January 26, 2023

#372 Chris Booth – Transcript

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Clayton Daniel
Clayton here from Ensombl today chatting with Chris Booth, better known as Boothy mate, how’s it going?

Chris Booth
I’m very well, Clayton from Ensombl. Happy to be here.

Clayton Daniel
Well, so we’re in the discussion of, you know, potentially watching a podcast dedicated for financial planners to get their head around property and debt and all those good things. And sort of, as we were discussing it, and I was getting my head around, and how you know, how knowledgeable you are in this area, including, we just spent the last five minutes going through my own personal situation. What I thought would be a great sort of introduction to the listeners of the Ensombl podcast, would be a bit about your background, sort of how you came to be one of the CO owners and CEO of Lydian and your experience working with financial planners. Basically, if we, if we fast forward six to 12 months from here, and you’re on, you know, on a weekly episode, educating financial planners about how to work with debt and property. Um, let’s set you up in terms of you know, why advisors are going to listen to you in the first place. And I know your background, and I share an office with you and I get to see how busy you are. But I think it’d be really interesting for to go through a bit of your history. And and what brings us here today in this fabulous office we have here at 75 Pitt Street.

Chris Booth
Yes. crackin, isn’t it? No, I love it. Love it for come on down.

Clayton Daniel
So, so talk us through when did you first get into this whole property and mortgage as well.

Chris Booth
So my first stepping stone into, I suppose banking and finance to do home loans, which is kind of part and parcel of what we’re talking about that now is when I was about sort of 30 years old, join the Commonwealth Bank. So I just recently left the Bank of China, which was an interesting conversation, but that’s probably a different part. No, no, no, we’re not.

Clayton Daniel
Tell me about the Bank of China, what were you doing there?

Chris Booth
Well, so my, when I first came to Australia, my previous job was in the Isle of Man at the Royal Bank of Scotland where I was involved in Treasury, so foreign exchange, money markets, all that kind of stuff. Like I was really, really buzzed to be involved in that sort of treasury stuff. It’s quite sexy, you know, read the Finn review or whatever it would be and it’s quite interesting. And then I did my courses subsequent to learn more about markets. So always been fascinated how markets say they, you know, they’re, they’re compliant and they’re regular ate it and thinks but how unregulated when you at the granular they are anyway, came to Australia and had no job looking for, you know, a treasury job. And the the job that popped up was for the Bank of China. So at the office in New York Street opposite the Occidental, so top page, this place absolutely. Yes started my journey as a foreign exchange person here in Australia, which was trading. Yeah, so my job was basically just managing the books, the balance the books out, so. So interestingly, we’ve got what’s called the 11am cache. So you know, that they can’t close the books at night with a shortfall on their books. So I’ll go out and borrow that money into bank just to cover those books and make sure we’re positive.

Clayton Daniel
Now, is that called LIBOR? overnight?

Chris Booth
So LIBOR is the interest rates with which determines, like, interest rates in the UK LIBOR? Right. Okay. Libor? Liburd? Yep. And then in Australia, we’ve got our bank bill swap rates, which covers sort of, that’s equivalent. Yeah. And then there’s, you’ve got your swap rates over here as well. But anyway, I mean, this is a long time ago. So things may have changed. But yeah, so one, I would cover the the interbank money. So if we’re short, we borrow money from say NAB or CBA, just a couple of bucks. Or alternatively, if we were holding more cash than than we needed, we then lend it out to the marketplace as well. So go to nab CBA, whoever needed it, and then that that as well. So that was quite cool. The other thing I did was foreign exchange. So we had a lot of Chinese businesses, so people importing or exporting. I mean, that’s tradition. And yeah, so I’d covered their foreign exchange exposure, and then make sure that our books were balanced as well. And then lastly, I had a proprietary trade as well. And that proprietary trading means you’re basically having a punt on the markets. And we weren’t, we weren’t restricted in that job to just FX or money market stuff, we can sort of go out and explore other avenues of investments as well. So this is all in your 20s. late, late, late 20s. Yes,

Clayton Daniel
So you’re running riot with Bank of China’s checkbook in your late 20s.

Chris Booth
That I mean, there’s a lot of drunk stories I’m sure I could tell you. I remember shutting down the pretty much shutting down the money market platform for Aussie cash, because the People’s Bank of China had liquidated all of their bonds. And like we had no way billions of dollars on our account.

Clayton Daniel
Liquidated their Aussie bonds?

Chris Booth
Yes, but they were already. This was just before the hospital hit the all time low. Also, just after the Aussie dollar hit the all time low. I think we’re down at 48 cents. And the Chinese they kind of gave up on holding Australian assets because of that foreign exchange lost they’d made. So they liquidated all of that sort of 55 cents. And then we had cat because we were there clearing house for them. So overnight, they’d gone unsold all their bonds, and it was it was treasury and state. So you know, we got a lot cash on the on the account. And it was billions of dollars. And I didn’t have the appropriate lines to actually lend it out enough money. I didn’t have enough limits to lend out to the local bank network. So I lent out the money I could, which was, which basically scratch the niche. And then I closed my book, you know, because I’m thinking what do I do now? Just leave it there? Well, I think sort of two o’clock 230 as things are getting pretty interesting. I get a lot of calls from a lot of people. I am no no pm closes in the afternoon. And again, you know why? Holding on to all this cash and I’m getting well, I have got no more lines to lend out. So I got a dirty call from quite a senior person, the Reserve Bank of Australia and I’m sort of 28 Taking this terrible call and I’m gonna make the Chinese won’t lend it to the government, the RBA, and he’s going you have to sort this out on the telephone to the Chinese people kind of go Well, guys, you know, look, it’s the Reserve Bank of Australia that pretty, you know, they’re pretty stable, we should be kind of, you know, we’ve got to lend this money just okay. So that was fascinating, but that and many other sort of trading stories because we you know, we were dealing with all the investment banks as well. So Goldman’s city, Solomon’s JB wait and stuff like that. It’s cool.

Clayton Daniel
Cool, man. So you’re in high finance, and then make what’s going on, then you start dealing with home life?

Chris Booth
Yeah. So I thought, Well, I mean, my fascination with markets was one thing, but then I actually felt that it was appropriate at that time to try study to be a financial planner. That’s kind of one of the things I wanted to do. And then through the application process of few banks and things or researching CBA popped up, though part of the CommSec Division at the time, so Comcept been their investment side of the banking business. So the job was to basically be a relationship manager for their mid wealth, clientele. So what I mean by that is, you’ve got your private banks with the sort of two $3 million Have you know assets or more, these are clients who are sort of living in eastern suburbs, maybe borrowing $1 million to $2 million, and stuff, you know, big houses, plenty of money on the accounts. So CBA basically sponsored me into learning about home loans. And they’ve got a fantastic sort of program to learn and develop. I mean, obviously, you can meet CBA. And plenty of clients, they carved out their Bondi Junction book for us, so the high net worth individuals in the Bondi Junction Eastern Suburbs area to speak to, which was great. So overnight had like 400 clients in tip, top demographic, never getting a home loan before my life, right.

So this
So this is 5.6 teachers, right.

Chris Booth
And then, and then the other part of CommSec. And I’m not saying this is good or bad, but concept, we’re underwriting a lot of their product, you know, their own products. So we had the, you know, the Pacific brands, the pearls offers the mixed in France and Britain his way back a long time ago. So, as part of my job, also, I was able to go out under a non advice sort of program and offer these, I suppose, Initial Public Offering offerings, right. to clients. I think we did four or five to capital as well. So some some funds and stuff. But yeah, so I got to sort of continue doing the investment stuff. And then learn about I suppose more mums and dads banking,

Clayton Daniel
Ma, and then a number of years at CBA. Yep. Is there any step between there and how you ended up working with our chairman Rocksy?

Chris Booth
Yeah, so we’ll, the journey was very good at relationship management, talking to people finding out about their sort of needs, and wants, learning at the same time, the product being debt, you know, home loans, and how that works. And things, I suppose I’ve got to that sort of saturation level of owning, knowing home loans and investment loans. And we’re starting to get fascinated about business loans and things like that. So I stepped up into the corporate world started doing lending to businesses, which I found very interesting. Yeah, because obviously, the type of assessment you go through for business is very different to a home loan. So you’ve really got to go down to the granular sort of risk elements of why you’re lending, what you’re lending, what the recourse is, and things like that. So the story gets much, much bigger. And I quite like that. Yeah. And that learning was really good for me as well. And then that that kind of led me into from combat to St. George bank, I specialized in that lending money to any business, which is going concern. So lawyers, accountants, financial planners, mortgage brokers, real estate agents, against their recurring revenue, yes, assets. And then I had a portfolio of those guys, which Roxy, back then he was looking to buy his business partner, so I’m in for that.

Clayton Daniel
No way you met you met rocks through a transaction?

Chris Booth
Yeah, yeah. Yeah. So it was helping them to try to sort of separate from his previous business owner take the business forward. In the new iteration with his new partners, yes. Yeah. And yeah, and

Clayton Daniel
that’s so interesting. He, the amount of times of people meeting rocks you through a commercial transaction, that ended up working with him later, is super high.

Chris Booth
So I mean, through this through this network of clients, which I did look after, I mean, there’s some fantastic financial planners back then. Right, yeah. But what I found going out to the main was that they were all hunting for clients who got the large from under management that you could then charge a brochure. Now, there’s a fantastic relationship they have, but the pricing was was basically predicated by the amount of money invested back then, right? What I found really interesting about Roxy’s model and the announced model was they weren’t looking at high net worth individuals, they weren’t looking at high fund balances. They were taking a fee for service from a very early age, when fee for service was pretty much how to I don’t how can you do this? How can you charge your clients a fee they were taking from platform unless they had such a large portfolio of accumulated clients, you know, so really different though. They were making their money from a large audience.

Clayton Daniel
And also, he was one of the first to get into the property and debt environment, as well as making it a part of the financial planning process.

Chris Booth
Yeah, well, I mean, again, so there was others out there who did it. But yeah, again, not as large an audience. Yeah. And secondly, I don’t think it was it was wasn’t sort of an integrated approach. Yeah, too. But, you know, think the learning years we’ve had both in the treasury, we want it, Bank of China, the CBA days were pretty great, you know, learning the debt craft from scratch. And they also also sponsored me and put me through DFB one to eight which I know back then was the the qualification to be a financial planner. Now it’s short of the mark today. But you know, it gave me that backbone of understanding the other elements of a client’s wealth creation plan, also protecting the client as well. Yeah. And and again, you know, I’ll try to live those values myself with the relationships I’ve got either in the bank or more more formally later announced, you know?

Clayton Daniel
Yeah, mate, that’s a, that’s a long journey, it seems, it seems like it feels long cuz you don’t look particularly old. But when you really break it down, you’re about 70 or 80 years of age.

Chris Booth
Grace, again, right. So if I go back through that story, I’ve always been wanting to learn. But before take a risky step as it were being either self employed or not. And that’s talking about you know, why Lydian today, I felt I had to learn my craft before I could actually take that next step. So, you know, for go back, you know, to be I always was always fascinated with become a mortgage broker, but, you know, husband, while if three kids financial obligations at home is difficult to do that, because you’re risking everything. So Roxy gave me that halfway house to learn how to be a broker, which was really, really kind of him at the time to do it. Yeah.

Clayton Daniel
So you basically built a quasi business out of that was a part of the announcer.

Chris Booth
So we built a business within the business. Yeah, yeah, that’s cool. And so you know, there’s a sponsorship of some salary in there. But from day one, I didn’t want to become a partner with the business yet also be a voice of, you know, the direction of the business as well. And also, you know, seeing all of these different businesses in my life as well. I’ve always been fascinated about how people build a business. Yeah. And how people build a good business. Yes. And what the current kind of the elements from a melting pot need to be in that business. So yeah, having a seat at the table with you know, six or seven other partners that announced that gave me the ability to one have a voice to learn a lot. Three, understand financials again, at that company level. Yep. For you know, figure out cash flow, hiring, firing, offices, fatales, all of that kind of stuff, you know, yeah. Well,

Clayton Daniel
I mean, all business is marketing, the better your marketing, the easy your sales, the more sales, the more operations, operations, delivery, delivery outcome outcome, how happy the client is, it’s this sort of linear process, and the better you are at each of those steps, the more likely you are to grow the piece of the pie. So when I look at what you guys are doing it Lydians a very interesting model, right? Because you’re you’re working with a lot of different brokers, you’re also have some amazing referral partners, like h&r block, for example. And certainly, while it’s a brand new company, in the sense that it’s about two years old to take, correct, yeah. It looks like it’s much older. Because each of those steps if I think about to my own entrepreneur journey, I was the complete opposite of you, you figured out exactly how to do it before you started. I had no idea what I was doing. I started over a decade ago now. But um, but yeah, the the systems and processes you have in place. It’s super top notch. Right? And I mean, because we were in the Philippines at the same time seeing our staff over there, and your team was quite large compared to ours. And, and the Jackie, I know you work with Jackie who handles a lot of your sort of interim steps on where the clients are and making sure that they get looked at often. What are your processes in your delivery in general and operations are super good. That’s been kind of the huge standout for me. What would you say in terms of working with financial planners specifically in your announced the days did you learn that you’re that you’re now taking into the Lydian company because a huge part of what you’re doing here at Lydian is creating a service that allows financial planners to increase what it is that they deliver to their clients or increased increase the share well, well if you use that terminology, and you’re making sure that those clients are well looked after, which is if I think back to my own financial planning days, that was what I was looking for. I was looking for how do I increase the share wallet, my office takes care of right. But without losing sort of that best of breed touch points along the way. So what did you learn at announcer that allows you to sort of bring everything that you learnt day into Lydian to help with financial planning clients.

Chris Booth
Yes. So, again firstly, my knowledge around relationship Oops. And certainly for me, it’s all about relationship with the client first. Okay, so at announcer The financial planners have an all financial plans have a really deep emotive and financial relationship with clients, I think which is important. Okay. So that in itself is for me is the standout. Secondly, I’m now have fun how hard it is for a financial planner to one, recruit a new client and build that trust and empathy. And yeah, you know, and their service proposition has got to fit that client, but also retain it now, you know, the, to charge an annual fee for a client to have that relationship is, you know, it’s quite bold, too. So, you know, for me, particularly, I respect the industry that they’re in and how hard they work for their clients. Okay. For me, I’m quite a lazy mortgage broker per se. I’m relying on you know, one that the big, you know, that relationship is super, super strong with that planet to that, because they’re providing that sort of wealth creation advice, they’ve got all of the fat, fine details, you know, income assets, liabilities down. So for me running into a conversation around finding an appropriate product to meet the needs and objectives that the financial planner is providing is very, very easy, right? So, and hence, sort of this partnership. And I’ve been, I’ve always worked really well with financial planners, because one, I respect that advice piece. So I’m not going to do anything or recommend anything, which is outside of the scope of that advice, initially, to recognize my position as being a person sort of participate in not only in the transaction, but that long journey of the relationship as well. So when you’re talking about touch points, you know, a client might come in this year, and I’d have nothing to do from an advice perspective, but a simple review of their debt being interest rates, equity, affordability, might be appropriate, and it gives them value for that conversation. So I think plugging in a debt conversation is important, especially for the accumulators. Certainly, today, when clients are getting to that sort of 5560 years old and still carrying debt. You know, they’re still be wealthy clients, but investment debt, it’s appropriate to review that too. So the model we have is all about sort of being integrated into that advice process, but been secondary to delivering the advice

Clayton Daniel
And just and from what I understand: Lydian, do you guys use Xplan?

Chris Booth
So we don’t but what would what we’d like to do is collect data from Xplan, which is the base pack find information yet? We are looking at trying to integrate data from Xplan.

Clayton Daniel
Do you send? So let’s say I’m a financial planner, let’s say I got 100 clients, let’s say 20 of those clients have debt, with Lydian through Lydian Yep, as the broker. So you’re saying that you sent over an annual piece of information for me to use with that client in my annual review? Yeah. And how that’s awesome. So how would you send it across? If you’re not using x plans? You just send it across in a PDF?

Chris Booth
Pretty much? Yeah, so we’ve got we’ve got a review document, which we use, which is PDF. Obviously, we’ve got all the privacy obligations in place for the, you know, the to a natural relationship. Yeah, so we give a PDF over which basically has current debt to income ratio, current loan to value ratio, you know, so that’s what equity is in the strength of the interest rate appropriate to other lenders. Yeah. And lastly, the score of your credit score, so your Equifax or your, like Vader, or whatever it was called.

Clayton Daniel
And then let’s go through the different ways, because we’ve spoken about it separately, but there’s, I think, two ways. Or maybe there’s just one that you’re focusing on in on but either way, like, let’s have a bunch of planet, right, let’s say, I might have a credit license just because of the qualifications that you do as a financial planner, but I certainly have never done a mortgage before, right. So, um, so let’s say, I, I want the 20% of my clients in the need for either refinancing or buying a property. And I want to work with you guys. How do you how what is the system that you do in terms of upfront and ongoing commissions and that kind of thing? And what work is required for me?

Chris Booth
Sure. So we believe that the you know, the best relationships are the ones where the financial planner or the financial planners, businesses participate in that transaction with us. So initially, you know, collecting that fact that initial fact find or an old fact find is important to us. And therefore, some of the work has been provided by the financial plan. So we’re happy to pay for that initial relationship. And as we’re doing, you know, if we’re implementing a review as well in tandem with the financial planners review, well, therefore we’ve got trail commissioning mortgages, therefore we can pay, we feel it’s appropriate to pay trail commission. If again, the financial planner is integrating this this product and service standardization at the review,

Clayton Daniel
right so if the financial planner includes the property as a part of the integrated financial plan, given there is an ongoing See that they can receive as well.

Chris Booth
So we’re happy to pay up front and trail commission to build a bit of an annuity stream and sort of complement the relationship that we’ve got. If, for me, we know we’ve got clients, financial planning clients who don’t want to receive an upfront income or don’t receive any income from our services, we offer a rebate the client, so the client gets a financial benefit for the relationship. Right. Okay. And that is reflected well at the financial planners,

Clayton Daniel
right? So this is where the option is. If if the advisor is happy to take a commission, then they can Yep. And if the advisor doesn’t want the commission, then they can have a good return. And client a fee to the client? Yep. super interesting. Yeah, I love it. When I think back to my insurance days, I would love it when clients came to me, and they already have something in place. And when they came across to me, I just call the provider and say, Hey, can you please take off the inbuilt commission that’s in there? Yeah. And then all of a sudden, the clients like get to an immediate reduction in what they were paying previously. Because I was I didn’t start out as fee for service, I started out just this very traditional financial planning, business, and then sort of over the space of build up the company over about four years. By the last year, I was doing my best to to do everything as fee for service as possible.

Chris Booth
Yeah, sure. But with

Clayton Daniel
that said, I’ve seen fantastic companies only work in the commission space and fantastic companies that only work in the fee only space and the combination. I think a long time ago, I gave up on the concept that there was only one right way to receive a revenue, I think, I think it’s hard to move to entirely fee. Like psychologically, yeah, but when you do it, you can actually make more money. I like the biggest practices. It’s the ones that that say, Hey, why, like why would I use a product provider to earn my revenue? Why wouldn’t at the same time, it’s obviously it’s it is, I feel psychologically easier to not have to charge a fee. So it’s, yeah, a long time ago, I gave up on the concept that there was one right way, I think, I think always a possibility. And it’s awesome, that you’re providing that as an option?

Chris Booth
Well, I think I think, and that’s something we’ve we’ve done with the platform we’ve got in place, you mentioned before operations team. So we can’t account for the brokers time, because we don’t have the systems to do that. But interestingly, what do you mean by that? Well, so you know, how long did they spend on the telephone call, which is how long do they scratches? Supporting the process of the home loan? Yep. What time did it take to actually write the advice? So all of those things, because our mortgage brokers are independent, we don’t control their sort of Sure. We don’t build it. We don’t log in a bill for time. Having said that, from an operations perspective, our guys in the Philippines, they use a software called time camp, and everything that they do on behalf of a client, they registered the incremental time it takes to actually do the loan process. Interesting. So it when I first started, Liddy and I actually bumped into or sorry, I got a referral to speak to Paul Leafa Coda capital pool with my best friend David Knowles works at CODA and, you know, Paul set up a code of capital on the back of an envelope, his big thing was, you know, dealing with, you know, non conflicted remuneration importantly, and building like a high net worth space. So yes, I’m sure there’s a lot more to it, right. But I sat down with Paul, and one of the things he said to me was that if you can, if you can actually, physically demonstrate the time it takes to service your clients, yes. And then appropriately charge a fee or collect commissions, which service your client, then you’re in, you’re in that sort of hybrid fee for service space. Yeah. So that’s what we’re trying to do now. So every time we have a transaction, we actually measure how long it took to actually serve from an operations perspective, that client now we get complicated ones, we get good ones, but the average time per file operationally to do end to end is about 10 hours, some blowout to even more, right. So if you think about that, from the cost to service your clients, if we can, at some point in the future, share with the client, how hard it is to actually do the transaction. Also share with the financial plan is all the other partners that we’ve got, how long it takes to do the transaction, then we’ll get a bit more. Yeah, I think the commercial realities of the agreements will be much more robust and, and stronger. Interestingly, people think a traditional straightforward home loan is really simple.

Clayton Daniel
Well, I do because I’ve never done one. So to me, you see these kind of these, these app platforms that are out there that you know, that give you 30 seconds and you You get a loan or something or other right. So, but I don’t know what that means. I don’t know if it’s real realistically from this side of the fence when you’ve never done it before. You don’t know.

Chris Booth
Yeah, well, so, again, there are many clients who are in that sweet spot whereby they’ve got strong income. And we’re just talking about their base income. They’re going to low loan to value ratio with a prime asset being City metro property. Yep. And to demonstrate both to demonstrate the valuation of the property, we can do an RP data and no problems. Yep. And to evidence income, we can just look at the deposits in an account as a salary. Yep. And that that’s no problems at all to service the debt. And there’s very few clients who actually fit that model breath, I’d say sort of 20 25% of clients would. And therefore, that’s why we’re getting this this digital transaction today. So and with open banking, which is being allowed now. But also, it’s being adopted now from a mortgage broking perspective, we’re in that sort of space now, where ultimately, the clients so right now we make a recommendation of three products. Okay. But then we still got to go through the application process. Yeah, right. But we’re in that space now, whereby that we could actually build the factfinder and evidence, the, you know, the income and things and also, then actually have almost approval for three products, and then push through to settle with the product rather than recommend and then approve. Does that make sense? Yeah.

Clayton Daniel
What is this recommendation piece knew? I didn’t realize mortgage brokers actually did that.

Chris Booth
No. So we so every time we actually recommend a product, we’ve actually got to discuss who we’ve considered our panel, why we’ve excluded them, right? The features of the product we’re recommending and why those features were appropriate, right, the interest rate component and the repayment components of the loan. And lastly, why we chose the lender. But typically, we’ve got to compare that with two of the prime products which they the client would have been,

Clayton Daniel
why would why would anyone ever recommend or accept something other than

Chris Booth
the cheapest? Oh, so

Clayton Daniel
I mean, well, okay. There might be some features like let’s say, offset account. So assuming an offset account exists, yep. Why wouldn’t you just pick the cheapest? So always?

Chris Booth
I mean, the the primary focus was this price. Yeah, that’s 100%. But then, like I said before, there’s a lot of clients who fall outside of standard credit policy. Therefore, we’re looking for nuances with regard to affordability. How the banks assess commissions bonuses, potentially will they accept the the property, so we’ve got a lot of high density properties in, in Sydney in particular. So some lenders look don’t like to do that. Others do. We’ve got for first homebuyers with lenders mortgage insurance premiums, there’s a big difference between the premiums you pay for lenders mortgage insurance. So in house products are typically a bit more expensive, then we’ve got Genworth and TBE, and others as well. So we’ve got that price as well to consider. So there’s a you know, like, fundamentally, we’re always going for best price, yes. Then second best product. And also lastly, people, you know, even though you’re borrowing money, people actually want to typically bank with a reputable household, you know, so net banks got to be good. I want to be banking with CBO. Because I just like CBO curl. So yeah,

Clayton Daniel
Right. So the second or third tier lenders who are offering, you know, five bibs as a discount. It’s not worth it, because I can’t see it in my normal banking app.

Chris Booth
Yeah, it might not be I mean, the technology might be as good that, you know, might the client might already have some existing bank accounts that the primary lender that we’re going to so I mean, that’s not to say we don’t go to second tier or the second tier market or the the non bank market tomorrow, because they’ve got some great offers and their credit policy under ASIC is much different to the Adi APRA. Policy. What does that mean? So we’ve got to to legislators APRA, and ASIC, okay APRA, a policing or monitoring through policy, the banks who take in deposit holders money and then lend it out, okay? Their policy is quite different in some regards to the ASIC, non bank lenders, who basically securitize their funding for lending. So we’re in that space right now where a lot of restrictions for the banks and not in place with the non banks, and therefore we’ve got a lot more flexibility with how we demonstrate affordability and the credit policies, we can use it, which

Clayton Daniel
is all right. So if you go to a bank and you say I own $100,000 in shares at a bank, you’re gonna have to show the share certificate in a recent valuation or something like this. And whereas a non bank lender, you could say, I have $100,000 in shares, and then that non bank lender goes, thanks. Is that the equivalent

Chris Booth
kind of a more appropriate one would be in, in the banks, and we’ve got a serviceability calculator. And we’ve got to demonstrate, you know, one times affordability, yep. After all of that coverage, and that one times might be, you know, scale back of investment income, a scaling back of mutual income and things like that, in the non bank space, we can use 100% of all of that income. And as long as there’s $1, at the end of accounting for servicing, rather than a multiple of servicing, we can actually lend to that person. So from a cash perspective, the non banks have got more flexibility, as long as we can demonstrate affordability after tax that the client is not going to be out of pocket for servicing, rather than like a debt to income ratio, like a six times or five times which the banks are police with binary.

Clayton Daniel
Right. Okay, that yeah, so almost different regulatory environments. Yeah, a little bit. Yeah. That’s amazing. Yes. So there’s all these things made, that I personally just don’t have any understanding of. And it’s, it’s kind of weird. And I don’t know why historically, financial planning, or financial planners have have just kind of scoped real estate out. It’s in obviously, like, you know, because of the licensing, speak about ASIC before, I know a lot about anything, so. So I think there’s always been a bit of a worry or concern. But that’s kind of largely been debunked, I would say, over the last couple of years, certainly over the last decade, to a larger, larger extent, you’ve seen more financial planners get involved in the area of property and debt a lot more than traditionally. And yet, it’s it’s like anything you kind of buy, by a certain age and by a certain kind of reputational environment that you build yourself up. And you don’t necessarily want to start dipping your toe into things that you’re not as good at, right, you could have been working on for the last 20 years. And so I can I, I see the natural resistance to financial plan is, and who don’t, who choose not to get involved in debt and property, and that was on what I never did. But I always knew it was one of those things that I should have done. So what what would you say to or what did you say to financial planners when, when you were working at Announcer And what and what do you say to them? Now, when you work with them? Yeah, that will, I guess, do an advisor, the confidence to get involved in this space, especially assuming, of course, that you’re on the back end, making sure that their clients get looked after? Like, how do you do presentations? Like do you have, hey, this is what you should be thinking about financial planning.

Chris Booth
I think I think the, you know, vicariously in the old business, because I was in the meetings with the financial planners, just as I was learning about, you know, financial planning strategies and things. I’m sure the financial planners were learning about the granular sort of policies around credit, right. But that being said, I think it’s appropriate for a financial planner to at least talk about the property and debt. And from a, you know, a macro perspective, give advice around that there’s no reason why they shouldn’t the granular part of you know which bank you go to why the policies and things like that, that’s an operations piece for me. And that’s why Lydian is so important. You know, we’ve got, we’ve got good people that you know, who are supporting the operations piece. Our brokers are qualified and specialized, which is great. What we’re doing is really sort of educate educating the financial planners, we’re enabling the financial planners to have the stronger, more robust conversations about that. And also, they’re either getting renumerated, or their client is benefiting from it. So it’s good. We want to make sure the clients are going to stay with them. There’s this big intergenerational wealth, conversation piece. So having a bit of diversified diversification in your portfolio is important. All of those things help the financial planner but most importantly, Lydian is an our brokers are about trying to help the financial planner have stronger conversations around property and debt, and then the confidence that they can refer their client through to losing because we’ve got good operations. And we’ve got, you know, we’ve got very experienced mortgage brokers to deliver on the promises that we’ve made from the

Clayton Daniel
advice and if your company. You know, if I think back to my financial planning company, one of the concerns I had in terms of working with mortgage brokers and getting involved in debt was you never quite like once you move across into mortgage brokering land. There’s always the who owns the client, correct? Yeah. All right. So the reason why I think your background with working with advisors like what kind of assurances or how Do you structure the contracts? Or how do you provide a level of confidence to the adviser that they’re not risking in any way that they’re gonna potentially lose their client?

Chris Booth
Yeah, that is difficult. I mean, in the contract, it states that, you know, that is their client. And we’re not going to sort of market and prospect to those clients. Like I said, before, we want to participate in the news. So I think that that’s what we would like to do. But if the finance plan doesn’t want to do that, we can’t force that on, on on the business to do that. Some of the other things we’re doing is rather than just sort of sort of referring through to a mortgage broker, we are allowing larger financial planning companies who’ve got the operations people or relationship people in their teams, who have got a bit of time resources, and have got strong client relationships, to participate in that transaction, whether it be from a compliance perspective, I becoming the broker, you know,

Clayton Daniel
right, or handhold,

Chris Booth
or alternative just sort of be the operations person before it gets referred to Lydian,

Clayton Daniel
right. Okay, so there’s the two options are low, low involvement from the plan is office or high involvement. Yeah,

Chris Booth
so we can get that scalable service offer. I mean, some of the larger financial planning firms, they’ve got staff in there, who are, you know, their goals are to be financial planners, some of the junior guys and girls, they’re looking to build up their client base themselves, their age, demographics, it’s appropriate for them to be picking up sort of more middle aged people than mature age people just purely for that relationship. So by adding the debt component, as a conversation to them, and then plugging into Lydian, so they can kind of be the broker, but we just got the operation side of it covered.

Clayton Daniel
That’s a super interesting concept. And here’s the question you probably don’t know the answer to. And so I’m just kind of thinking out loud. But one of the major issues with financial planning right now is getting younger staff through their professional year. I wonder if there’s any thing that they can do in terms of being involved in brokering, which would take some of those boxes? And again, I don’t I don’t expect you to be able to answer that question. Something I might. I might see if I can spend a bit of time getting my head around.

Chris Booth
Yeah, cool. I mean, that’s something that we’ve just sort of started to explore this year. So the last couple of two years has really been building up the partnerships that we’ve you mentioned before, a couple of big national ones, but, you know, most appropriately, we’re just looking at smaller financial planning firms who don’t have the capability or want to do mortgage broking in house. Yep. And they plug into us. But what we’re what we’re also finding is a lot of larger businesses who do mortgage broking, they have may have the broker. But these financial planning businesses are specialists at operations for financial planners. They don’t give any operation support to their mortgage broker. Right. So when I like the unloved cousin, yeah, so when I talked before about 10 hours to process a loan, that’s not I’m not messing around. So that poor mortgage broker has got to do the relationship. So I’m gonna give a high client experience to their person, right, let’s do the data entry, file hygiene, maintain compliance. The business owner is thinking, well, I’ve got this great mortgage broking business, but it’s not supported by the same operational excellence to the financial planners.

Clayton Daniel
So you might actually be using financial planners, or even potentially even brokers and plugging in a back office to them.

Chris Booth
Yeah, can’t Yeah, kind of Yep. So that’s the VBP thing. Right? Yeah. The Lydian thing is, is potentially we have that, you know, we placed that broker in that group, which otherwise it’d be too hard to build out this. This ecosystem didn’t always broken. Yeah, yeah. So anyway, look than we were two years in, and we’ve got definitely got the maturity in the operations space now, which has been our primary goal. You know, we’ve got guys and girls over in in Cebu in the Philippines. Yeah, you know, that process that so many applications, with so many different lenders, their credit knowledge is huge. And we’ve got three or four guys now or girls who are almost at that credit, analyst perspective. So you can give them the data, they could sift through the different policies and things. And they could recommend the product, not that they provide the advice to clients, but they can certainly do all of that, you know, that paper movement and things. And that means that our brokers then have a lot more free time to want to handle the clients to seek other partnerships, three, participate in our partnerships. Yes. And yeah, basically specialize being in sales and advice. And that’s an uncomfortable space for mortgage brokers to be in because typically, they’ve all been beholden on the operations process, yes, and the transaction process, and that’s what we’re trying to do is liberate the brokers a little bit to go right. Well, I’ve got all this free time now I can look up to so many more clients.

Clayton Daniel
That’s awesome. That’s awesome. Boothy, Mate, I really hope because we didn’t even get a chance to get into all of this knowledge that you’ve built up over the years. In terms of what you do know about specifics in terms of how to take someone like me who doesn’t know a lot about property and debt and inform them over the course of a period of time so make this has been an awesome podcast in terms that I hope it is only the first of many, so make thank you for coming on.

Chris Booth
Thank you very much

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