The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is done and dusted, but some of the resulting changes to the finance sector are still to be seen. Potential impacts to commissions and remuneration for mortgage brokers have many considering diversifying to new income streams to ensure their survival.
The other main reason for residential brokers to diversify is to look after the long-term needs of their client base and uncover hidden value based on their needs. Research shows that 25% of mortgage borrowers own small businesses or are self-employed. More and more, consumers are looking for a single source to meet all their finance needs. Brokers who can provide the right product or service for their clients have the potential to build stronger relationships, uncover the hidden value of their database and put them one step ahead of the competition. If you don’t offer business lending to clients who need it, they could go elsewhere and eventually switch their mortgage lending as well.
The recent Reserve Bank’s Advisory Panel has stated that big banks are reluctant to finance newer businesses given the high risks involved. Recent research shows that small and medium size businesses (SMBs) are increasingly turning to alternative lending options because they aren’t having much luck with traditional banks. This presents an opportunity for brokers to provide guidance and value by helping business owners and those managing the finances of SMBs find viable, credible financing alternatives. The market has seen a rise in non-bank lenders providing small and medium business loan options, leaving businesses with a lot more options to navigate, even more decisions to make and in need of serious help.
Diversifying into business financing can be daunting, but understanding the lenders requirements and business documentation requirements is easier than you may think. Most lenders have a simple application process and offer training and support. Private Mortgages Australia hosts regular webinars that explain exactly what is required from a broker and how the process works.
Diversifying into small business lending can help brokers not only grow their business but to service more of their customers’ financial needs and deepen customer relationships. Increasingly, customers are looking for advice across
a broad spectrum of financial products, not just their mortgage.
To be successful, brokers will need to put the customer at the centre of everything, understand the customers’ full needs and to address those needs. This comes down to brokers ensuring they have a range of products on offer to address the holistic financial requirements of their customers.
We believe that diversifying into business lending is the biggest opportunity that brokers will have to grow and develop their business over the next few years.