How to beat banks at renewal time

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The challenges of the traditionally slow winter season are now being compounded by banks contacting past clients 120 days ahead of renewal – and just out of reach of the brokers’ 90 day rate hold.

 “I’m relatively new so I still don’t get those return clients with renewals (and) this time of year in Ottawa it’s slow because people don’t want to move in in December and January,” Nick Bachusky told MortgageBrokerNews.ca. “The banks are getting to the clients first – 120 days out, the managers get an automatic message saying whose renewals are up and then the specialists contact the clients with the best rates. It’s tough for brokers to compete because we can only offer at 90 days out.”

The banks tend to have the rate advantage and it can be difficult to sway a previous bank client to move the mortgage to the brokerage side.

“The banks go on floors: they don’t make revenue on it, they make more on volume (and) if it’s a war on rates, the banks will usually win it,” Bachusky said. “They can go to upper management and get rate matches and clients are more willing to stick with the bank because no new paperwork has to be done and no new rules need to be discussed.”

However, one way to get a leg-up on the competition is to focus on other areas of wealth management and providing customers a more holistic financial services approach.

“For renewals, what we’re finding, is that with our client base we offer more than just mortgage services,” Patrick Briscoe of Mortgage Alliance told MortgageBrokerNews.ca. “We have a little bit more client dedication in the fact that they come to us first to get an opinion on what they should do.”

Briscoe believes it can be difficult to compete on rate but it’s those other services that help keep the client, in many cases.

“We have seen competition from the banks for sure as they compete for rates, but at the same time by offering other services we have been able to maintain the client,” Briscoe said. “We do investment services, life insurance and income tax preparation.”

Perhaps this approach is the best way to stay competitive during this important time of the year.

“It’s nice to have a niche in what we’re doing but we think it’s necessary for brokers to have the same sort of model if they want to remain competitive,” Briscoe said.

  • Ron Butler on 2013-11-04 9:04:23 AM

    Okay, let me think about that for a moment: it's renewal time and the bank offers the client a rate, the broker offers a slightly lower rate but the clients needs to be re-underwritten with a new lender, go through the whole process, pay per diems and pay a discharge fee to the old bank. The incumbent bank says "wait, we will match that offer, nothing to do, no docs to submit to us and you save the discharge fee".

    So at that point we as brokers have a decision; further rate discounting (possibly not practical, and the incumbent will continue to match) and cash incentive to offset the discharge fee, or both.

    The bottom line is no matter what level of other non-mortgage business you could be doing with that client, the client stays with the incumbent unless they are incented to leave. Why would the client do something against their own monetary interest just because they have other financial products with you.

    Perhaps the most important question is: if it is against the client's monetary interest to do the transaction, why would we ask them to do it at all?

  • Welbanks on 2013-11-04 9:26:11 AM

    @Ron You bring up some good points, but I think the idea is that we need better incentives in order to switch clients. That may be a cash incentive for the hassle they go through, that may be other products you offer. It could be a myriad of things but at the end of the day, we can never stop trying, as long as we are not doing something that acts against the client's better interests.

    Right now it is harder because clients are coming out of a high rate environment and early renewing into lower rates. Once this cycle of mortgages renews into what will probably be higher rates, we won't see the renewal rates as high as they are as people will have no incentive to give up their lower rate early. It all ebbs and flows.

  • Nick Bachusky on 2013-11-04 9:36:12 AM

    @Welbanks I totally agree with your second paragraph. Great point.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-04 9:46:50 AM

    Both Ron and Welbanks make good points.

    I think the real lesson here is the rate game is (as always) a losing game. Bad brokers sell rate, good brokers sell value.

  • Ron Butler on 2013-11-04 9:55:32 AM

    @Wellbanks. I love "we can never stop trying" that is the truest thing, it needs to be shouted at all of the folks telling us to switch to working on "B" deals; we cannot give up competing on "A" business; never. My point is that I cannot see the correlation that selling other financial services to the client will create an environment where the client would act against their own monetary interests regarding their mortgage renewal. I believe we need to win on the math to incent the client to switch on renewal.

  • Ron Butler on 2013-11-04 9:58:15 AM

    @Paolo, I guess I am a bad broker. Although the clients seem to really like low rates.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-04 10:02:55 AM

    Ok, maybe "bad broker" was a little extreme, but if all you're selling is your rates, then you're selling yourself (and the rest of our industry) short.

  • Ron Butler on 2013-11-04 10:07:31 AM

    @Paolo, but I really don't care what you or the "industry" think about discounted rates, I only care what the consumer thinks about it.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-04 10:18:45 AM

    Well, if you're only selling rate then backing yourself into a corner. It's an intangible that you have very little control over, and you're fighting people with much bigger budgets, deeper pockets, and that can afford to either take the loss, or can force you to cut to the bone every time.

    And again, there's other ways to offer clients value than just rate. Rate and value aren't mutually exclusive - competitive rates are something we all have to offer, but offering more value is the more tactful, and makes it a win-win for both parties.

    That's why Tim's charges $2 for a cup of coffee, and Starbucks charges $7 - Tim's sells a cup of coffee, Starbucks sells an experience. Both models are profitable, both models leave their customers satisfied. But personally, I want to be a Starbucks.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-04 10:18:56 AM

    Well, if you're only selling rate then backing yourself into a corner. It's an intangible that you have very little control over, and you're fighting people with much bigger budgets, deeper pockets, and that can afford to either take the loss, or can force you to cut to the bone every time.

    And again, there's other ways to offer clients value than just rate. Rate and value aren't mutually exclusive - competitive rates are something we all have to offer, but offering more value is the more tactful, and makes it a win-win for both parties.

    That's why Tim's charges $2 for a cup of coffee, and Starbucks charges $7 - Tim's sells a cup of coffee, Starbucks sells an experience. Both models are profitable, both models leave their customers satisfied. But personally, I want to be a Starbucks.

  • Ron Butler on 2013-11-04 10:45:55 AM

    Paolo, you always struck me as sort of a Grande non-fat, soy only, pumpkin spice latte kind of guy.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-04 10:50:12 AM

    lol.

    To be honest, I don't really drink coffee, I'm more into tea.

    But this is a discussion about business models, not beverages.

  • vlt2 on 2013-11-04 11:13:55 AM

    My question is why can you only get a 90 day rate hold when 120 days is the norm, unless it is just my brokerage who can get that? I am certain that is not the case though. The other thing about the bank is that they usually don't renew at best rates anyhow, therefore it gives you ammunition to sell yourself as the better choice for both service and rate. Knowing what the bank is offering ahead of time is a bonus. It allows you the luxury of deciding if it is possible to match or beat their rate or to cut bait and move on to the next client. Maybe rates go down in the time they get their renewal and you can beat it. Any way, you don't have to waste your time if you can't help your client. And another thing, why on earth are you letting the bank get to your client first? They are your clients aren't they? You should know when their renewal is. If you are worried about the bank "getting to them" at 120 days, then "get to them" at 130 days and let them know they are about to receive a renewal from the bank. Make yourself indispensable and give them what they want, to feel like their business matters to you and that it cost them the least amount of money. In the end wherever they sign they just want to feel like they made the right decision. It may mean you don't get the commission on this deal, but if you did your job you didn't waste your time and they will send someone else to you.

  • Ron Butler on 2013-11-04 11:17:37 AM

    @vlt2, last sentence says it all, do a great, informative, competitive job, if you don't get the renewal get the referral.

  • Nick Bachusky on 2013-11-04 11:42:30 AM

    @vlt2, I was referring to acquiring new clients who have mortgages renewing at banks, not clients I have helped in the past that have mortgages at banks. You are also incorrect in your statement on the rates that banks renew at. Also, how would you know what the lowest the bank can go to without the representative going to their manager or their manager's manager? If they get their renewal at 120 days at a much lower rate,they renew right then and there and it goes into effect the following month, not in the 120 days that a broker could. Could the rate go down in those 120 days, potentially yes. But if it doesn't and you tell your client this, you have basically lied to your client and lost them money. How do you explain that to your client? They certainly would not refer you to anyone in the future. Another thing, it would not be a "receive a renewal" like in the past, it would be a phone call right on the earliest date they could early renew without penalty.

  • Dan on 2013-11-04 11:51:37 AM

    Browsing thru interesting comments one thought has struck me: brokers have to charge retention fee/security deposit from rate shopping clients - and clients should happily pay it, since only because of brokers better offers, clients are getting better deals with their current lender.
    I don't now how it's practically possible, but please share if somebody has developed sustainable fee based model already.

  • LindsJJ on 2013-11-04 3:11:12 PM

    I dont get it Paolo. You assume that if a broker discounts rate, he cant or wont provide value? If a broker provided value and a lower rate, why would the client choose you?

  • vlt2 on 2013-11-05 6:14:20 AM

    Well Nick I think you need to learn the difference between a prospect and a client. There is a difference.
    Usually a bank does not offer their best rate up front so how I handle this in order to weed through to get from prospect to client is quite simple. I find out if their loyalty to the bank for so many years is not being reciprocated with the best possible rate up front, as thanks for that loyalty, matters to them. If after all the money they have already given the bank through bank deposits, Visa cards, LOC's, loans, etc is not worthy of the banks best up front, why would they they want to deal with them when they can come to me and I will give them the best rate at first meeting. If they don't care, and think that paying more at the bank is better value, you were never going to get them in the first place and you haven't wasted your time have you. Ask for a referral and be on your way. If they do care , bring them into your office and show them why it is better then going to a bank. If they still are rate shopping you, they were going to stay with the bank anyway so say thank you and ask for a referral.

  • vlt2 on 2013-11-05 6:14:56 AM

    Well Nick I think you need to learn the difference between a prospect and a client. There is a difference.
    Usually a bank does not offer their best rate up front so how I handle this in order to weed through to get from prospect to client is quite simple. I find out if their loyalty to the bank for so many years is not being reciprocated with the best possible rate up front, as thanks for that loyalty, matters to them. If after all the money they have already given the bank through bank deposits, Visa cards, LOC's, loans, etc is not worthy of the banks best up front, why would they they want to deal with them when they can come to me and I will give them the best rate at first meeting. If they don't care, and think that paying more at the bank is better value, you were never going to get them in the first place and you haven't wasted your time have you. Ask for a referral and be on your way. If they do care , bring them into your office and show them why it is better then going to a bank. If they still are rate shopping you, they were going to stay with the bank anyway so say thank you and ask for a referral.

  • Lior, Mortgage Edge on 2013-11-05 7:41:55 AM

    The renewal rate with existing lenders is very high. In fact, 85 to 90% of borrowers renew with the same lender unless they something really pains them with their existing lender.

    Brokers really have two choices:

    1) Compete for business based on pricing alone (never a good idea in sales in general).

    2) Support lenders that offer trailers or renewal compensation.

    If you keep in touch with clients throughout the entire terms (i.e. quarterly phone call, mailings, newsletter), basically keeping yourself top of mind, you will have less problems at renewal time because now the relationship part is part of the value proposition.

    So support lenders who actually see you as a partner in their success and develop a comprehensive CRM plan on keeping in touch with your clients and I believe you will save yourself a lot of headaches down the road competing with everyone else at renewal time.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-05 7:59:39 AM

    @LindsJJ - That's not what I said. What I said is if that's ALL they're providing, then they're selling themselves short.

    To go back to the Starbucks-Tim's metaphor: Starbucks does sell $2 coffees as well, but they have the flexibility to sell premium $7 coffees because they've demonstrated their value to their clients. Tim's couldn't put a $7 drink on their menu - no one would buy it. Tim's is "cheap, quick and dirty" - Starbucks is viewed as a treat: a drink you savour.

    It's no secret, that for the most part, we can all provide the same rates (+/- ~20bps). And it's no secret that the banks, if they really want to, can match us.

    The reason why there's so many stories about clients using brokers to rate shop and then go back to the bank once they rate match is simple - there's too many brokers selling ONLY their rates - they're NOT demonstrating any other value to the client, whereas the bank has already demonstrated value by building a prior relationship with the client. In fact, that's why many clients sign renewal forms without even shopping around - they trust the bank.

    Until we can, as an industry, build that same comfort, trust and relationship with our clients (and the general population), we haven't effectively communicated our value - and we're probably going to keep hearing the same scenario play out over and over.

    It's also important to note that it's much cheaper to keep a satisfied client than to hunt for new ones. If the ONLY thing you sold them was rate (something you can't really control), then they'll walk away the second someone offers them a 10bps cut. If you sold them on your experise, your knowledge and your professionalism, then that 10bps is a small cost to them for peace of mind. As I said - that's why so many sign renewal forms without shopping around.

    That's why selling ONLY a good rate is a bad way to do business. That means taking a bit more time to educate a client and build loyalty. That's what wins and keeps clients.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-05 7:59:44 AM

    @LindsJJ - That's not what I said. What I said is if that's ALL they're providing, then they're selling themselves short.

    To go back to the Starbucks-Tim's metaphor: Starbucks does sell $2 coffees as well, but they have the flexibility to sell premium $7 coffees because they've demonstrated their value to their clients. Tim's couldn't put a $7 drink on their menu - no one would buy it. Tim's is "cheap, quick and dirty" - Starbucks is viewed as a treat: a drink you savour.

    It's no secret, that for the most part, we can all provide the same rates (+/- ~20bps). And it's no secret that the banks, if they really want to, can match us.

    The reason why there's so many stories about clients using brokers to rate shop and then go back to the bank once they rate match is simple - there's too many brokers selling ONLY their rates - they're NOT demonstrating any other value to the client, whereas the bank has already demonstrated value by building a prior relationship with the client. In fact, that's why many clients sign renewal forms without even shopping around - they trust the bank.

    Until we can, as an industry, build that same comfort, trust and relationship with our clients (and the general population), we haven't effectively communicated our value - and we're probably going to keep hearing the same scenario play out over and over.

    It's also important to note that it's much cheaper to keep a satisfied client than to hunt for new ones. If the ONLY thing you sold them was rate (something you can't really control), then they'll walk away the second someone offers them a 10bps cut. If you sold them on your experise, your knowledge and your professionalism, then that 10bps is a small cost to them for peace of mind. As I said - that's why so many sign renewal forms without shopping around.

    That's why selling ONLY a good rate is a bad way to do business. That means taking a bit more time to educate a client and build loyalty. That's what wins and keeps clients.

  • Nick Bachusky on 2013-11-05 8:25:24 AM

    @vlt2 Thank you for your education. I wish you luck in your world, unfortunately I have many years of experience in the banking industry and know what really is going on and my clients and prospects value that.

  • Ron Butler on 2013-11-05 8:52:30 AM

    Oh Paolo, it's great to be young and so full of certainty. True North focuses on discounting rates to its clients and does ZERO "B" business and although there is a ton more to True North than just rates; great discounted rates are their leading differentiator. They are the fastest growing brokerage in Canada (jumped nearly $200 Million to $700 million last year).

    When you have built a $700 Million brokerage please come back and tell us again that good rates are a bad way to do business.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-05 9:11:08 AM

    lol - Ron, I think you're still misreading me.

    Rates aren't everything, they're the minimum offering for getting you in the door. But once you're in, the only way to guarantee a win is to provide more for a client.

    You yourself said True North does that, so I don't quite understand what you're disagreeing with: "...there is a ton more to True North than just rates..."

    That's exactly my point, and I can't put it any more simply.

  • Ron Miller on 2013-11-05 10:37:34 AM

    Paolo Di Petta...

    What value and products are we talking about? It is confusing to me. Sell them bad insurance? Only products we have for insurance are definitely not in the best interest of the client. Advice on paying the mortgage off faster? That's not hard. Educating a client that is listening, is just normal procedure every time you sell a mortgage?

    I am just really curious what this special value is that so many brokers/agents claim to have? Sending them a birthday card?

  • Paolo Di Petta | dipettamortgage.com on 2013-11-05 10:44:54 AM

    @Ron Miller - if you don't think you have anything to offer other than rate, then great, keep doing what you do. I'm not getting paid to run a client relations/marketing seminar, so I'm not going to post a thesis on something that you'll probably distill into your sales training.

    I will say though, that advice - especially advice that's unbiased and not coming from someone on the bank payroll can provide plenty of value.

  • Ron Miller on 2013-11-05 10:52:47 AM

    Ok makes sense, I am sure we all have our own CRM.

  • Jeff on 2013-11-12 7:19:41 AM

    Butler is a idiot!!!!

  • Paul Therien - CENTUM on 2013-11-12 10:51:31 AM

    This is an age old argument, and one that is divisive in our industry. The reality is that although some brokers may focus on rate, they also are required to sell service – if they did not they would not have any repeat business. The consumer cares deeply about cost, because in the end the amount of money that they have to pay each month is a primary factor in their decision making process. It is why leasing cars has become so much more attractive than purchasing. Lower monthly payments for a higher end vehicle – it is why we see so many BMW’s and Mercedes on the streets today compared to a decade ago. Perception of value. If you look at the actual product, a BMW is not really all that much better these days than a Hyundai. In fact Hyundai beats BMW for initial quality, retained value, long term quality, and has a far better warranty. Yet we still would rather drive a BMW. Economically it is not the right decision to make for most people, but add in consumer perception, a manageable lease payment, and top notch service… and bingo… BMW it is.

    Rate is important, and it can get the customer in the door, but it is not what drives loyalty. Service and quality are the only things that drive consistent consumer loyalty. It is the consumers perception of value that matters most, for some that is price, for others it is services, for most however it is both. If there was no service value offered no business could survive, especially as consumers continue to have higher and higher expectations. Competition is fierce and price is

    Ron, not to be a naysayer, but True North is not the fastest growing brokerage in Canada. 200 million is very impressive and I applaud them for great growth. BUT I have a CENTUM franchise that has grown by over 300 million this year so far.

  • Ron Butler on 2013-11-12 10:58:17 AM

    Paul, with all due respect True North added no net new agents and combined no franchises. They moved into no new real estate offices.
    Pure organic growth acquiring no new agents.

  • Paul Therien - CENTUM on 2013-11-12 11:12:24 AM

    Ron, This is a single franchise that has had organic growth. Not moved into a real estate office, no combination of franchises and no net new agents, in fact about 10 less agents than last year.

    This is pure organic growth.

  • Ron Butler on 2013-11-12 11:15:45 AM

    Paul, in that case you can lay claim to the biggest organic growth last year, at least your franchise can.

  • Paul Therien - CENTUM on 2013-11-12 11:23:22 AM

    Thank Ron, but in all honesty it is not about laying claim. Although we are very proud that they are a part of the CENTUM Family.

    It is more about understanding that sometimes, just because someone blows their horn loudly, does not mean that they are necessarily the biggest or the best. It just means that they are the loudest.

  • M. Robertson on 2013-11-12 11:24:46 AM

    VERY well said Paul.

  • Ron Butler on 2013-11-12 11:29:57 AM

    Zero horn blowing going on here Paul, True North never even talks about their success, the numbers appear in an independent magazine as part of Canada wide sample of many independent businesses, that's where I saw it. Dan even quit appearing in CMP's list.

  • M. Robertson on 2013-11-12 12:14:32 PM

    With all due respect Ron, that is not true.

    Production numbers are not for public consumption... lenders and D&H do not advertise what different brokerages do for volume, or even what networks do. The ONLY way that could get out is if Dan and team put the numbers out there.

    Nothing wrong with it, most companies do it, but to say that there is zero horn blowing is simply untrue.

    Besides, you only have to search True North or Dan Eisner to see that most of this information is done via press releases and you can also see how many time the flag has been run up the pole in CMP.

  • Paolo Di Petta | dipettamortgage.com on 2013-11-12 1:06:26 PM

    With all due respect, gents, but can we wrap up the ****-measuring contest and focus on the real opponent here: the banks...

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