Diversification is one of those industry buzz-words that has been tossed about so often it can lose all meaning. Brokers are told they need to add new revenue streams and service offerings to their business, but they are rarely told how or why. For those looking to expand to a full-service offering, however, it would be hard to go wrong by emulating the success of this year’s AMA winner for Brokerage of the Year – Diversification, The 500 Group.
The 500 Group’s Martin Vidakovic said the decision to diversify was primarily driven by the brokerage’s client base.
“I think the client dictates the market. We were dealing with a lot of home loan type clients, but a lot of self-employed clients as well. So for us to have commercial lending was a natural progression. What we found is it had a massive effect, because not only were we looking at more business loans, but that filtered down to doing home loans not only for those business clients, but also the employees of those clients,” he said.
Vidakovic said clients are increasingly coming to finance professionals with the expectation of having all their financial needs met in one place.
“I think it’s a time thing. I think the client demands the market. We saw that as an opportunity. Clients like to come to one place and know they’re taken care of. Maybe they just don’t want to be disjointed into different areas for different solutions,” he said.
And Vidakovic said The 500 Group believes the best way to accomplish this is with a team of experts rather than a simple spot and refer model.
“We always had the image of the client sitting at the table with like four experts in different areas listening to the conversation and then delivering on what was required,” he said.
Expertise is key to success in diversification, he said. With this in mind, Vidakovic said The 500 Group has added new service offerings by bringing in top experts in different fields of finance.#pb#
“Our aim was always to be the masters of our trade, so we get really top quality specialists in each area, and we don’t really cross areas. We just have go-to people within the group, but the client gets to build the relationship within the group. Then whatever their needs are, we can direct them to the right specialist. We find that’s what they want. They want to come to one place that can meet all their needs,” he said.
The journey to diversification
The 500 Group’s service offering didn’t come into being overnight. Vidakovic said he started as a purely residential broker, but soon saw the need for expanding into commercial finance.
“I thought that the business clients weren’t really being looked after by the banks. They felt very threatened and very scared to shop anywhere else or to see what was out there, because they felt if their business banker didn’t support them they would be very vulnerable,” he said.
With this in mind, he said the business took on commercial finance to help advocate for its business clients.
“What we’ve done is empower the client to have a finance professional on their side to best represent their business to the banks. We come in and write 40 or 50 page reports, do all the analysis work and then make the business banker’s role easier as well in regards to processing the opportunity,” he said.
With the disparity in customer satisfaction between banks’ retail and business customers, Vidakovic said business brokers can also serve as a valuable asset to banks.
“I think the way we position it is working together as a team. The client still has to feel that not only the product and opportunity is a match, but so is the business banker. That relationship is built by us,” he said.
Vidakovic said the company only added commercial broking to its offering in 2012, but that it has already grown to 60% of The 500 Group’s business. Around the same time, the company added financial advice.
“We brought in financial planning as well with Wealth 500, so we can take care of insurance needs and superannuation needs,” he said. “It gives us great diversification with The 500 Group as an asset overall that then intertwines into each other.”
Six months ago, the company rounded out its offering with Lease 500.
“We got, once again, one of the best leasing experts within the banks to come across. She’s already shooting the lights out, so we’re expecting big things next year.”
