If a growing number of industry leaders “concede” brokers must buy down rate in order to compete, at least one remains focused on steering them away from the practice, with more than 600 now prepared to hear him out..
On Tuesday, in the first of two free webinars, industry trainer and broker Greg Williamson – joined by Street Capital’s Paul Grewal – will attempt to dissuade the growing number of agents and brokers from using that strategy for several reasons, among them self-preservation.
“Ultimately, following a system of buying down in order to attract and retain clients leads the industry down the path of travel agents,” he told MortgageBrokerNews.ca. “That’s not in their best interest – it’s like telling lenders that we as brokers are prepared to get paid less.”
With "Threats to The Broker Channel - And What We Can Do About It," Williamson and Grewal will address all the key challenges facing brokers in a slowing market.
Make no mistake, there are several, but the problem of disintermediation – countering the move to cut out the middleman – will figure prominently in Tuesday’s discussion, starting at 1 p.m. EST. A conversation with DLC’s Gary Mauris, the second webinar in the series, will also take up the issue, Feb. 8.
Both discussions follow on the heels of a MortgageBrokerNews.ca article outlining why brokers are increasingly willing to sacrifice commission in order to close a deal with a client, most often a rate shopper from the Internet.
“The fact is that our products and services have been commoditized – that’s a reality,” said Jim Tourloukis, owner of Advent Mortgage Services in Unionville, Ont., and Ontario’s No. 1 broker on last year’s CMP Top 50. “We talk about value propositions and customer service, but at the end of the day everyone expects good customer service, so if you want to keep your deals, you’re going to have to also offer the lowest rates and that means buying down.”
He’s speaking from experience. While he did a whopping $212,927,433 in funded volume for 2010 with “almost zero” buy-downs, last year the high-volume broker opted to buy down as much as 15 per cent of his deals in order to hold onto increasingly price sensitive “retail” clients.
His total funded volume for 2011 actually grew by the same 15 per cent, although there wasn’t a dollar-to-dollar correlation, said Tourloukis. It's also worth noting that year-over-year income went up only modestly. "It requires more work to make the same amount," he said.
The analysis comes as banks drop variable rates – 2011’s weapon of choice – and pick up increasingly competitive fixed ones in order to fight this year’s battle of the rate wars.
In many cases, brokers just haven’t had access to those lowest of the low rates, many opting to buy down their rates.
But there is another option, said Williamson.
“It’s time to make a choice,” he said, in a blog posting Sunday. “Will I sell rate or will I innovate and find other ways to win customers? Will I say out of one side of my mouth ‘I offer service and added value and never buy down rates’ and then out the other side of my mouth I advertise a bought down rate that essentially says ‘I am the cheapest, buy from me.’”