Layering your business: How diversification can make you a stronger broker
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21/10/2009 9:00:00 AM
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The financial skills and customer service know how that come with being an experienced mortgage broker can lead to a number of ancillary business opportunities that create additional profit streams and broaden client reach. That's why when Tiffany Clark, a broker with TMG The Mortgage Group in Grande Prairie, Alta., learned the company was launching an equipment leasing division last June, she jumped onboard.
"There's a really strong market for leasing in Grande Prairie and I thought it would be something I'd like to pursue," says Clark, who has a background in both the financial and automotive industries. "There's a lot more to it than there is with mortgages, so it's interesting and there's a lot for me to learn."
Along with equipment leasing, popular ancillary business options for mortgage brokers include selling creditor life insurance policies and providing wealth management services. There are also opportunities to head back to the classroom to obtain designations that can allow for expansion into more real estate related services like property management.
And while mortgages should remain top-of mind for brokers who add on new profit streams, the benefits of offering ancillary services can mean a big boost to business, allowing a broker to cross-sell services and become a more diversified financial professional.
"The more you know, the more it will strengthen your skills on the mortgage side because you're going to learn more about how different deals are put together," says Clark.
Equipment leasing
Equipment leasing and mortgages may appear to have little in common but it's a type of diversification many brokers have taken advantage of. Dominion Lending Centres, for instance, introduced its leasing program in 2008, while TMG launched its leasing division in June.
In these types of leasing programs, the broker basically acts as a sales rep who finds clients - either individuals or vendor companies - and packages a deal to be sent to the leasing company, who will then look for financing. Equipment can range from tractors and cranes to computers and printers.
At TMG, brokers can simply refer mortgage clients to the leasing division or take a more hands-on approach to finding and packaging deals in preparation to be brought to lenders.
Clark, for example, has made leasing a larger part of her business and dedicates part of her time on the job to building a client base on the leasing side. While her background as a business manager for an automotive dealership helped her learn the ropes, Clark says the traits needed to be successful at leasing are similar to those needed to be a good mortgage broker - strong people skills and strong sales skills.
"This is not the type of business where people are going to be walking in your door saying, 'hey I want a loader.' We have to go out and get the business," she says, giving examples like attending trade shows and events and taking clients she's heard are in the market for equipment out to lunch.
Lisa Fibiger, a broker with DLC in Victoria, B.C., also says getting the word out to people that she takes on leasing clients is key. This can be as simple as letting mortgage clients, particularly self-employed ones, know that it's an option.
"We run into a ton of business for self clients doing mortgages and I can offer it up to them like, 'Hey, did you ever think of leasing this because it's non-reporting on your credit bureau and it doesn't tie up your cash or capital,'" says Fibiger, who took training courses through DLC to learn about equipment. "It's not hard to sell because it makes sense business-wise."
Fibiger says a big part of her strategy has also been building relationships with equipment vendors that send through regular business. She gives the example of a company that sells exercise equipment and needs someone to service their clients (i.e. gym or office building owners) by arranging the lease and taking care of the financial side of things. This is also popular in new condo buildings, where strata companies provide new phone or alarm systems and need to charge building tenants through a lease agreement.
Putting together an application for leasing can take longer than a mortgage application - typically requiring documents like financial records, certificates and articles of incorporation for a business - but there are common denominators.
"Each application that comes in is, in a way, like a mortgage application - the terms and flexibility that they have available is going to depend on the strength of the application as a whole," says Clark, adding that having experience shopping around for mortgages also comes in handy when packaging up leasing deals, where terms, rates and buyouts are negotiable. "We have the broker advantage - we can customize based on what a client's needs and business goals are, whereas if you work for a bank, you only have a certain pool of products."
And even though commission payouts are smaller on leasing deals because the dollar amount is lower, there can be sizable payouts because of higher commission splits, generally between three and five per cent on larger deals and up to 10 per cent on deals for less expensive equipment.
"You could make up to five to 10 per cent commission on a bigger deal like a $100,000 lease, but you can also make good money on smaller deals," says Fibiger, referring to someone she knows who does several deals a month for around $10,000 and can make up to $1,000 per transaction.
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