Changes in investor appetite by the banks may see borrowers ditching their investment loans, which will reduce broker trail books in the future.
Tighter lending criteria and higher interest rates by the banks mean borrowers will start feeling money stress sooner rather than later, Julian Musgrave, adviser principal at financial coaching consultancy Your Wealth Matters, told
Australian Broker.
“When push comes to shove, clients will look after their family first. Investment properties are a ‘nice to have’ and not a ‘need to have’,” he said.
The ability of a broker to alleviate future client money stress is a valuable tool in their arsenal, he noted.
“The last thing that brokers need is clients suffering money stress caused by changes in policy moving forward from this low interest rate environment. As these changes start to bite, clients will have to offload properties and loans which will affect loan books across the country.”
Working with clients to build up their future will then also help brokers protect their futures – the trail books that they have worked so hard to build up.
Brokers are well positioned to help clients through this stage, Musgrave said, since the ability to inoculate clients from money stress is not too far from typical levels of broker engagement. The key is helping clients understand their base numbers and setting them up to understand both their long-term plans and the end result.
“Freedom is a specific number unique to every family. Understanding that number and designing a plan that resonates with the family clarifies the entire process and adds to the broker’s value for their client.”
Musgrave said this means sitting down with the client and boiling down what they need to achieve financial freedom for their family into a single number – say $7,000 per month.
“It’s the ability to be able to buy your time back and have choices. With enough money coming in, you can choose how you spend your time. That’s true freedom.”
Brokers can do a large portion of this, he said, especially since this advice lies outside the traditional financial advisory area.
“To organise people’s bank account structures is not that difficult. Neither is showing them a system for how they actually identify where their money is going and then shift their mindset to understand the game they’re supposed to be playing.”
There is no licencing or compliance around changing the client’s mindset or automating and restructuring bank accounts, all of which brokers can do right now, he said.
“This is basic foundational stuff that’s in a broker’s wheelhouse anyway.”
Musgrave explained that having a specific target will stop clients from dropping assets such as investment properties when the going gets tough.
“The ability to build buffers and pre-empt future head winds will enable brokers to guide their clients through tougher times. This will save their clients’ futures and shore up their own future income streams.”
Some brokers do this anyway through aspects such as sales pitches and conversations with the client around why they need an investment property, he added.
Musgrove’s strategy was built from the MindShift.money approach created by the firm’s founder Tony Pennells, author of three books on finance.
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