It’s a question I am often asked….how do we find the right mortgage broker for our business?
It’s a question that invariably produces many more questions and points us back to the very first question – What are we looking to get out of having a relationship with a Mortgage Broker. You know, what’s in it for me? (YOU in this case)
It’s a critical question. In fact, it is the most important question of all. And needs to include “the good, the bad and the ugly”. Because if you are going to look at engaging with a mortgage broker then you’d better know the full “ins and outs”…..
Breaking it down into three categories gives you an opportunity to truly assess whether this is the right thing to do for you and your business. You see your business doesn’t have a voice but you do. So it is important to be objective and also ask “your business” if this is the right fit for it.
While adding mortgage broking to your business via referral partner, JV partnership, In-house broker (Employed or contracting) can be extremely rewarding and the right thing to do it is critical to ensure the right path is chosen.
So, let’s look at the good the bad and the ugly of each type of broker engagement:
Referral Partnerships: 0-200 active clients
The good: Having a referral partnership with a like minded professional can be quite rewarding and solve you and your clients problems in the debt space.
A good mortgage broker should make YOU look good to your clients by providing excellent service all the while educating your clients on the process, products and outcomes of lending.
I always expect them to be active in bringing in new clients into your business via reciprocation, which is a critical part of the relationship.
The Bad: Referral agreements generally aren’t worth the paper they are written on. While they will outline commission splits and a general rule around the terms you set they provide no real certainty or ownership for you in regards to the income generated or your clients.
We prefer to use “aggregation Agreements” where it is a sound legal document that adds certainty into your business agreements. The aggregation agreement is a proven document that will stand up in court and is to be taken seriously. By way of having this type of agreement you have clear ownership of the clients, revenue and other important items you may include such as IP etc.
The Ugly: Not all mortgage brokers are created equal. While the Pareto principle (the 80/20 rule) tells us in general 80% of the work is done by 20% of the workforce, the principle in mortgage broking is more like 90/10. Finding a good mortgage broker isn’t easy and from 25+ years of experience I can tell you most aren’t up to what you would deem acceptable for your clients. That is why most accounting firms stay away from referring their clients to debt.
Having an incompetent mortgage broker involved can do a lot of brand damage that can take years to recover from. Even worse on a referral agreement the broker can walk away at any time. There is nothing holding them to you and your business.
Over my time I have also seen what I call “The ungrateful Broker” syndrome where after a period of time, the broker has got what they want out of your relationship and simply disappear. Along with the revenue you expected and good will of your clients.
Mitigating this: DON’T work with an independent mortgage broker unless their aggregator is active in the relationship with you. You need an escalation path and accountability and having the aggregator in toe will allow for this, and ensure all agreements are met.
JV Partnership: 201-500 active clients
The good: JV Partnerships are a deeper connection to the broker than an “aggregation agreement”, as both of you have ownership in the mortgage broker division. This means it’s both of your baby. You and the mortgage broker have a vested interest in making sure everything works as it should, as your financial futures are entwined to a degree.
The broker will work harder for your clients and generally speaking the broker becomes “a part of the furniture” of the accounting firm. The accountant also works harder and smarter to engage with their clients in the program.
The growth from this can be really fast and sustainable too as multiple resources are available such as shared staff and premises, and shared client lists.
The Bad: While you have a partnership with the mortgage broker that will do what it says on the packet, you don’t have full ownership of the broker. And as such, directing them to do specific tasks can be tough. But it is all really in the selection of the partner that is critical and not rushing into a JV. It is best when you let a referral partnership evolve into what could be a long term relationship. Kind of like dating. You need to go on a few dates before you know this person is the right one for you long term.
Getting to know them through the good and bad times is critical before committing. How do they handle stress and failure? Do they present when things go bad or run and hide? You won’t know how someone operates until they have worked with some of your clients.
The Ugly: Extracting your business from a failed JV partnership is generally messy and causes a massive distraction on your core business. Especially if things go toxic. As mentioned previously, try before you buy….test them out and see how they perform prior to committing. Again, it is important to have the right aggregator behind you both. One that is active in your partnership and works with both of you to create a sustainable business model.
In-house Mortgage Broker Division: 501+ active clients
The good: This is my professional favorite. If you are able to refer 4 quality clients per month, (Which is a doddle for this sized business) I would highly recommend going down this path. Not only is this role a mortgage broker role but it becomes a part of your client engagement and marketing team too. It is the most profitable model as well.
Over the years I have seen some exceptional results in this area as the mortgage broker engages with the clients. They are either commission only or PAYG or a blend of both. Either way as they are employed by you, you get to be more involved in their duties and how they operate.
We have built a client engagement program that is second to none and all but guarantees results in this area.
The Bad: Finding the right broker is the hard part here. I generally look for brokers who are customer service superstars and technically great, but useless at business development. They need you – you need them. Look for older brokers too. Generally they are more settled in life and more stable, competent and conscientious. With the right person it’s simple to hit the ball out of the park.
The Ugly: People change over time and the person you hired 5 years ago will be different to the one sitting at their desk today. Hopefully they grow in a positive way but we never know. So it is important to have clear rules and procedures and expectations around client ownership. I always look to have a path to equity in the business as this means they are far more likely to be long term and stable. It doesn’t have to be more than 5 or 10% either.
Well I hope this helps and doesn’t scare you off including mortgage broking into your business.
Done right it is an amazing addition to your business that your clients will genuinely appreciate and will build a substantial asset and revenue stream.
As always, if you’d like to discuss this with me please feel free to contact me at any time.
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