Financial advice JVs on the rise, says aggregator

A non-bank aggregator has identified that new business structures are being formed between mortgage brokerages and financial planning firms in place of traditional referral deals.

Kevin Frost, general manager of Centrepoint Lending Solutions (CLS), the aggregator owned by ASX-listed Centrepoint Alliance, said the method for cementing business partnerships between the two sectors is undergoing a shift.

While historically, financial advice and accounting practices would approach CLS to provide lending referrals to a mortgage broker outside their practice, they are now adopting new structures more akin to joint ventures, Mr Frost said.

“Many advice practices are now setting up new business structures and either employing brokers on salaries or both parties are taking a financial stake in a joint venture or partnership,” he said.

"This approach means that internal referral processes can be properly integrated, and office and administration costs can be shared. Most importantly, it means the mortgage broker becomes an integral part of the business.”

The change in business structure could also see an increase in the volume of loans written.

“It also means the mortgage broker can properly leverage their client base by referring them for financial advice,” Mr Frost said.

A Brisbane financial planning group recently approached CLS to source an existing mortgage broker that would join their firm on a salary plus profit-share basis, with the group willing to buy out the broker's current trail book, he said.

"This approach isn't for all mortgage brokers, advice or accounting practices," he added, however. "There are still many practices who are content to simply refer each other business, and this often makes sense in terms of their size and focus.”

Centrepoint Alliance also owns financial planning dealer groups Professional Investment Services and Alliance Wealth and the Associated Advisory Practice network of self-licensed advice firms. 

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Aleks Vickovich

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