Diversification: The key to client retention
Client turnover can be costly for broking businesses.
Whether it’s chasing up referrals or spending money on advertising, customer acquisition uses up resources that could otherwise be spent delivering great service to your existing clients.
By offering a diversified range of services, brokers are holding on to their clients – and spending less time on finding new business.
Building relationships that last
For Chris Hall from Blue Crane Capital, being able to respond to the various borrowing needs of clients was one of the main things that drew him into broking and away from banking in the first place.
“I worked in the commercial bank for a while and I did see the high level of turnover,” says Hall.
“The customer would be wooed by a particular banker, they might come on board, they might refinance, settle them, they look after them for 12 to 18 months and then that banker goes on to another department, or they leave the bank.”
His observations as a banker have shaped his approach to broking.
“I want to be a relationship manager with the client for the next 20 to 25 years,” explains Hall.
“As a broker, you don’t jump around, you are there forever if the client wants you and you do a good job for the client. I see the relationship model coming down to the broker now, rather than the banker.”
Increasing services increases opportunity
By taking care of their clients’ commercial and residential needs, as well as their asset finance, brokers can ensure repeat business.
Matt Carr, founder of MC Mortgage Solutions, enjoys working in the residential loan space, but understands that each point of contact with a client offers the opportunity to learn more about their broader financing needs. In turn, he says it’s then possible to deliver a wider range of services that take a client’s complete financial position into account.
“You obviously see all of that through the financials when you are assessing their income for the residential space.”
Carr freely admits that he prefers residential broking ahead of commercial deals, but also understands that there is enormous value in offering both services.
“It keeps the client; that’s why we do it.”
On the flip side, broker David Loft primarily specialises in commercial lending. However, he has found that clients are increasingly turning to his business, Steward Funding, for their otherborrowing needs.
“We are getting a lot of enquiries for consumer lending,” says Loft. “That is creating a diversified model for our business.”
Loft readily admits that he prefers commercial lending over residential, but welcomes the benefits of diversification for his business.
“I would love to just do commercial lending, but the reality is, if I don’t write residential mortgages for clients, then someone else will, and that puts my brokerage at risk,” he explains. “We are trying to offer a full service that is completely debt focused.”
Taking a strategic approach to diversification
Although diversification can be a huge benefit to broking businesses, it’s important to be strategic.
If your broking business specialises in residential lending and doesn’t have the expertise to execute a commercial loan, offering the service could expose the business to reputational risk.
Rather than simply diversifying for the sake of it, BF Money’s George Karam chooses to focus on his area of expertise.
“We let go a lot of opportunities that aren’t the core strength for us, or of the business,” says Karam.
“We have actually not been active in that, because you end up trying to do things that you are not very good at. It is not to say that other people are not doing it well, but we like to be really good at a few things than make money on everything.”
However, Karam doesn’t simply let opportunities for diversification go. Instead, he uses his clients’ multiple needs as an opportunity to build partnerships with other brokers.
“On the upside, it encourages and promotes other relationships with other providers that can do all these things. We have got people that we refer work out to, they will also refer back,” says Karam.
The key to using diversification to your advantage is about knowing how you can benefit the customer, according to Chris Hall.
“It comes down to knowing the market and having the knowledge and skill set to add value and make it a trusted relationship,” says Hall.
“The client knows that you have their best interest at heart and you are safeguarding their interests, not only in the short term, but more importantly, the long term as well.”