Understanding the needs of High Net Worth and Private Clients, supported by the skillset to work through and assess complex financials and company structures
Understanding and knowing how to present investment income and lumpy income that is simple for the bank to understand
Working closely with a client’s financial adviser, accountant and bookkeeper to prepare accountants letters and letters for advice for the bank.
THE SITUATION
SF Capital was referred a High Net Worth Client from one of Sydney’s leading wealth management firms
The client was contracted to purchase a luxury apartment in Sydney’s Eastern Suburbs and needed unconditional approval prior to the settlement date
The client was a retired investment banker, who now earned his income from arranging corporate finance deals and private investing
This was an extremely important deal of the firm, given the profile of the client and the importance of the referring organisation.
THE CHALLENGE
The client’s income was very high ($1M+ pa) but extremely lumpy, consisting of deal-specific income and multiple sources of investment income including interest, dividends, trust distributions and capital gains
Furthermore, the income flowed through multiple companies, trusts and corporate beneficiaries. The client also owned many unusual asset classes such as Hybrid securities, International Securities and a farm. There were also inter-company loans across the entities. The client also held many directorships that were unrelated to his servicing income. These deal features would be highly unusual and challenging to most retail credit officers
The client had an existing Private Banker, who was dropping the ball, and it was obvious that little work had been done on the file, putting the settlement date at risk
Finally, the client’s latest tax returns were not complete at time of submission. Putting further time pressure on the deal.
THE RESULTS
A ‘drop everything’ approach was taken for this particular High Net Worth client to assess his file. The client agreed to a mandate fee to prioritise his loan above others given the urgent time frame. A valuation was immediately ordered across a handful of preferred lenders
We worked closely with the client’s accountants to understand their group structure and flow of income. We “normalised” the earnings for the bank, stripping away lumpy earnings, one-off income and one-off-expenses, and simplifying the income in a way that was easy for a credit officer to understand. Three broad categories were used: Consulting Fees, Dividends and Interest from term deposits and hybrid securities
We worked with and convinced the bank to work with Management Accounts for the latest financial year, while we waited for the Accountant to finalise the latest tax returns and financial statements across the group. We also drafted an accountants letter explaining the nature of the income, any add-backs, as well as all directorships of which there were many (20 plus!)
To mitigate the approval risk we prepared a “dual-track” application, submitting one deal to Macquarie Bank and the other to Westpac Private, and monitored the deal closely through credit. There were multiple rounds of credit questions which we managed
The deal was approved by Macquarie one week from settlement, and loan documents issued shortly thereafter. Westpac Private was approved soon after that. The client was able to settle on time and secure the property!
