Advisers are increasingly diversifying into debt solution strategies to drive their revenues in a dislocated market, according to Nicholas Young, managing director of Melbourne-based NewCo Financial Services.
“Advisers are embracing debt solutions as part of their cleint financial advice strategies in much the same way they are increasingly embracing life insurance,” Young said.
The debt solutions provider’s client base is mainly comprised of joint ventures with advisers and accountants throughout Australia, who are referred to its database of brokers and banks for loans.
Advisers are paid an upfront commission on the settled loan amount as well as on the monthly trailing commission for the life of a loan.
Young said the trend to debt solution strategies is also being driven by a growing recognition by advisers that offering a holistic wealth management approach involved advising on debt.
He said the adviser who wants to get serious about wealth management needs to advise on the debt that a client has on board, and need to be asking questions, such as: “Are they paying the best rate? Is there a better loan for them? Should they be talking on more debt? Should they be getting rid of debt? Should they be turning their debt into non-deductible debt?”
Young said advisers are also moving to take on more clients at the accumulation phase, and this required a strong debt offering.
“In many respects, managing clients in the accumulation phase is about how you manage the client’s debt,” he said.
Clients too are driving the trend to debt solutions, he said, even though they “might not be buying heaps of money to invest in shares directly or indirectly”.
“However, they are still acutely interested in their current debt, asking themselves whether they have got the best loans and strategies in place to manage their debt.”
