re being the ‘fixer’ for their clients, solving problems and getting everything arranged as they move home. Yet it’s also a sign of what consumers will increasingly expect from their brokers. In MPA 15.7 we wrote about global innovations that could both enable and threaten the broker, and spoke to banking expert Mike Abel, managing director of credit services at Accenture Australia. Tomorrow’s broker, he told us, will be expected to help clients across the entire home-buying process, either as an adviser on all aspects of finance, or a ‘one-stop shop’ that connects providers, or a value aggregator – just giving clients a good rate won’t cut it any more.
Wright, in his comments to MPA, took a similar view, albeit coming from a different direction. “When [clients] get in front of a broker, whether they be residential or commercial, they’re looking for that help, guidance and advice, because they’re busy people, and that’s the real opportunity for brokers.” As Abel warns, Australian consumers’ expectations are about to be transformed, “and when it does change, it’s going to change quickly; it’s not going to be two to three years when people get the chance to respond”.
From the business perspective Becoming a group brokerage is a natural play for brokers, but diversifying may not necessarily be the right decision for the individual broker. “Diversification is not for everyone,” argue Dodd and Peirlot of The 500 Group, “as doing what you do best is still a proven and successful business model.” The process of setting up new brands, they conclude, still comes with risk.
At Cube Central, Beattie understands brokers’ hesitancy to diversify. “Some other mortgage brokers find it takes their attention away from what their core offering is,” he says. “To a very small extent I agree that is the case, but it’s also about having a holistic approach to what the client is after.”
Green Finance Group’s strategy of hiring specialists to offer new services nullifies that lack of focus to a point, but as Green himself has found, it’s still vital for the head of the brokerage to strike a new management-broking balance. “I was a single operator for the first two years of my broking career,” he says, “and while I had managed staff in previous roles, it’s definitely required adaptation to ensure I can manage the needs of a larger team and continue to service my own clients.”
Ultimately, diversification has to stand on its own two feet. “The more services we offer, provided they are complementary, the more opportunities we have to bring in new clients and to maintain those clients for life,” explains Green. “It’s not about short-term gain.” Banks have long appreciated the role of auxiliary services in locking down customers, according to Beattie. “We see it time and time again. People say, ‘I want to stay with my bank because it’s easy; they’ve got everything under one roof’.”
Diversification by other brokers means that keeping clients will become more important, Wright argues. “Commercial and asset finance brokers have been around for 40 years and they’re now starting to deal with the home loan needs of their clients.” Adding at least some services to your offering (Wright suggests asset finance as an easy starting point) can make a big difference in protecting your core mortgage business. Wright believes every broker needs to ask themselves the difficult question: “what’s your strategy for meeting all the needs of your current client base, let alone getting more clients?”
Be the go-to guy (or girl)
The group brokerage is an impressive demonstration of where diversification could lead, and how to get there. However, it’s also a long, long way from the experience of most brokers who focus on mortgages. What connects the two is the motivation to find and keep clients, as Beattie concludes. “We do try to make sure clients see us as the go-to guy, and a centre of influence, so they’re always thinking of us.” When the time comes to get a mortgage, he believes his previous insurance and commercial clients will call him first. And for brokers who do want to go down the diversification route, Green has some straightforward advice: “Stop talking about it. Just do it.”
DIVERSIFICATION AT A NATIONAL FRANCHISE
It’s one thing to diversify a single office, another to diversify a huge national network. Aussie Home Loans has experimented with diversification for a decade, and MPA talked to general manager product and strategy David Smith about what they’d learnt from the experience.
“All of our products outside mortgages are built around the mortgage conversation,” Smith explains. Therefore Aussie offers a wide range of insurance products and refers to personal loan providers. “We think it’s important to be a specialist and build on our reputation as providing excellent home loan advice.” However, Aussie is beginning to off er asset fi nance and commercial property lending to business customers. “We’ve evolved it over time to reflect consumers’ needs over time,” Smith adds. “We used to have an Aussie MasterCard product … [but] the closeness and relevance of that offering to our offering began to drop off .” Franchises aren’t required to offer diversified products, but Smith hopes to win support. “We put our best foot forward and off er them to [the franchisees] and their customers.” This year Aussie will be focusing on insurance and asset finance.
Yet the number of services now provided by brokers has made even the label ‘finance broker’ too restrictive. We’re now reaching the next stage in broking’s evolution, with the emergence of the ‘group brokerage’; an organisation that can provide for almost every need in a consumer’s financial life cycle.
The ‘group brokerage’ might be an abstract term, but it’s the logical conclusion of brokers diversifying their businesses, which in turn has been driven by economic trends. In this article we feature three group brokerages that have taken diversification to this level: AMA Brokerage of the Year – Diversification The 500 Group; MPA Top 10 Independent Brokerage Green Finance Group; and AMA finalist Cube Central. We’ve also spoken to FAST CEO and long-time diversification advocate Brendan Wright.
These brokerages are set up to off er much, much more than the humble home loan. Daniel Green started Green Finance Group in Hawthorne, Queensland, as a spare-room operation in 2010. Now the group has separate divisions for commercial finance, equipment finance, home finance, insurance and financial planning, in addition to multiple offices. The 500 Group also has a number of arms: Mortgage 500, Business 500, Wealth 500 and Lease 500, all based in Victoria. Finally, Cube Central, which is headquartered in Brisbane, has 12 different brands, covering finance, wealth, insurance and a variety of ancillary services.
A MESSAGE FROM OUR SPONSOR
Whether you’re a broker looking to grow a more engaged client base, or to better service your clients’ broadening needs or simply 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.
Commercial or business lending settlements have grown on average by 50% per annum in our business, and in 2015 FAST brokers settled more than $4bn in business lending alone. This year we are well on track to settle more than $6bn.
These statistics confirm the significant opportunities to be reaped from diversifying outside of mortgages. And for brokers looking to take their business to the next level, looking beyond residential loans can lead to some powerful results.
To put a long story short, residential loans and commercial loans needn’t be mutually exclusive. As we say at FAST, ‘more than mortgages means more mortgages’.
As an advocate of diversification, FAST is proud to partner with MPA to bring you this dedicated report on diversification. I hope you find it valuable and useful to your business.
Brendan Wright
CEO, FAST
How these brokerages developedBuilding such complex brokerages obviously required a proactive and strategic approach, but their impetus for diversifying came from customers and the economic environment. “We started with home loans in 2005,” recalls Cube Central founder Scott Beattie. “When the GFC hit we didn’t get paid for three months, and we realised that we had to diversify, and diversify quickly. We couldn’t be solely reliant on mortgages.” Beattie started experimenting with other services and has never stopped. The latest success has been in health insurance. “No brokerage that I’m aware of has really seemed to dabble in it before, and we were pleasantly surprised; people were really interested in getting a quote,” Beattie says.
In essence, brokerages like Beattie’s have expanded to fill the needs of clients. As Daniel Green explains, most clients will have several diff erent needs. “Business owners have home loans, investment properties, cars and, more often than not, a family that they are the primary provider for … Clients are definitely receptive to having all their fi nance needs catered for in a ‘one-stop shop’ situation; it simply removes that perceived barrier of having to make another appointment or share their personal fi nance records, again!”
There are different approaches to building a one-stop shop. Cube Central is a more traditional example. Beattie and his wife Jo have gradually added on services, initially through referral agreements. According to Beattie this approach has kept things simple. Apart from creating new logos “we haven’t had to get any more staff on, and that’s the great part; there’s been very little if any financial impact on us, apart from the initial time to integrate those services”. One exception to this policy has been their recent acquisition of an accounting practice.
Making the initial steps into diversification is also becoming easier, according to FAST CEO Wright. “Lenders and aggregators are investing in brokers being able to lodge business and asset finance loans in the same way they do home loans,” he says. Lenders have previously highlighted the ease with which sub-$2m secured loans can now be applied for; spot-and-refer models can provide a starting point for involvement in asset finance and other areas. FAST has now updated Podium to integrate business details and tracking, Wright adds. “There’s lots of work being done right across the industry to make that easier for brokers … it’s exciting times.”
Some clients are, however, reluctant to deal with what they regard as a ‘jack of all trades’. Mindful of this, Green took a different approach when building his brokerage. “Our policy has been to recruit experienced finance professionals, experts in their own fields, who work as a team to help our clients to protect, manage and grow their wealth,” Green says.
Recently the group took on Mick Hall to head their Sydney office and Pravesh Daya on the financial planning side; together they have almost five decades of combined experience.
Hiring specialists and keeping all services in-house does of course take considerable investment and effort. It also requires a shift in mindset by the proprietor, notes Green. “The financial investment is one thing, but I think the investment of time, both in integrating new staff into the existing team, establishing referral procedures and generally making myself avail-able in a mentoring capacity is far greater.”
When diversifying, it’s also important to consider your brand, insist Steve Dodd and Greg Peirlot, brokers at The 500 Group. “You need to have a well-established brand with strong creditability and the financial strength to carry through your diversifi ed plans.” The services you add to the business have to complement this brand and each other, they add. “Synergy and competency needs to exist between the services you provide so that the diversifi ed brands can support and reinforce one another … the services provided must complement each other to help support the client.” Insurance, for example, naturally complements the process of buying a home, as it is usually required under the terms of residential mortgages.
What do clients want?
These brokerages are all success stories, but diversification does remain a gamble. Unlike the banks, brokers don’t have well-staffed research divisions to work out what clients want, or the marketing resources to promote their new offerings. Clients might want a one-stop shop, but the broker still needs to go through the process of educating the client that a broker isn’t just about mortgages – and as in Dodd and Peirlot’s example, this generally starts with the mortgage itself.
“Most of the business we do is generated from mortgages,” explains Beattie of Cube Central. “We have a welcome pack which goes out to every client, and it asks the question: ‘Do you have this product in place, and do you need a review?’” Beattie then uses the client’s answers as a prompt for his interview with the client. As Cube Central mostly depends on referrals for leads, mortgages continue to be a starting point, although Beattie has had an increase in enquiries for health insurance through social media, boosting the brokerage’s database.
Finding out a client’s needs before starting the interview has another benefit: if it emerges that the client isn’t ready to take out a mortgage, it means Beattie won’t necessarily go home empty-handed. “They might need to get their savings together or whatever the circumstances may be – but in the interim they might want to get a health insurance quote, or hadn’t thought about life insurance. So sometimes it can create an income opportunity where there wasn’t one until the loan actually settles.”
With commercial clients, the scope for additional services is wider. Green aims for a long-term partnership with clients, so it’s easier to move the conversation beyond commercial and residential property to areas like insurance and equipment finance. Moreover, he’s finding that, with the help of Facebook and LinkedIn, these ancillary services are actually bringing clients through the door. “Our new car-buying service, established late last year, is really gaining traction both with existing and new clients … People are much more comfortable with outsourcing these days. They understand the value of their time and appreciate that there are professionals out there that can do it better.”
This idea of saving people time on smaller tasks also applies on the residential side. “One of the most powerful services we off er is Cube Connect,” explains Beattie. “After I do your loan, chances are when you move into your new home you’re going to need phone, electricity, gas; we arrange all of those things for you … it has probably the least effect on income generation, but it’s the thing we’re getting the most positive feedback from … chances are my competitors aren’t doing it.” In other words it’s not bringing people through the door, but it’s giving people a good reason to call Beattie first.
What Green and Beattie are doing might seem quite old-fashioned: they’re being the ‘fixer’ for their clients, solving problems and getting everything arranged as they move home. Yet it’s also a sign of what consumers will increasingly expect from their brokers. In MPA 15.7 we wrote about global innovations that could both enable and threaten the broker, and spoke to banking expert Mike Abel, managing director of credit services at Accenture Australia. Tomorrow’s broker, he told us, will be expected to help clients across the entire home-buying process, either as an adviser on all aspects of finance, or a ‘one-stop shop’ that connects providers, or a value aggregator – just giving clients a good rate won’t cut it any more.
Wright, in his comments to MPA, took a similar view, albeit coming from a different direction. “When [clients] get in front of a broker, whether they be residential or commercial, they’re looking for that help, guidance and advice, because they’re busy people, and that’s the real opportunity for brokers.” As Abel warns, Australian consumers’ expectations are about to be transformed, “and when it does change, it’s going to change quickly; it’s not going to be two to three years when people get the chance to respond”.
From the business perspective Becoming a group brokerage is a natural play for brokers, but diversifying may not necessarily be the right decision for the individual broker. “Diversification is not for everyone,” argue Dodd and Peirlot of The 500 Group, “as doing what you do best is still a proven and successful business model.” The process of setting up new brands, they conclude, still comes with risk.
At Cube Central, Beattie understands brokers’ hesitancy to diversify. “Some other mortgage brokers find it takes their attention away from what their core offering is,” he says. “To a very small extent I agree that is the case, but it’s also about having a holistic approach to what the client is after.”
Green Finance Group’s strategy of hiring specialists to offer new services nullifies that lack of focus to a point, but as Green himself has found, it’s still vital for the head of the brokerage to strike a new management-broking balance. “I was a single operator for the first two years of my broking career,” he says, “and while I had managed staff in previous roles, it’s definitely required adaptation to ensure I can manage the needs of a larger team and continue to service my own clients.”
Ultimately, diversification has to stand on its own two feet. “The more services we offer, provided they are complementary, the more opportunities we have to bring in new clients and to maintain those clients for life,” explains Green. “It’s not about short-term gain.” Banks have long appreciated the role of auxiliary services in locking down customers, according to Beattie. “We see it time and time again. People say, ‘I want to stay with my bank because it’s easy; they’ve got everything under one roof’.”
Diversification by other brokers means that keeping clients will become more important, Wright argues. “Commercial and asset finance brokers have been around for 40 years and they’re now starting to deal with the home loan needs of their clients.” Adding at least some services to your offering (Wright suggests asset finance as an easy starting point) can make a big difference in protecting your core mortgage business. Wright believes every broker needs to ask themselves the difficult question: “what’s your strategy for meeting all the needs of your current client base, let alone getting more clients?”
Be the go-to guy (or girl)
The group brokerage is an impressive demonstration of where diversification could lead, and how to get there. However, it’s also a long, long way from the experience of most brokers who focus on mortgages. What connects the two is the motivation to find and keep clients, as Beattie concludes. “We do try to make sure clients see us as the go-to guy, and a centre of influence, so they’re always thinking of us.” When the time comes to get a mortgage, he believes his previous insurance and commercial clients will call him first. And for brokers who do want to go down the diversification route, Green has some straightforward advice: “Stop talking about it. Just do it.”
DIVERSIFICATION AT A NATIONAL FRANCHISEIt’s one thing to diversify a single office, another to diversify a huge national network. Aussie Home Loans has experimented with diversification for a decade, and MPA talked to general manager product and strategy David Smith about what they’d learnt from the experience.
“All of our products outside mortgages are built around the mortgage conversation,” Smith explains. Therefore Aussie offers a wide range of insurance products and refers to personal loan providers. “We think it’s important to be a specialist and build on our reputation as providing excellent home loan advice.” However, Aussie is beginning to off er asset fi nance and commercial property lending to business customers. “We’ve evolved it over time to reflect consumers’ needs over time,” Smith adds. “We used to have an Aussie MasterCard product … [but] the closeness and relevance of that offering to our offering began to drop off .” Franchises aren’t required to offer diversified products, but Smith hopes to win support. “We put our best foot forward and off er them to [the franchisees] and their customers.” This year Aussie will be focusing on insurance and asset finance.
