For his many sins Jack*, a friend of mine, owns a vintage Alfa Romeo – for those who are interested it’s a 1965 Giulia Sprint GT. Arguably, Alfas of that vintage are the most unreliable car marque this side of Creation. Jack treats that car better than his kids – and if you’ve met his kids you’ll understand why. It has its own tiled garage with a car hoist. It only gets driven very briefly twice a year. His kids share a bedroom. There’s blood splatter on the floor from 2006 (I assume/hope from a nosebleed) and food scraps from which the cockroaches have fashioned Scandinavian furniture.
The Mechanic
It is however serviced by the same mechanic who has been servicing the car since 1977. He’s an Alfa specialist which the previous owner of the car had found and Jack continued to use. This mechanic only services Alfa Romeos and nothing else. He’s so much in demand that he stopped taking on new customers around 1993. Now the mechanic’s son and daughter have joined him in his passion.
The mechanic is not cheap but as he knows the cars he works with so well he’s able to offer a diagnosis and solution much quicker and will cost Jack less than if someone new – who’s never seen the car – starts poking around under the bonnet.
If existing clients presented this mechanic with a Toyota, Holden, Mazda or any other marque other than an Alfa, he’d turn them away. He’s applied this weird kind of self-regulation which has ensured that he has only focused on a single brand (with all its quirks).
He’s been successful without the use of any advertising, marketing, social media or any other distraction from his trade. In fact, in his early years he didn’t even have a telephone at the workshop. People would simply drive into his workshop and he would have a quick look and book them in then and there.
Customer service was not in his lexicon. All he wanted to do was work on Alfa Romeos. The fact that they were owned by human beings was a minor discomfort he was willing to tolerate.
So, you’re wondering what the hell this has to do with loans and accountants. Thanks for being so patient, please read on.
The Trusted Accountant
Last week, I got calls from two accountants asking why their clients were getting knocked back for home and commercial lending.
Both of these accountants run medium sized businesses which have an introducer arrangement with a single bank. They introduce their clients to the bank and they get paid between 0.50% – 1.00% of the loan amount as an up-front commission. The accountants have no obligation to comply with NCCP regulations nor do they have any obligation to not introduce a loan which is unsuitable. These two accountants also dabble in financial planning and life insurance.
Too often, these days, I see accountants swimming outside their specialist flags.
I asked both of these accountants whether or not they required assistance. Both declined. They were just calling to find out – you know, from a specialist – why their clients are getting rejected. Remember they had taken their client to a single bank.
Both times I shared the bare minimum of information as we have long since discovered that these accounting firms will only give to us the most difficult of deals – the one’s they can’t place and which they’ve clumsily shopped around not having a clue about credit risk and the current climate within a bank. It’s a one-way relationship if you like.
As I mentioned above they have a relationship with a single bank and a single banker. We have relationships and are accredited with at least 23 home lenders and many more commercial lenders. We probably have twice that number who we can also try should the ones we’re accredited with prove to be unhelpful.
For commercial loans…
Our relationship doesn’t begin and end with a single banker or BDM. We usually have a number of layers of contacts depending on the industry for which we’re seeking finance and a BDM assigned to us should we come across a transaction that may be a little more specialized.
Once these loans cross a lender’s desk and the answer is negative it’s very difficult to get them interested in the deal again. So, it’s extremely important – and potentially much cheaper – to get it right the first time.
For home loans…
Given that every time you apply for a home loan, your credit rating takes a hit. Particularly if you’re rejected, then you may want to speak with a specialist rather than a generalist.
Getting a home loan has become more difficult but not impossible. Your accountant was once able to assist you in procuring a loan. Most are now unable to do so with any degree of certainty as they are no longer keeping up with changes in the market.
Like the Alfa mechanic above, we don’t offer accounting services, financial planning, life insurance or any other distractions. All we do is lending.
It’s up to you if you want to risk your credit rating or your business cash flow by applying through an accountant.
Oh, and if you’re an accountant reading this and wish to have an honest discussion about assisting your clients, we’re here to help. Just be genuine and tell us up-front if all you want is access to our clients. At the end of the day, that’s probably what we also want but for different reasons. The difference is explained above. We can do our job better than you think you can. How do we know this? We’ve seen the damage done to your clients’ credit rating by members of your industry who thought they knew better.
Suggestion
If you want to continue on your current course of action as an Introducer to a single bank we suggest you declare your conflicts, up-front commissions and alternatives available to your clients seeking finance. Failing that we suggest you increase your PI insurance.
Disclaimer
We deal with some very reputable accounting firms. The above is not a commentary on them.
*Not his real name.