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Mortgage Broker News | 17 Aug 2011, 07:24 AM Agree 0
A broker channel lender is endorsing the idea of client exclusivity agreements, arguing the time has come for an industry-wide discussion on those controversial but, perhaps, increasingly necessary contracts.
  • @kiltedbroker | 18 Aug 2011, 01:36 AM Agree 0
    This is a very interesting conversation. I definitely see both sides of the coin here, however I don't think I will be using exclusivity contracts in my office any time soon.

    As our lead generation is entirely relationship based, we don't really get many rate shoppers, so this really isn't as big of a deal to us!

  • Gary | 18 Aug 2011, 03:55 AM Agree 0
    There is also some issue with the ability to charge a fee based on the regulations - at least in Alberta.
  • Phil McDowell | 18 Aug 2011, 03:59 AM Agree 0
    Regardless of the business model any brokerage would like to adopt, the first step is for the provincial Regulator to allow such a practice. Then, would the exclusivity fee become GST payable? And, if an exclusivity fee agreement is accepted, defining an enforceable contract still comes down to certaintity of contract terms, usually meaning defining numbers- be they dates, price, or prepayments. Great conversation to have because it is a professional option.
  • Christopher | 18 Aug 2011, 04:10 AM Agree 0
    In my early days as a broker, we had the client sign a contract where we laid out the deal we were trying to get and that they would be liable for our commission if they went to another broker or lender after we had received a commitment.

    It may not have held up in court, but it did cut down on the number of clients moving the deals to their bank.
  • Julia Krause | 18 Aug 2011, 04:15 AM Agree 0
    This type of agreement isn't new. When I started out as an assistant back in '92, the brokers I worked for used an 'Exclusive Agency Agreement' with every deal they did. But there was less competition back then. The question is what will do with that signed agreement if your client goes somewhere else anyway... others have mentioned this... do you really want to initiate legal action? Like kiltedbroker, I've always been a relationship-based broker, and I never had a problem with losing clients. So when I was training mortgage brokers ('05 to '08) I was surprised that I was asked about this everywhere I went, all across the country. I told new brokers to be up-front and completely honest with their clients, right from the start, about how they get paid. It's a common-sense approach. Ask for their commitment to sticking with you, in return for your efforts on their behalf. You absolutely MUST prepare them for the fact that as soon as they say they're getting a mortgage, everyone and their dog will have an opinion on what they should do and where they should go. You tell them that whatever they hear out there, no matter what it is, to call you, and you will check into it. And if their bank suddenly gets very competitive, it's only because now a broker is involved, and that's not fair or honest. Call me naive and small-town, but this approach always worked for me. Even on pre-approval clients. If you meet and spend time with a client, and they immediately go somewhere else, you obviously didn't make much of an impression on them. We sell a service, and that means we sell a relationship. Build that relationship and you won't lose clients.
  • Frank Petrin | 18 Aug 2011, 04:58 AM Agree 0
    I dont agree with an "exclusivity agreement" as a way to keep your customer from comparing your services to those of their bank. In my opinion, if you are consistently losing customers this way then you need drill down and figure out why and make changes. Implementing an agreement that keeps the customer tied to one service provider breeds incompetence and will lower the overall service our industry provides.
  • Vans T. LeBlanc, MA, BBA, | 18 Aug 2011, 05:36 AM Agree 0
    My last comment in this medium was in favour of: (1)the earlier proposed Brokers-only Association. I now express support for Boris' more widespread implementation of: (2)the exclusivity Agreements. The other issue I think we should examine as part of our overall discussion is: (3)the lender-imposed funding ratio requirements.
    All these three issues are also lender-related and I reiterate that our industry has been stagnant because we have been Lender-driven rather than customer-driven.
    I repeat that there is a basic contradiction between meeting the funding ratios of the lenders and meeting the best interests of our clients.
    Our leaders have a responsibility
    to place these three issues on the discussion table and chart a viable future for industry.
    Quo Vadimus, Brokers???
  • Greg Williamson | 18 Aug 2011, 06:09 AM Agree 0
    I think that if the broker has the expert sales skills that would be needed to convince a customer to sign an exclusivity agreement I think they would be better served to use those same skills to better sell their value so that customers will not shop.

    Of course the irony in this is that I think many of the very people struggling with clients leaving them on rate may have lost their way on communicating there value, and then of course will likely also struggle in getting people to sign this agreement.

    I think there is another way to win the rate war.
  • Philip Slen - Calgary | 18 Aug 2011, 06:14 AM Agree 0
    That is the nature of mortgage broker business. Your time and advice is perceived to come at no cost or obligation to the customer. That's the way we have marketed ourselves. There will always be a small percentage of deals that won't close due to competition. This actually has an even greater impact on lenders who issued the commitment than the broker. Lenders have to book funds from their pool in anticipation of closing and can no longer use funds set aside. This has real $ implication to them along with resources spent underwriting the deal. Lenders should take a lead in this matter. Their commitment which includes a cancellation fee would have more teeth and legal ramification.
  • Paul S - London | 18 Aug 2011, 08:47 AM Agree 0
    First off, I’d like to say that I am new to the mortgage industry and as I visit this Mortgage Broker News forum, it enlightens me with knowledge and the tools to better myself at this craft. Thank you everyone for posting tips and insights!!
    Secondly, great points by Greg and Philip.. The skills needed to convince a client of an exclusive agreement are identical with convincing your clients that your services, and the brokerage industry’s, have superior value then going off to the banks… To Greg’s point, we market our services as “no cost & free services” in order to capture potential customers away from banks. And as that generates new leads, it’s in our hands now to secure and retain those new leads. And if any should slip away, it’s simple, as said by wise men, “it’s only a small percentage”.. And yes, I know every percent counts, whether small or big! But if you really understand your client’s need and can reassure of their best interest then you made it even less likely of letting any slip away.

    So if I may put in my penny for a thought. I do believe that the exclusive agreement will certainly endorse the brokerage sector to gain market shares away from the banks considering that clients are limited from running off with the rich guy (banks). I firmly believe that there is absolutely no advantage to dealing with banks in mortgage matters, except for the perceived “trust” factor clients have about their banks… In the mean time, with out the exclusive agreement, the only commitment you can have from all your customers is that they are committed in believing that you are their best choice in mortgage matters.. While I entered into this industry, I remember the BEST advice I was given: “The top agents/brokers never fiddled with clients who primarily try to shave off little bits of the rates (rates already at its all-time low). If the customers were counter offering that’s ok, but if it’s nickel and diming then you will know off the bat and not to waste your time – but know the difference”
    Cheers, and thank you again Mortgage Broker News!
  • John Martin Mokrenko | 18 Aug 2011, 09:42 AM Agree 0
    Exclusivity agreements are long, long, long overdue to be implemented. Mr Collu and Mr Bozic are 110% correct both in their view and there comments in this article. On a daily bases extensive time and effort is put forward from brokers and agents alike for the better interest of the client and then in a split second (after much time and effort has been utilized) people go to the bank and say here is what we got and what can you do. This practice is not right in any way shape or form and should be addressed finally.Surely it is only fair and proper when one works hard for someone they are entitled to be compensated accordingly, but this present way of doing things is unfair and ridiculas. The realtors would not operate like this(and quite rightly so) there is no fair argument that we in the mortgage industry should be treated as substandard. Our time and energy in large part is what we have to make a living for our familys and to continue to work hard in many cases for nothing simply does not work at all.
  • Neil in Calgary | 18 Aug 2011, 01:20 PM Agree 0
    Let me play devil's advocate from our customer's perspective if I may. When a customer goes looking for a mortgage deal for a property and approaches a bank, does the bank force that potential customer to sign an exclusivity agreement saying that the potential customer must deal with them or pay a penalty if that customer goes to another bank looking for a better deal? How and why would potential customers be persuaded to sign on with a broker who demanded such an agreement?
    I believe tha aforementioned comments re broker customer service breeds customer loyalty. If you can not win and keep them with your service, then perhaps you need to clean your own house.
    Thanks for letting me share my thoughts.
  • Ottawa Broker | 19 Aug 2011, 08:19 AM Agree 0
    Sell only rate, you will lose business based on rate. You will never beat the banks.
    Sell on service, knowledge and after funding service, you will ALWAYS beat the bank. I have clients that regularly come to me after our initial meeting and say the bank beat me by .10%. I explain to them my services and what i bring to the table in our future relationship and 95% of the time, they stay with me and i DO NOT match the banks rate.
    All depends on how you do your business.
  • Marilyn, Calgary | 19 Aug 2011, 10:31 AM Agree 0
    I think it would be a great deterrent in brokers spending a lot of time working with clients, personal, repeat or new ones, as time and time again, deals have been lost for 0.10 BPS to the banks. Right now, I just lost a deal for over $600K on a refinance because RBC beat my rate by 0.10 bps. We can't compete with the banks and they keep stealing our clients, with whom we have spent time and educating them and giving them numerous options but we lose in the end. I thought TMACC had a Client Agreement that they used? No more. Phil perhaps you can respond to this question. Thanks.
  • Jim | 19 Aug 2011, 12:31 PM Agree 0
    Guys, lets face it - this business is getting more competitive by the day. If you are losing clients to rate then you probably have not done a good job in impressing your clients. Yes, rate is important to clients but so is expertise. If you provide no value to your clients then you deserve to lose them on rate. Ask yourself this - would you pay more than you need to if the only value proposition is rate? Of course you wouldn't. So why would you expect your clients to do so. An exclusivity agreement will never work. I would never sign one, neither would you so don't expect your clients to do so. If you provide no value then excpect to lose. This is a competitive capitalist society. If you don't like it, get a job with the govenrment
  • Mike Maguire - London | 19 Aug 2011, 11:21 PM Agree 0
    I don't get it. Our business is about relationships, repeat clients and referrals from existing clients.

    Looks like brokers using exclusivity agreements only see the client as a transaction and a paycheque. Maybe this is why they need an exclusivity agreement. My personal belief is to spend more time looking after the client and less time worrying about the money you are making and maybe you would not loose the client to begin with. Exclusivity agreements hurt the image of our business. We fight hard to be seen as professionals and now we want the word on the street to be that brokers are suing clients. NOT GOOD FOR THE INDUSTRY - MAKES US LOOK LIKE USED CAR SALESMAN.

    This premise that banks are stealing our clients is disgusting. This implies that a client is owned. How many clients would appreciate the idea of being owned. Personally I like when a business treats me a valued client not their indentured servant. From my past experience when I have had a client in my office that has signed an exclusivity agreement with a another broker they never seem very happy about it and when I tell them that the norm in the industry is not to demand this agreement they become angry. So how many referrals do you think that broker is getting from that client. Have fun in court, but please stop tarnishing the mortgage brokerage industry.
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