Integrating lending solutions into advice practices through an effective referral relationship

There are a number of factors that have been shaping financial advice, including consumer behaviour, access to information, industry consolidation, choice, the influence of technology, social and demographic factors, and increased consumer and legislative scrutiny.

These factors are all placing pressure on advice businesses to adapt. And while a lot of firms successfully run a profitable and well-oiled service proposition as a specialist in a niche field, we are seeing business models being shaped by the convergence of offerings, such that they are evolving into multi-disciplinary practices delivering a full suite of services, including advice, accounting and mortgage broking.

The reasons for this convergence vary, however some consistent themes that have emerged include:

- The evolution of advice practices to deliver values-based whole of life propositions to their clients;
- The transition to a ‘house of specialists’ driven by the client expectation that their trusted adviser will deliver a fully integrated view of their planning needs and provide all services under one roof; 
- The cost to produce advice is under extreme pressure from increased compliance, staffing and operational costs, forcing business owners to look at ways to grow their revenue per client; and 
- Responding to the ongoing challenge of customer value creation, by introducing adjacent services to deliver on both new and existing client needs, to lead to increased revenue per client and advocacy.

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So, with this convergence happening, what are the key ingredients to building an effective referral relationship? And with the appropriate structuring of credit now being a central component of most financial plans, what are the options for integrating a lending solution into an advice offering?

While the adviser and broker both have the client at the heart of the relationship, some adviser–broker relationships have historically been uneasy bedfellows. This apparent tension lies in the different mindset and time horizon advisers and brokers have had in their approach to the client relationship. Historically the broker relationship has been more transactional – albeit this is evolving into a more holistic ongoing offering, whereas the adviser takes a more whole-of-life planning approach.

These different engagement cycles have led to inconsistent client outcomes, misaligned client engagement and communication, and an environment of referral fear.

Advisers and brokers are now bridging that gap through building effective, more closely aligned relationships that are resulting in more a consistent view around the client relationship, experience and outcome.

The start point for advisers is understanding how a lending solution fits into your growth plans and client offering. Considerations include:

- Is your current broker relationship adding the value to your clients and practice – leading to aligned credit advice, client retention and client referrals?
- Are you wanting a residential and commercial offering?
- Are you wanting to increase the revenue per client without increasing your workload or impacting the advice being given?
- Are you wanting more referrals back into your business?
- Are you wanting to develop another revenue stream or just provide an aligned offer?

These answers will help guide your objectives and the type of broker relationship you are looking for:

- A referral relationship and strategic alliance with a broker/broking firm;
- A “white label” joint venture with a broker/ broking firm; or
- If you have the scale, appetite, and speciality skills, bringing it fully in house.

It is important to assess and understand the costs and benefits of these different models to ensure the model you integrate suits your objectives.

And importantly, take time to align yourself with the right broker/broking firm who has similar values and who takes the time to understand your personal and business objectives, your service offering and the advice you offer your clients – what you do, how you do it and who you do it for.

Additionally, ask them about their value proposition and process around engaging and working with your practice at a B2B level as well as their service proposition and process on how they would engage and service your clients – both pre and post settlement.

Once the basics are established, you can then integrate the solution into your processes, offering and marketing collateral, and leverage the opportunity through educating your staff, educating and servicing your client needs and through your ongoing partnership review meetings.

This more strategic approach should lead to your clients being provided with a tailored mortgage and finance solution aligned with your advice and in keeping with their values, aspirations, goals and financial profiles and plans – and one that is consistent with your service expectations and that delivers on your strategic objectives.

Anthony Landahl, managing director, Equilibria Finance

Integrating lending solutions into advice practices through an effective referral relationship
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