So why do it?
To be honest, we ask ourselves that question almost every day, this is some of the least fun you can have in the mortgage business; it’s an endless frustrating grind.
But we do it. We do it because it will likely generate $300 million in mortgage volume this year just in Ontario; if we expand to other provinces that number could be $450 million. We have other divisions in our company that will do about $225 million of traditional mortgage broker volume but the fastest growth is from the rate sites.
We do it because rate discounting may be the future of this business, and we want to be successful in this business for years to come, so we want to master the discounting trade now, not later. We do it because 80 per cent of the applicants are absolutely perfect candidates: 800 Beacon scores, government jobs, smart, well-educated; they have all of their documents at their fingertips. We do it because it is a seductive business challenge: can we tweak a ton of different variables to improve profits, reduce overheads, increase pull-through and wring greater net income from a tough to execute business model? It keeps you awake at night but it’s an intriguing battle.
Many will tell me that we are only doing harm to a great industry by advertising discounted rates. Many think we debase the whole business by commoditizing it. Many say rate discounters cannot take the time to give real counsel and get to know our client’s needs properly because we need to work very quickly and efficiently on every file.
I don’t have all the answers, but I think I have a couple. Banks are advertising discounted rates so why should mortgage brokers be afraid to do the same? Should we just roll over and give up?
Maybe this business will be commoditizing itself anyway, so why not try to get ahead of the curve? Almost all of the extremely qualified clients who use the rate sites do not want advice or council; they want service and they want us to execute the instructions they give us. Perhaps we as brokers may have better rate and product ideas, but if the client is mature, well-educated, and successful and tells us they have done their product research and they have determined the mortgage is suitable to their needs, why would we contradict them?
Conversely, if the applicant does ask for advice and guidance our brokers have a combined 50 years of experience from billions of dollars in funded mortgages to give the clients the counsel they ask for.
John Webster once said the greatest thing mortgage brokers can offer is choice and advice and he’s right. I firmly believe a full-service, highly proficient, full-commission mortgage broker will always be here, and nothing a rate site can do will replace deep knowledge, long experience combined with great lender relationships. Particularly, I think niche brokers have a bright future, whether it is sub-prime or investment property specialists. But I firmly believe the public gets to decide what mortgage source they want and if technology makes mortgage rate information highly available to the public, someone will discount rates to attract leads just as sure as night follows day.
So either we will provide those discounted rates on rate sites or someone else will do it, it’s going to happen anyway. Remember: travel agents did not get to decide if Expedia or Priceline was a good idea, the public made the decision.
Not a strategy for individual agents - continued on page 3