Brokerage launches new wealth model

Loan Market has begun rolling out new franchise models for its wealth business, Wealth Market.

Despite the major brokerage stating that it would not allow its brokers to double-up as Wealth Market advisers when the brand first rolled out in 2014, the company has now said that it has begun rolling out a franchise model for the financial planning arm.

The Wealth Market franchising option will cover three models:

• a joint venture (JV) between a Loan Market franchisee and one of the existing salaried Wealth Market financial planners;
• a joint venture between a Loan Market franchisee and their external financial planner (in place of a referral model);
• a self-employed model in which an existing Loan Market franchisee that also has an AFSL can set up a Wealth Market brand, too.

Speaking at the Loan Market Connect 2018 conference earlier this week, the executive director and head of distribution and advice, Matt Lawler, said: “I don’t think anyone disagrees that talking to a Wealth Market adviser about financial planning and protecting a [mortgagor] is a bad idea. Everyone agrees that is a good idea. The question is, how do you implement that in your business? So, we are offering different models for brokers to do this and we can integrate it completely inside a brokerage.

“People talk to us about the noble purpose of becoming a broker. People become brokers to look after clients. I think Wealth Market is the missing jigsaw piece of completing that picture of looking after the client. We think that it is a great addition to what we’re doing and we think it is the next evolution of how we reinvent business.”

Speaking to Mortgage Business about the decision, the former YBR CEO said: “The whole concept of financial planning and mortgage broking sitting side by side has been around for a while and it is a very compelling argument for meeting more needs for the client. This is particularly the case when you find that the loan sizes that people are taking out, and the ages at which they are taking them out, are leaving them very exposed.

“So, that is our first port of call: to make sure we don’t leave our clients exposed, that we can give them advise on what they are doing, and not necessarily just sell them product and leave them to their own devices.

“We started that with the salaried model of Wealth Market, and now we have been running that for a while and have developed the infrastructure required to run an AFSL; the next phase for us is to develop it further.” 

Mr Lawler said that while some Loan Market and Wealth Market franchisees might set up the offering as two separate businesses or decide to merge them together, the Loan Market Group will run them as separate businesses due to their AFSL responsibilities.

He added that the seven salaried Wealth Market advisers will remain available to Loan Market brokers regardless of whether they set up a joint venture, and that the brand is also in talks with other financial planners that are interested in becoming salaried advisers.

The executive chairman of Loan Market, Sam White, told Mortgage Business that the decision came to roll out the Wealth Market franchise as it was increasingly seeing business owners “wanting to bring the financial planning in-house and make it part of their overall practice”.

Mr White said: “This was how bank branch managers used to be; they could really help customers with a whole range of products. But once the banks moved away from that model, they left that whole space up for grabs. Brokers are so well placed to take that because they have a fundamental relationship through the mortgage and their market share is growing.

“The thing now is to know how they diversify their revenue streams so they can afford to keep investing in the customer service, particularly if commissions change and trail does go [as recommended by the Productivity Commission], they will need to have multiple revenue streams to protect their business.”

He continued: “If trail commissions do go, it will be painful and there will be some challenges that we’ll go through, we’ll need to change as an industry, but brokers will still prosper and thrive.

“This move to a diversified practice of financial planning, mortgages and asset finance will enable those business owners that want to have their own multi-revenue, multi-discipline practice.”

[Related: Fees-for-no-service compensation could exceed $850m]