New company pairs advisors, mortgage brokers

The Smith Manoeuvre is now a corporate enterprise. A group of financial industry veterans have teamed up with founder Fraser Smith to create Smith Manoeuvre Financial Corporation. The company will offer seminars and accreditation to mortgage brokers and financial advisors, who will then work together to implement the Smith Manoeuvre for clients.

The Smith Manoeuvre is a well-known strategy that requires clients to leverage their mortgage debt and invest it interest-free. But recognition is not necessarily synonymous with success, Smith notes. Smith is not happy with how his manoeuvre has become a catch-all description of all mortgage-debt conversion techniques. If recklessly implemented, these types of strategies greatly increase the risk of a client losing hundreds of thousands of dollars, if not their home.

So SMFC was founded with the hopes of instilling credibility into his technique. Karl Straky, SMFC’s chairman and a past president of the Canadian Association of Mortgage Professionals, believes part of the problem is a disconnect between advisors and mortgage brokers.

“[Planners and brokers] have both made a mistake not talking to each other,” Smith says. SMFC believes a client doing the manoeuvre is best served by using both advisors and accredited mortgage professionals (AMPs). The AMPs are more adept at getting the “re-advanceable” mortgage necessary for the manoeuvre, and a certified financial planner is imperative for managing and investing the client’s assets.

Straky and Smith created SMFC to facilitate this relationship, particularly between independent advisors and brokers. “For 20 years the two sides have not been talking to each other, and meanwhile traditional lending institutions, traditional retail banking is talking to all of our clients about both sides of the balance sheet,” Straky says. “We bring the planners and the brokers together. We train everybody on how to do the Smith Manoeuvre properly. We provide them with marketing assistance, tools and infrastructure to deliver this strategy to the consumer.”

The seminars are held for prospective clients who are in the market for a mortgage. After the seminar, attendees fill out a survey and are asked if they are interested in the Smith Manoeuvre. If they are, SMFC facilitates a meeting for them with both an accredited planner and broker.

According to SMFC, both sets of professionals must be accredited in order to participate. The mortgage brokers must have an AMP, and the financial advisors must have a CFP. The company trains both sets of professionals in the manoeuvre and, upon completion, they become Smith Manoeuvre Certified Professionals.

The compensation for SMFC comes from the planning end. Upon the confirmation of a deal, SMFC takes a fee for hooking clients up with planners. “You would only compensate SMFC not only if you got the lead but if that lead turned into a deal. You only pay for a customer; you don’t pay for a lead.”

The lead process originates with the AMP and not the other way around because mortgage brokers have a much larger database of prospective clients, and the clients attending the seminars are already in the market for a mortgage, so there is a much higher conversion rate of prospector to client, Straky says.

“About 50% of attendees, from our experience, would like to book an appointment, and about 50% of those end up transacting business,” he explains.

This is because people who formerly may not have had the equity to invest will now be investing hundreds of thousands of dollars with the planner. The strategy generally requires the time it takes to pay off a mortgage, so likely the clients will be with the planner for the long term.

For more information about the Smith Manoeuvre, check out these related articles on Advisor.ca.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com