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Financial Planning > Tax Planning

Some Agents Find Gold In Mortgages

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Next time youre working with clients who are considering the purchase of a new home, where will you, their financial advisor, refer them for their mortgage?

Some advisors arent referring them anywhere; instead they are offering mortgages as part of their list of client services. And with commissions ranging from one to several thousand dollars, some feel its a good addition to their business.

In fact, with the recent refinance boom, Dennis Cobb estimates his mortgage business over the last 2 years has made up about 40% of his revenue. Cobb, a financial planner with Waddell and Reed in Dudley, Mass., offers comprehensive financial planning services to his clients; often that includes originating a mortgage, home equity loan or reverse mortgage.

Making these types of loan products available to their clients is a natural fit for financial advisors, says David Peskin, chief executive officer of Vertical Lend, Melville, N.Y.

“Their existing customer base is looking for them to offer additional services,” he says. Since most consumers have a trusting relationship with their financial advisor, they naturally feel more comfortable working with them for their mortgage needs, he explains.

This was the case for Ralph Fields, an independent insurance agent from Rochester, N.Y. Many timesbefore he offered mortgages as part of his servicesFields clients would ask him for his advice when it came to their mortgage. They would ask for his opinion on their interest rate, the terms of the loan and how much they might qualify for. In some instances, he says, before his clients signed any loan agreement with their bank or mortgage company, they would run all the terms by Fields to see what he thought.

Now that Fields has been offering mortgages for the last 6 years, he estimates it to make up about 10% of his revenue. Fields clients “have responded favorably. They dont have to go someplace else, and theres no hesitation when it comes to their personal information because I already have it,” he says.

Peskin adds, “Rather then going to a local mortgage broker or even a local bank that doesnt have much knowledge of the customer, clients feel a lot more comfortable going to someone they trust.”

Since 1998, Peskins company, Vertical Lend, has been in the business of making these services available to insurance agents, financial planners and tax professionals. He estimates about 2,000 financial advisors across 25 states have signed up with him to sell mortgagesincluding Cobb and Fields.

And while adding mortgage brokering to an advisors already lengthy list of tasks may seem a bit daunting, Peskin explains that its actually very little extra work for the advisor.

“They have the responsibility of the loan officer, but they dont do any of the back-office functions that somebody would have to do if they owned their own mortgage company,” he says.

In fact, once an advisor is named an “associate” with Vertical Lend, he or she is then assigned an account executive who works with the advisor through the entire process.

“All the associate is doing is meeting with the client, finding out what the client is looking for, helping them fill out the application and collecting the documentswe basically do the rest,” says Peskin. “We take care of the back-end work; they take care of the front-end work.”

“Its an easy turn-key operation,” says Fields. “I added more services for my clients and they [Vertical Lend] made it very easy.”

Furthermore, not only has offering mortgages increased the number of services advisors can offer their clients, but Fields notes that some people have come to him looking just for a mortgage. As a result, hes done some insurance planning for them as well. “Im able to cross-sell them the different products I offer,” he says.

At the time the loan closes, advisors earn a commission on the transaction. A $200,000 loan will yield a commission somewhere between $1,000 and $2,500, says Peskin.

An additional benefit to making mortgages available to his clients is the use of a variable fee program, says Cobb. Since Cobb develops a comprehensive financial plan for his clients, he has the option of lowering his loan fees depending on the type of plan he is working up with his clients. “You can cut the fee back depending on the services that youre already providing, which makes it more competitive for your client,” Cobb says.

Agents interested in offering mortgages to their clients only need to go through a formal application process with Vertical Lend and pay a fee of $300. “That covers all your marketing material,” says Peskin. “It really only covers our initial costs.”

But some agents feel that they will never offer mortgages as part of their services. “I dont want to practice being a banker; I cant imagine I would enter that arena in the near future,” says Mark Squairs, a Syracuse, N.Y.-based insurance agent with Falcone, Squairs & Marshall Financial Services Inc., and a member of the Independent Insurance Agents and Brokers of New York.

“Im not interested in it,” he says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, February 13, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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