Becoming A Broker

Hi,

I'm considering entering the mortgage broking industry and was wondering if any of you learned people could offer any advice?

If anyone could answer any of the following questions I would greatly appreciate it!

What is the average rate of commission at the moment? Upfront and trail?

Do any franchises other than Mortgage Choice offer a truly impartial service (as they pay brokers the same commission regardless of the lender chosen)?

Who are the most highly rated Aggregators/Franchisors?

Who has the worst reputation?

Who has the best software?

Who provides the best/most leads?

Who has the best support?

Thanks in advance!
 
Hi,

I'm considering entering the mortgage broking industry and was wondering if any of you learned people could offer any advice?

If anyone could answer any of the following questions I would greatly appreciate it!

What is the average rate of commission at the moment? Upfront and trail?
From my panel of lenders it's about 0.6 / 0.15 + GST. Even within an individual lender it can very periodically based on aggregator and individual metrics.

Do any franchises other than Mortgage Choice offer a truly impartial service (as they pay brokers the same commission regardless of the lender chosen)?
I'd say that MC pay their brokers badly regardless of the lender...
Seriously, I don't think any of the non-franchise aggregators do this, but most brokers worth their salt don't recommend based on commissions. In most cases, the difference is negligible and not worth a complaint.

Who are the most highly rated Aggregators/Franchisors?

Who has the worst reputation?


Very hard to answer these questions in a quick post. Aggregators will generally pay better and allow you to run your business the way you want to. Different aggregators have different support levels depending on what you need. Franchisors will often have lead generation and more support.

Factors to consider would also be a cross-section of their panel of lenders. Will in be able to meet the needs of your target market. Will the support you get be relevant to your desired target market.

Who has the best software?
In my opinion, none of them have very good software. I have access to my aggregators 'free' software, but I choose to pay for a third party product because it meets my business needs far better.

Who provides the best/most leads?
Those that provide leads will tell you they generate lots and they're good quality. I've found that leads generated by third parties (either aggregator, franchise or a specialist) tend to be time consuming and of very poor quality. I'd prefer a single referral to 20 paid leads any day.

Who has the best support?
Franchises will generally have better formal support for people with no industry experience.

There are some requirements that you need 2 years of experience with some aggregators and industry bodies. Most franchsies will give you this as part of their agreement. Most aggregators will require you to work under someone either as a part of their business or within a mentoring program.

I found a great mentor and for me this was ideal. I don't expect or need much aggregator support and thus I don't have to pay my aggregator much at all. I have the support of several of the best brokers in the country instead.

Feel free to give me a call if you'd like to discuss in more detail.
 
Hiya PP

What Pete Said pretty much covers it,.

Id like to add a small caveat to the general theme and its on this

Who provides the best/most leads?

No one except you..............

Many of the aggs and most franchise groups promise the earth with lots of coulds maybes and shoulds.

Anthony Robbins has a good tag line with the should thing, that being "" you should have all over yourself", not very family friendly I know, but you get the point.

Unless you can generate your own business or have a direct mentor or market relationship, most leads that are provided are rough, not ready ............and often consist of someone that has been badgered into seeing you with a $ 50 woolies voucher..

There are some exceptions to this rule in terms of some of the really large groups like Aussie, but then your income is correspondigly clipped.

ta
rolf
 
Agreed PistonBroke.

Initially their formal support is quite good. Franchises expect a zero level of knowledge from new recruits and they charge an arm and a leg for it.

They tend to have a glass ceiling too. Their support is great for entry level, but it's lacking at the middle to upper tiers. I think you could also say that for most aggregators, but at least you're not paying as much for it.

The superstars in the broking industry tend to operate under aggregators so they can run their own business. They find the best mentors and figure out the path that works best for them.
 
Thanks very much for the informative responses.

The reason MC interested me was the point of difference (no bias in commissions) and the brand name.

It's always hard to confirm what people are telling you about number of leads (they NEVER mention quality), marketing/advertising assistance, levels of support, etc

Who do you consider to be the best referral partners? Is it Real Estate Agents? Financial Planners?

What do you think about White Labelling?

Do you think fee for service is far away?

Thanks again in advance.
 
There's plenty of groups out there that will send you as many leads as you want. Some are better than others, but my experience is that they're simply not worth the time or cost. I know an MC broker and as his business matured he developed the opinion that buying leads from the franchise wasn't worthwhile.

I suspect that MC generated leads are probably better than average, but they'll never be as good as a direct referral. I take any promises of lead generation or marketing support with a grain of salt.

Good referrals can come from lots of places. Real estate agents, financial planners, accountants, etc. can all be good sources of business. It all comes down to the relationship you build with these people.

The best source of business is from your existing clients. Most brokers will tell you this and it's hard to really understand what it means until it happens. You reach a critical mass of clients, treat them well and the magic just happens. Most of my marketing budget is spent on existing clients, not advertising for new ones.

As I've already mentioned, commission bias isn't really an issue. Most brokers already discloses commission comparisons via a chart to each client. I've never had a client question this. They generally feel it's nice that the recommendation is based on their needs, but they don't really care what the broker is paid so long as the recomendation is right for them.

White labelling often allows brokers to set the commission at the expense of the deal the borrower gets. I personally don't think it's a very good idea for the individual or small group of brokers, but I can see the benefit to large groups where this is their primary product.

Fee for service? Hard to say, but it'll probably happen eventually. There's lenders who'd love it and lenders who have demonstraited that they won't be doing it. If it does happen, it'll be a very interesting year.
 
I started with MC a while ago now. The unbiased advice line seemd like a good selling tool, but looking back, Im not sure it was that important. MC had to wthdraw their advertising because they dont have every lender on their panel (no one does) and so they couldnt actually say they were unbiased, and paid the same etc in their volume advertising.
As to their com structure, it is pretty woeful unless you can meet their performance targets and earn bonuses. Mostly these only go to multi franchise owners.
With the current environment, especially if you are starting fresh, I would look at working for a franchisee (being a contractor) rather than buying into your own franchise. Spend a year or two getting to know the business, and building a data base before fronting up the cash for a franchise.
Franchises were worth a lot more beofore the GFC and com cuts. There may be more of that in store in the future, and you are better off hedging your bets, especially if you are new to the industry.
Working for a large multi owner franchisee will also teach you more about running a successful business than MC head office will.

Good Luck.
 
Hi Property Paul,
Please see below in response to your questions:

What is the average rate of commission at the moment? Upfront and trail?
You will probably find that there is a correlation between the level of support provided and the commission paid. That being said, there is a common misconception about how and what Mortgage Choice pays. Because of the structure of our payment system it is best to discuss the details of this in person, so I've listed my details below.

Do any franchises other than Mortgage Choice offer a truly impartial service (as they pay brokers the same commission regardless of the lender chosen)?
Mortgage Choice offers brokers a very unique selling proposition. Being able to assure customers that you are working in their best interest by selecting a product that is tailored to their circumstances is a powerful selling tool - Mortgage Choice is able to do this as our brokers are paid exactly the same commission rate no matter which home loan or lender their customer chooses. We often hear from our brokers that when a customer is broker shopping, hearing our 'paid the same' policy usually puts us ahead of our competitors in the customer's mind.

Who are the most highly rated Aggregators/Franchisors?

Who has the worst reputation?

Who has the best software?

Who provides the best/most leads?

Who has the best support?

In terms of the above three questions, Mortgage Choice has a strong, recognisable brand and a great reputation that we work hard to strengthen even further. Our head and state offices provide industry leading training, quality leads, lending and IT support, plus local as well as national marketing and public relations support. Did you know January marks the seventh consecutive month that Mortgage Choice has ranked number one on Google’s organic search listings for the phrase ‘home loan'? We are number one for several other terms too.

You'll also be interested to know that we were named Retail Aggregator/Originator of the Year at the 2009, 2008, 2006 and 2005 MFAA Awards.

A face to face meeting is perhaps a better means of communication than this forum. If you'd like to schedule a meeting, please give me a call on 02 8907 0514 or 0403 570 039.

Lesley D'Arcy - National Franchise Recruitment Manager, Mortgage Choice
 
Hi Lesley

Thanks for that feedback

Thats all the nice upfront stuff..............when u do post this type of material on a forum you are going to have to expect some questions.

What happens when a franchisee wants to sell the business they have developed over many a year ?

How many leads are provided to a new franchisee and what is the close rate of these leads.

Say Hello to Micheal Russell, you have great leadership there !

ta
rolf
 
I refer work from my law practice to one MB because she goes above and beyond the call of duty. She just changed banks and the deal is that I don't want any referrer fees etc- she just has to do a good deal for the clients... a few points better than if they had walked in off the street.

She will refer work to me (usually conveyancing but also Family Law ) so I like to look after her.

I expect that our referral "success" rate is 90- 95% as I don't point "losers" in her direction as she is busy enough already.

How did I meet her? She walked into my office unannounced one day and I made the effort to talk to her. 20 mins after she left I got a call from a new Family Law client referral from her! :D
 
do you have any finance/broker experience or starting from scratch. I have been looking into joining a franchise or going direct, and have found someone I think is worth joining, however you require 2/3 yrs previous experinece in finance. let me know if you need the details?
thanks
 
Would it be possible for a group of friends to start up a mortgage broking business and only lend amongst themselves?

Im guessing they can rebate the trails so the interest rates are lower or something? As for the fee, this can be divided equally?
 
Would it be possible for a group of friends to start up a mortgage broking business and only lend amongst themselves?

Im guessing they can rebate the trails so the interest rates are lower or something? As for the fee, this can be divided equally?

Interesting idea, but other than getting the commissions from your own loans, what would be the point?

Mortgage broking businesses aren't as simple to set up and operate as some people think. I'd agree that anyone can do it, but there are costs involved, minimum education requirements, compliance and memberships which often require a level of experience or mentorship. Only once this is done will lenders even accredit you to originate loans for them.

You've then often got minimum volume commitments and ongoing educational to maintain these days to keep your accreditation. If you loose your accreditation you can loose your trail income.

You wouldn't do it just to get what amounts to a discount of 0.1%
 
I've looked at this quite at length & detail, and unless you have a few things up your sleeve your pushing it up a steep hill.

A group of mates getting together? How many mates you got 7+ figure loans?
And why would it be worth it to them?
What if they ask for a bigger cut next time?

The franchises are no different, they also want their cut plus training.
I generally don't like franchises, I like mortgatge one less.
Good luck, your gonna need it.
 
comes back to the view that there is lots of money in the business to go around, which there is...........for some, perhaps 5 % of brokers make "good" money.

Borrowers look at the comm disclosure and go wow, look 1500 bucks, and the guy was only here for 70 minutes.................


ta
rolf
 
To put some of the figures in perspective...

Setup costs for an individual business will take about $15k-$20k. It also takes about 3 months if you move reasonably quickly. This is for a single broker, your friends could just let you do it all for them, or they'd cost at least another $5k each.

The commissions you can rely on is about 0.5% upfront and 0.15% trail. Aggregators will take about 20% of this, so it's more like 0.4% & 0.12%.

If you and your friends have $4M of lending between you, you'd break even on the setup. It also takes about 10 hours work for each loan if it's a straight forward application (which they wouldn't be, as you're the now self employed broker doing this).

To maintain this, you have to meet minimal ongoing educational standards and maintain insurance, memberships, business registration with ASIC, accounting and so on. At a minimum these come to around $5k a year. I expect it'll actually go up in July this year as new legislation comes in.

The trail income to meet these costs is about $4.2M.

Its safe to say that your break even point is at least $4M in lending.

Most full time brokers write less than $2M per month, but they also spend a lot of time marketing as well, so it's possible to write $4M in a month if you've got that much business knocking on your door, but keep in mind you've only broken even so far...


All this also assumes that the person setting up the business has 2 years lending experience (otherwise you won't be eligible for the professional memberships). If you don't have someone already qualified, you need someone to operate under. Most would want at least 30%-50% of your commissions.

Mortgage broking is a good business. The barriers to entry really aren't that high, but the barriers to success can be substantial. You don't do it to save a few bucks on your home loan, you do it to build a serious business.
 
Thanks for all the great information!

Does anyone have any experience with Smartline, Mortgage House or The Mortgage Gallery?

Hi PP,

I have been accepted for a Smartline franchise and so far have been very impressed with their business and team comradery. They seem very honest and have not sugar coated anything for me to try and lure me in.

The fees I will be paying total just under $15k including GST, this includes the franchise, training, and a stationary pack. I then will be paying around $10k to set up my home office and also for licenses/insurance etc.

For this I get.

Use of Smartlines software and systems.
Access to their marketing department.
12 weeks business coaching.
2 years mentoring.

The commissions they pay seem good although you can get better through other aggregators but you will not get the 2 years mentoring required to get into the industry with them. I did get offered a job with a Mortgage broker but would not have been paid any of the trailing commission and would have had to work from their office on the other side of town to me so I chose to go with Smartline.

The commissions also increase depending on the amount of loans you write and the size of your loan book.

As far as leads from the state office go they have warned me not to get my hopes up and only expect about 1 a month as they don't advertise much but instead rely on referrals and building ongoing relationships with the existing clients which is fine by me. Apparently 85% of their clients originate from referrals.

All up I would highly recommend them but if you pm me towards the end of February I should have everything set up and have more of an idea.

P.S. as part of my research I rang 1/2 a dozen former franchisees and questioned them and not a single one had a bad thing to say about them apart from the lack of lead generation. They all just stopped for personal reasons.

Hope this helps
Paul.
 
Top