There is more talk of loyalty and exclusivity agreements in the channel – but most mortgage brokers refuse to handcuff clients with a piece of legal paper, and doubt it will become common practice.
“I’d be embarrassed to have someone sign one,” says Jason Friesen, of Verico
Friesen Mortgage Group. “With the client base I have in North Toronto, it is unnecessary. I don’t see good brokers going that way, and I don’t see it gaining much traction industry-wide.”
Some – like Dan Eisner
’s True North Mortgage – have started charging clients a 1 per cent cancellation fee, a trend CMT’s Rob McLister described as becoming “more prevalent” in a recent issue of the Globe and Mail.
But for a top 75 broker like Friesen, he is hard-pressed to see how such an agreement could be enforced.
“Where do you draw the line?” he asks MortgageBrokerNews.ca. “What if the client can get a better deal? Do you as a broker in good conscience say ‘No, pay a penalty!’ How do you even enforce it? More importantly, I wouldn’t want to work with a client who was contractually obligated to work with me.”
In the case of the True North agreement, the penalty is payable if these four things happen:
A client asks True North to obtain a firm lender approval;
True North arranges that approval at the client’s requested lender;
The client then asks another lender to match True North’s rate; and
The client cancels his or her True North application.
But for Friesen, the entire raison d’etre of a mortgage broker is to put the client’s best interests first.
“Isn’t that why you use a mortgage broker, to get the best deal possible?” Friesen asks. “Some of my best clients are the ones I’ve let go or sent to a bank; they’ve come back to me every time, and been my biggest supporters. That is how you go about creating a client for life; that is how you grow a book of business.”
Ingrid Menninga, the founder of JOLT Marketing
, agrees that there are better ways of assuring client loyalty than through legal documents and strong-arm tactics.
“I understand that they want loyalty from the client,” she says, “but there has to be a better way than policing it. How does such a document benefit consumers? That should be the number one question.”
Menninga says that it isn’t so much laziness driving these agreements, but a lack of awareness on how to educate the client.
“You can have a conversation about loyalty with the client,” she says. “But ultimately you have to have that relationship with the client to have their loyalty.”
Nancy Ingram, an agent with Dominion Lending Centres
Home Capital Solutions, finds explaining all the options to the client from the very start is the best way to ensure client loyalty.
“I rarely lose a client,” says Ingram, who works in the Guelph market and includes 27 years working for CIBC in her 32 years in the industry. “I tell them what it is I can do for them as a mortgage broker; it is their choice in the end – but I make sure they understand that the banks can’t give them the well-rounded advice that I can.”
Ingram says her success can be defined as having faith in herself – and also asking the client not to show all their cards when they do go to the bank for a second opinion.
“I tell them, ‘Don’t tell them my rate until they give you their rate,’” she says. “Of course the banks can beat my rate – they have deep pockets. But it helps the client better understand what it is that I’m doing for them by not sharing that information. That is the value of a mortgage broker.”