Advisers are leaving business on the table if they don't offer business advice to clients with SMEs
This article was produced in partnership with Financial Advice New Zealand
Many advisers are currently limiting their advice to personal advice to these clients when they could be expanding their offerings to structuring business loans and business risk management advice particularly in respect of the key person in the business.
Currently, small businesses face many potential scenarios that could devastate both their business lives and personal lives that advisers could help mitigate.
For businesses which are essentially family-run mum and dad businesses – what happens in the business will often also have a direct effect on the running of their home.
When it comes to credit, for example, small business owners often fall outside a lot of traditional business lending criteria. The business doesn’t have enough income or assets to use as security so the owners must put up their home as security for the business lending which can then end up like a melting pot of risk.
The risks are increased if the business is the sole or significant source of income to the household and the house is security for the business. When things go wrong the worst outcome can be the business is not able to generate revenue, therefore there is no personal income, and the domino effect comes into play - no ability to service the business debt and home mortgage and no income for the household to maintain its day-to-day living costs.
Small businesses can be very vulnerable and exposed. They need advice from people who know what they are doing. They need better ways of structuring loans and insurance.
Financial Advice New Zealand (FANZ) has recognised the need for advisers to understand and better serve the needs of the small business market and is running a modern advice masterclass as part of its Financial Advice New Zealand National Adviser Conference on 1-3 April, in Christchurch.
Designed for intermediate and experienced advisers this interactive session will provide attendees with a deep understanding of the lending and insurance advice opportunities for SMEs.
Prospa managing director Adrienne Begbie said she has seen recognising the needs of SMEs help advisers win business. “In one case an insurance adviser was having a conversation with a salon owner while getting their hair done. This casual interaction led to the discovery of a business opportunity: the salon owner needed to upgrade their space to accommodate more services and increase turnover,” she said.
“The adviser recognised this need and facilitated a $40,000 loan, which was funded within just 24 hours. This quick turnaround allowed the salon owner to begin renovations within two weeks, enabling them to freshen up their space, use it more efficiently, and ultimately increase their revenue.
“Additionally, the adviser emphasised the importance of reviewing insurance coverage during and after the renovations to ensure proper protection against fire, general liabilities, and the salon owner as the key person.”
In another instance, an insurance adviser conducted a routine insurance review with a client who owned a coffee truck in a busy industrial area.
“During this appointment, the client mentioned that they were struggling to secure an overdraft facility from their bank and recognising this challenge, the adviser arranged a $15,000 line of credit, which was funded and made available within 24 hours” Begbie said.
“This solution gave the business owner much-needed peace of mind and financial flexibility to manage fluctuating staffing challenges and supplier payment terms and the immediate access to funds created a financial safety net that allowed the business to operate more confidently despite day-to-day operational uncertainties.”
However, it was the adviser recognising what the SME client needed that allowed the adviser to provide more holistic advice and keep the client from looking elsewhere for added services.
Diversification is something advisers recommend for clients. It is equally important within the business of advice, to diversify the offerings of advice businesses.
“In addition to giving clients better service and coverage, expanding the advice offering to SME clients will provide resilience to the advice business through the ups and downs of market cycles,” says FANZ head of professional development Cecilia Farrow (pictured above).
“Developing capabilities in multiple markets builds potential revenue streams and reduces vulnerability and reliance on residential lending and personal risk advice.”
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Financial Advice New Zealand is the largest financial adviser-representative professional body for Financial Advisers and Financial Advice Providers (FAPs) in New Zealand. Our members provide trusted advice to consumers across financial planning and investments, mortgages and lending, and life, disability & health insurance, which ultimately helps Kiwis grow, manage, and protect their wealth. Today, Financial Advice New Zealand is a vibrant, innovative association, where the underlying driver of policy is that great advice transforms lives. We promote the highest professional standards for financial advice, so more New Zealanders have the confidence to actively seek quality financial advice to improve their financial health, wealth, and well-being.
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