A report published by the MFAA late in 2016 reveals some intriguing insights into the mortgage broking industry.
The report shows that broker productivity has significantly decreased in 2016, with the broker population containing very few high performers. Perhaps one of the most startling statistics to emerge from the report is that 17 per cent of brokers have failed to settle a loan in the past six months prior to the report. In light of this information, we must ask ourselves a core question: why are some brokers performing so poorly, whilst others are clearly leading the charge as brokers settle record percentages of overall mortgages.
One potential, albeit unconventional, answer to this dilemma is that in today’s environment the industry has a rump of “semi-retiring” brokers who may be looking to leave the mortgage brokerage sphere. Retiring, or becoming a ‘lifestyle broker’, or simply branching out into other allied businesses, appears to be a common trend nowadays. Our business, a broker M&A and funding boutique, BBBSA Finance, has seen a steep increase in both seller enquiries or those simply wishing to retain their trail book but use it to secure additional capital – an area in which BBBSA is a pioneer.
Yet, speaking to potential new blood entering the industry, in tandem the MFAA reported 750 new brokers entering the industry in the past six months of last year. However, with home loan rates starting to creep up and tightening credit and regulatory pressures and increasing competition throughout the industry, mortgage broking has become a more challenging industry to work in for brokers simply looking to ‘hobby-farm’. This is also difficult for new brokers, who might struggle to find clients and therefore will need greater patience and financial resources to sustain them in the early years until they establish themselves.
I offer two potential solutions for brokers that may be mutually beneficial for both newcomers and retirees alike. A relatively new broker, with the requisite banking or finance experience, can still qualify with us for a specialist loan. This loan can be used to either fund working capital needs such as renting an office or hiring a new staff member to boost 'organic growth' or perhaps increase marketing. Alternatively, we have a unique product to fund up to 100 per cent of the purchase price of another trail book and thereby generate 'inorganic growth'.
Alternatively, I suggest that brokers already easing into retirement, or seeking a more balanced lifestyle represent natural ‘partners’ for the young blood who are hungry, ambitious and willing to pay more to ultimately acquire the book or business from more experienced industry professionals, where they have established strong relationships. Similarly, these new brokers can place themselves in an advantageous position to potentially inherit or acquire older books and businesses.
So it seems that solving the current productivity puzzle is less about relying upon the ‘lazy broker’ trope, and more about encouraging innovative solutions to challenging issues within the industry. In this respect, BBBSA hopes to be both a thought leader and a trusted consultancy service for our clients – be it old or new.
Jeff Zulman is the founding Managing Director of TrailBlazer Finance a specialist financial services lender offering business loans, valuations and M&A advice and execution services, specifically tailored for financial intermediaries, principally mortgage brokerage and financial planning firms, and finance brokers.
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