The latest research on the broker industry from Maritz Canada for CAAMP, revealed some interesting facts about brokers and their relationships with consumers and lenders.
The study entitled “Canadian Mortgage Broker Channel: Consumer and Industry Perceptions” noted among other things that only 35 per cent of consumers have a full or good understanding of the services provided by mortgages brokers, 17 per cent are aware of the AMP designation and that while two-thirds of those looking for a mortgage consult with a mortgage broker on first mortgages, that falls to 27 and 21 per cent respectively on early-term renegotiation and scheduled renewals.
In the broker/lender relationship there is still clearly work to be done. While the vast majority of mortgage lenders (97 per cent) see the value of being involved in the broker channel for such reasons as access to wide range of customers, less costly to operate and putting different lenders on a level playing field, nearly two-thirds of banks (32 per cent) don’t believe their institution benefits from involvement in the broker channel. Lenders and banks cite four primary concerns when dealing with brokers: fraud, inconsistent or inexperienced brokers, lack of client ownership and the difficulty of cross selling. Surprisingly, when asked what influences brokers when choosing a lender, lowest rate was just the fifth-most influential consideration. Number one was speediness of approval, followed by underwriter support and service provided.
In terms of keeping clients, the study indicated the key is in the relationship between the broker and the client after the first mortgage has been completed. While low interest rates are one of the key drivers in attracting clients, what drives satisfaction and loyalty are things like, being proactive, suggesting strategies to improve terms and being helpful.
“While these results may be eye-opening, they should not be surprising,” stated the study. “The fact is that brokers have already passed the rate test among their customers; that is why customers chose their broker in the first place. What drives true loyalty is development of meaningful relationships with customers, ones that ensure that when it comes time to deal with their mortgage, customers immediately think of their original broker.”
MortgageBrokerNews.ca solicited reaction on the report from a number of industry professionals:
Vince Gaetano, VP, principal broker, MonsterMortgage.ca
First, the Mortgage Broker channel has dropped to 25 per cent and the survey described this as delicately as possible. At the end of the day, we are moving backwards.
Second, the broker/lender relationship needs work. It speaks volumes when among Bankers, one third do not believe their company benefits from the involvement of the mortgage broker channel. It is apparent that "trust" needs to be established to grow market share. Without it, brokers and lenders cannot increase market share moving forward.
And lastly, the AMP designation needs to improve its value. I agree with the survey that AMP’s themselves need to communicate with end consumers the value and importance of the designation. The problem that I see is, how can one be proud to discuss their status as an AMP with a client when all they had to do is attend free industry luncheons and stay awake for CE credits. The concept is a good one but the designation credits need to be earned with effort.
Overall, the survey is not surprising. The industry has to come to the realization that the only way we can grow is to draw back the lenders (BMO and HSBC) that left and convince new ones to enter – you need more participation in the channel (simple math). The only way this can happen is if brokers give up something to entice them to come back or enter the market. Brokers need to start understanding the term “cross-selling” and how it will start effecting lenders decisions to stay in the space as we know them now. Brokers need to begin the digestion of the term clawbacks and understand how this mechanism can help the industry’s sustainabilty when coupled with trailers, accountability, representations and warranties to the lending partners. Trust is built when two parties are working together and being fully transparent of their respective painpoints. There is no more pie to split up.
At this point in time most lenders and brokers seem paralyzed to speak about the painpoints that need to be discussed. As we commence a new decade, we need an industry summit now more than ever to help shape our industry into one that we can all be proud of.
I believe that success leaves clues and this report provides a blueprint for moving our business forward. The first thing that jumped out at me was what mortgage broker clients find most valuable, being pro-active, suggesting strategies along with friendly after sale contact. Consumers are looking for expertise and leadership when it comes to financing their biggest investment. Most consumers don’t even know what they don’t even know so the entire mortgage discussion is centered around rate as a consequence. By suggesting clear strategies, and dollarizing long term savings, educating the customer on how the different products affect them and confidently recommending the best solution rather than asking the customer what they think they want is a way to become their trusted advisor, minimize rate sensitivity and close more transactions.
The biggest hurdle this industry is going to have to overcome in the future is a lack of consumer awareness. The report raises this concern again this year and unless the associations, lenders, brokerages, and agents get organized and deliver a clear consistent message to the consumer of exactly what we do, then this will be an ongoing challenge. I believe strongly in and support the AMP, but feel any monies spent by the association should articulate what an Accredited Mortgage Professional does. The ads should read something along these lines: Use an Accredited Mortgage Professional as your trusted advisor. An AMP will provide expert, unbiased advice, choice and value by negotiating the best mortgage on your behalf from Canada’s largest financial institutions and lenders.
The other item that stood out was our continued poor showing when it comes to early renegotiations and renewals. We have to get better as an industry at pro-active communication. Many agents simply lack the systems, resources or organization to contact their customers on a regular basis and keep them apprised of changes in the industry, rate trends, refinance, debt consolidation opportunities or advanced renewal discussions and then wonder why their clients renew at the originating lender? A steady informative campaign with options and suggestions, via regular emails and quarterly telephone calls will increase these numbers significantly for any agent. Many companies large and small lack the resources, scripts and systems to put an effective program in place.
In a nutshell, our entire Industry has to be alarmed at the flat line or even negative growth the mortgage broker space has been experiencing at a time when the rates are near their lowest point in history. Although I willingly participate in spirited competition, it is time that the super brokers, independents, associations and lenders check their guns at the door and start cooperating and spreading a consistent message to the consumer of the value we bring to the market. I have watched the financial institutions massively increase their mobile mortgage sales forces, continue to restrict product offering to the broker community, cut commissions and restrict access based around our lack of organization and fragmentation as a whole.
I think there should be uniformed licensing, a one fee association membership which gives you the opportunity to participate in up to three regional Associations. (Right now many agents are being asked to be MBABC, AMBA and CAAMP members.) This is expensive, time consuming and waters down the effectiveness of the numerous yearly events offered. I also think the provincial yearly licensing fees should be increased to discourage part time agents so that we can begin growth with committed fulltime professionals and focus on best practices.
Dave Larock, mortgage planner with TMG The Mortgage Group (Thompson/LaRue)
Broker market share has also been affected by the drop-off in sub-prime mortgage loans. We had a disproportionate share of this market so that fact that overall broker market share is holding steady means we have pretty much replaced that lost volume with more prime business (which is no small feat).
It’s true that a few bad apples can spoil the barrel but I find it interesting that lenders are so concerned about broker fraud, especially when the largest mortgage fraud in Canadian history was recently perpetrated at RBC and BMO – two banks who don’t accept business from mortgage brokers.
Where brokers compete, customers get a better deal – plain and simple. If the average decrease for a renewal client using a broker is 1.4 per cent and the overall average rate decrease for renewal is one per cent then the average decrease for renewals who sign-back their lender offer without contacting a broker is even worse than one per cent.
I’m really surprised that more brokers don’t manage their database better. It’s hard to get customers through the door and once you’ve built that trust it seems like such a waste to throw these relationships away.