How planners are beating the banks at their own game...

The term "Jack of all trades and master of none" has, depending on your standpoint, two meanings. Traditionally, it is a sapient caution against the downside of spreading yourself too thinly. But, if you are a major bank used to having the term levelled against you by a spurned army of independent financial planners, you could be forgiven for dismissing it as hackneyed whingeing.

The banks' success in stealing customers away from the traditional financial planning sector through their sophisticated data mining techniques suggests that the modern consumer pays scant regard to snappy sayings and is happy to be persuaded to go to the banks for both advice and products in a full financial package.

And an increasing number of financial planners are realising that they too must become Jacks and offer their clients far more than the traditional pail of water to avoid a particularly painful roll down the hill.

Home loans is one sector where forward-thinking financial planners have branched into. "Advisers who don't help clients with their finances are crazy. It's like a David Jones salesperson telling a customer to go to Grace Bros for a wider selection - goodbye customer," says Peter Gomer, managing director of independent mortgage manager AM Mortgage Plus.

And Gomer adds that it is not just a case of the banks poaching ready-made customers from the traditional financial planning sector. "The banks have targeted relatively ordinary clients and turned them into potential clients for financial planners," he says. "The trend is currently towards debt consolidation and home loan reduction. The banks have already picked up on this and are offering suitable services before the financial planners have even woken up to it."

It has become recognised that one of the key growth areas for advisers is the wealth creators who use debt to drive financial plans and not just chase the declining lump sum/redundancy market - which is already swollen with competition.

But most financial planners currently see mortgages at best as a necessary evil, useful only for defensive reasons. "Financial planners have to give their clients a reason not to sit in front of their bank managers and be cross-sold into the bank's core business," says Andrew Creaser, general manager at Associated Planners.

"There's no money in it, it's all about share of client."

Associated Planners has an alliance with Loanmart mortgage brokers, where its advisers refer clients to Loanmart if and when appropriate. But of Associated Planners' 140 advisers, only 10 have made the effort to complete Loanmart's training programme which accredits advisers and allows them to complete the necessary paperwork. Most prefer to take the easier and quicker option of effectively scribbling Loanmart's phone number on a scrap of paper and handing it over to the client.

Barry Lambert, managing director of Count Wealth Accountants, joined forces with Perth-based BankWest to offer home loans around two years ago. Count has endorsed the bank's product but is under no obligation to sell it - but Lambert believes it is the best product on the market and says Cannex figures back up this claim.

"Home loans is a very competitive market and not one we really wanted to get into. But we were offered a deal we could not refuse," says Lambert. As the 5.99% standard variable rate with no monthly fees and an application fee of just $200 including valuation fees beats BankWest's own mortgage products, the bank insisted that Count must badge the product as a Count Home Loan when advising clients through its network of 475 accounting firms. "We would prefer not to have our name on it, but BankWest said it did not want to be seen to be reducing its own margins," he says..

Lambert says the product is "just a service" and represents less than 1% of Count's business. Over the last two years, he estimates that Count has earned around $30,000 per month at its commission rate of 0.2% - but Count's input is very low, just giving out a phone number when appropriate.

And despite the fact that business is a mere trickle, Lambert announced he will be throwing his doors open to more banks. Under the terms of the original BankWest agreement, Count had to give 12 months' notice if it intended to offer mortgages from another bank - and Lambert gave that notice last month.

"We don't want to be tied to just that one product," he says. "It is likely that we'll continue to work with BankWest, but expand into having a number of providers. It should develop in a similar way to our rapidly-growing leasing business, where we have created software which means it takes us less than a minute to get quotes from four leading providers of finance for a lease on, say, a motor car or equipment."

Other regional banks such as Queensland's Suncorp-Metway will be keenest to tap into Count's New South Wales and Victoria distribution muscle and offer Count exclusive mortgage products. "We only want to deal with the big boys," says Lambert. "It's part of diversifying our business, showing a greater commitment, but it will never be a really big commitment. I can't see it ever being more than 1-2% of our overall income."

But while the major banks continue to top the funds inflow rankings, there are those that expect a backlash and financial planners should not be panicked into diversifying into low-profit commodity products - which is what mortgages effectively are - merely for defensive reasons.

"The area where the banks are most vulnerable is their view that the customer wants to do all things through them. In all of the research conducted on the subject, no customers have actually said they want that,"says Stephen Tunley, managing director of consulting group knowledgebank.

He believes the banks are attempting to create an "unsustainable value proposition" in trying to be all things to all people. "The public just does not believe that a single manufacturer can be good at all things," says Tunley.

He advises independent financial planners to take a page out of the guerilla warfare handbook and use their smaller size as an advantage. "The financial planner has to be seen by his peers as trustworthy. The only way to do that is to continue the relationship beyond the sale. The independents need to go back to the old relationship mode with their customers and talk personal terms one-to-one with their customers. Chats like "here's how you can save for your kids' education" or "here's your aspirations and here's how long it should take to achieve them" are better coming from another individual rather than a big corporation as they might actually know the kids' names and chat about the aspirations," says Tunley.

This argument has long been used to bolster the confidence of independent financial planners. But, despite the fact that independents can claim to offer the best of breed and are not obliged to push any single company's products, they have seen their territory consistently encroached upon by the major banks over the '90s. Sheer convenience from the customer's standpoint and slick marketing is clearly working in the banks' favour.

Tunley advises that independent advisers should be looking at some "more interesting" areas traditionally held by the banks, such as tax-efficient wrap-type accounts where all investments and liabilities are consolidated in one package.

"If you can deal with the mortgage, share trading, managed funds and superannuation in one swoop, then most customers will leave happy people because, basically, that's all they care about," he says.

He also believes that the level of sophistication Australian banks have in issuing credit cards should not be over-estimated, possibly opening a gap in the market for a forward-thinking group of advisers. "Compared to the US, Australia is not advanced at all in the field of credit cards. High-risk customers are subsidised by low-risk ones and we don't know how to price risk here. In the US, you can have an atrocious credit record and still get a card - you just pay a 760% interest rate."

Tunley says the US is also fields ahead in terms of the sophisication of the data used when issuing credit cards. "Here, the banks use basic data points such as age, postcode, salary and size of deposit to categorize their customers. But the public is sick of being categorized and in the US they add emotional data to the equation. A friend made a lot of money in the US by using available data to work out that the Southern baptist belt was the ideal place for a direct marketing campaign for credit cards: they are low earners and high credit users, but the moral ethics running through the culture also means they pay on time."

However, using 'emotional data' could also mean that the financial planners' traditional advanatge over the banks - knowing the customers personally - could also be eroded.

Most players are now conceding that home loans are a necessary evil and the advisers' forays into banking services are set to increase. Money Management talked to one group of advisers - which insisted on remaining anoymous - planning to make a major impact in the sector later this year.

"It's an area which we're going to pursue extremely aggressively," said the source. "We think we've come up with a formula which is not only about share of client but also about making some decent money. To say any more would see our competitive advantage disappear out the window. But we are limited by the infrastructure and licensing regimes that alllow the banks to enjoy a market advantage."

While mortgages may not seem top priority to financial planners, they could do well to remind themselves that most people's major asset is their home and their debt structure - as well as their whole attitude to finance - begins and ends around bricks and mortar.

In 10 years' time, when traditional demarcation lines are fully broken down, the financial services industry could be featuring more Jacks than a poker game in a Le Mans garage.