The recent spate of interest rate cuts by the Federal Reserve has reenergized the mortgage market, and you’re likely fielding more questions from clients these days about refinancings, home equity loans, or new mortgages. While independent advisors are adept at helping clients track down financing or fill out loan applications, most lack the resources and tools needed to originate a loan, forcing them to refer clients to a loan officer at a bank or to a mortgage broker, and ultimately losing out on additional revenue.
In these times of hypercompetition in the financial services industry, it’s more important than ever for advisors to offer a broad spectrum of services to retain clients, including help with mortgages. And advisors are getting help in tackling the task of originating loans from an unlikely source–an accountant.
Steve Connolly, a CPA, helped launch a company called Vertical Lend a couple of years ago so small- to medium-size independent financial professionals could add mortgages to their stable of services. “I saw that financial services people were always being asked to help clients find financing, put the documents together, and fill out the [loan] applications. But when it came to the client actually getting a loan, they had to go to a complete stranger–a loan officer,” Connolly says.
Melville, New York-based Vertical Lend, launched in 1999, is an outgrowth of Mortgage Warehouse, a retail mortgage broker and banker. Connolly, VP and cofounder of Vertical Lend, joined Mortgage Warehouse in late 1998 and collaborated with the mortgage company’s founder, David Peskin, on the Vertical Lend concept. “When David’s loan officers met with a client about a loan, the client always had to go back to their financial professional for tax returns and supporting documents and advice,” Connolly says. “So we thought, ‘What if we took that stranger out of the picture, the salesperson, and created a situation where the financial professional could originate the loan for the client.’” And Vertical Lend was born.
Connolly says Vertical Lend was also conceived to help independent professionals such as financial advisors, CPAs, and insurance and tax professionals deal with the competitive playing field created by the Gramm-Leach-Bliley Act and revisions made to the Uniform Accountancy Act. We’re all well versed on the former. As for the latter, the act was revised in 1999 to allow accountants to accept commissions or contingent fees on services like financial planning and insurance. “These four segments of the financial services industry are all coming together. A lot of [these professionals] are feeling very threatened by all of these changes,” Connolly says. “They are asking, ‘How can I compete with these huge banks that can offer everything? How can I afford the technology?’”
Vertical Lend is the answer to the small- to medium-size professionals’ prayers in the lending area because they can access the company’s stable of 50 lenders as well as its technology and product expertise, Connolly says. Vertical Lend initially offered only residential loans, but has expanded into business lines of credit, auto, SBA (small business), and commercial loans.
The idea here is simple. You keep your clients in your own shop, where they can work with someone they know and trust. So you end up satisfying another client need while keeping her away from competition–all while earning additional compensation by originating a loan. Vertical Lend “opens up a lot of opportunity for these [professionals] because they are not increasing their overhead or technology costs, and they are providing their clients with the same service that the banks are.”
Jerry Style, a CPA and CFP with Freedom Financial Services in Bohemia, New York, says Vertical Lend is helping him keep his competitors at bay. “I try to be a place where my clients can come for a number of their financial needs, not only their taxes, but investing, and now with Vertical Lend, their mortgage needs,” Style says. “There really has to be a holistic look at a person’s finances before you can make a good decision.”
Vertical Lend’s services are free–at least for now. “We don’t charge anything,” Connolly says. To use Vertical Lend services, you become a Vertical Lend employee via a W2 form and are licensed and trained by the mortgage company. Training starts with a 45-minute introductory telephone course that familiarizes advisors with Vertical Lend’s Web site, www.verticallend.com. Advisors also receive introductory training from a designated loan specialist, and get ongoing education on terminology and products, Connolly says. “We are not looking to make [financial professionals] a loan expert,” he says. “Their responsibility is to initiate the loan transaction, understand client needs, and see what the consequences [of a loan] will be on their taxes, assets, and debts.”