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   ARTICLE   |   From Scotsman Guide Residential Edition   |   December 2014

Selling Wealth Creation

Financial planners can be one of your most lucrative referral sources

Financial planners could be your biggest and best source of mortgage business. Tens of millions of wage-earning Americans desperately need professional wealth-creation and debt-management products and services. For most, their biggest asset is their home and their largest monthly obligation is their mortgage.

The three great obstacles preventing these wage-earners from beginning wealth-creation programs are: lack of discretionary cash-flow, lack of a plan and lack of awareness that help is available. This is where mortgage consultants and financial planners come into play.

If you’ve ever had conversations with financial planners or asset managers, however, you know the biggest challenge is often getting them to agree to an appointment; they often doubt a broker or lender can help them in any way. Your way into that initial conversation should always be to say, “I’d like to spend 20 minutes to share a way for you to grow your core business.”

Mortgage as investment

Many professional asset managers don’t know that mortgages can be investment tools or understand that home equity earns zero rate of return. No one would ever recommend you save money in a coffee can because money in a coffee can generates no investment income. Accumulating equity in a home delivers the same result. Sure, homes increase in value, but home appreciation occurs independently of outstanding mortgage debt, and home equity generates no investment income.

Today’s mortgage rates continue to be attractive, and the U.S. equities markets are the world’s preferred destination for investment capital. A JPMorgan Chase & Co. report this past June shows that the New York financial markets have regained all of their 2008 losses and their profits are higher than ever.

Savvy planners often recommend that their clients take out the largest home-equity loans they qualify for, extended over the longest terms available, and invest the dollar differences in equities. Those who don’t probably will after talking with you. This scenario allows the borrower to arbitrage the unequal costs of money yielded by a mortgage and equities to borrow low and sell high.

Americans are born and bred with two specific financial goals: to own their house and create financial security for retirement. Their mortgage and a professional asset manager are the keys to these American dreams.

Receptive audience, good timing

According to the Bureau of Labor Statistics, there are more than 223,400 personal financial advisors nationally, with multiple specialties. They may not know it yet, but these professional asset managers are eagerly waiting for you to introduce yourself and help them dramatically increase their business, commissions, and client loyalty by providing a free, value-added mortgage management service.

Key Points

Partnering with financial planners

  • Tell them you can grow their business
  • Teach them to see mortgages as investment tools
  • Help them educate their clients
  • Sell wealth creation instead of rates

In many cases, the first client these asset managers will have you refinance is themselves. Financial planners aren’t stupid. If some-thing is a good idea, they’ll jump on it first. They will likely become your first clients because it’s a good idea they never thought of.

The timing may never be better to begin talking to financial planners. The stock market hit an all-time high this past August. Homes are appreciating again and homeowners are more comfortable with their job situations. If you lay the groundwork correctly, you won’t even have to sell clients on this strategy; the financial adviser will introduce the idea for you.

Your relationships with asset managers represent win-win-win opportunities. Lenders win with new mortgage business. Financial planners win with new business and commissions. The clients you now share with planners win because they take a step toward achieving their financial dreams.

This professional and loyalty relationship can evolve into a huge source of mortgage activity. You are creating demand without worrying about price and rate. These clients are referred to you by a trusted planner and you are selling them wealth creation instead of the lowest rates in town. This results in high-quality deals and long-term, loyal borrowers.

Questions for planners

To get your foot in the door with financial planners, ask them how many of their clients:

  • Need to reduce their tax exposure;
  • Carry outstanding balances on luxury or recreational boats;
  • Face major expenses like college tuition, weddings or medical care for an elderly parent;
  • Own vacation or investment property; or
  • Have accumulated equity in their homes?

After the planners answer these questions, discuss how their clients would benefit from receiving compounding interest on their home equity, and explain the benefits of meeting one-time expenses by using tax-free equity with tax-deductible interest instead of after-tax liquidated investments.

Once that information sinks in, ask them what kind of investment advice they could provide to clients who just discovered new monthly cash flow. Would it be valuable to them to be able to calculate future investment growth and mortgage reduction for comparison purposes — i.e., should clients cash out home equity or leave it where it is?

At the end of these meetings, financial planners will probably think you are brilliant and realize they’re going to look brilliant too for suggesting these wealth-creation options to their clients — all because you brought them an idea they had never thought of.

•  •  •

If you manage these relationships well, you will come to love your planners and they will love you back. They will welcome the opportunity to see you because you can help grow their core business. Clients will be happy because you and the planner help get them closer to their financial dreams and goals. Even their kids will be happy because their parents are saving money for college tuition, a vacation home, a wedding or an inheritance. And you will be happy because of the increased referrals and resulting business you stand to gain from working with financial planners. 


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