One broker remembers the expensive lesson learned by brokers a few years ago in opening storefront locations in high traffic retail centres, and sees the BMO micro-branch model succeeding if costs can be controlled.
“I don’t know the economics of running a four-person office,” says Ron Butler of Verico Butler Mortgage. “You are paying top, top rental dollar in the downtown core – but you don’t have the vault, and you are operating on a reduced staff. Maybe that will make it work.”
Bank of Montreal announced it will be testing a number of micro branches next week, its model being four employees in a space of 900 square feet within residential buildings (condos) in downtown business areas. Employees will be able to do mortgages, discuss retirement planning and children’s education saving.
Butler sees the utilization of condo retail space as ideal for making the plan fly.
“Condos are the most cost-effective way to make a storefront business work,” he told MortgageBrokerNews.ca. “If you remember, the brokers experience with store fronts a few years ago wasn’t good, as any decent retail centres and high traffic centres like malls were too expensive.”
One broker who maintained a presence in a high-traffic area is True North Mortgages, which has three storefronts in The Path underground pedestrian mall in downtown Toronto.
“The industry has seen our numbers, which are pretty strong,” says James Laird, COO of True North. “Our locations in The Path system are similar to what we have in five cities across Canada.”
Laird says that to have a prime downtown location, you are faced with two major obstacles.
“A big initial down payment and high rents,” he says. It’s a cost the brokerage is willing to pay for the foot traffic True North receives, which, in The Path system, is considerably more than what is found in a retail condo space.
“We couldn’t make it work in a retail setting in a condo,” he says. “We wouldn’t come close to the volume of traffic we get where we are now. At a condo, you only get maybe a few thousand people. It’s all a numbers game.”
Laird also points out that the product offerings are what will make or break any successful lender.
“Anyone who thinks that rates don’t matter doesn’t understand the business,” he says. “And whereas we offer a variety of products, BMO will only carry BMO products. It should prove interesting.”