Recent media reports on a major mortgage group have led brokers to debate the role of franchising in the third-party channel.
Last week, The Adviser ran an editorial in which we opined that the recent Mortgage Choice news coverage is more closely related to an ongoing inquiry into the Franchising Code of Conduct, rather than scrutiny of the broker industry.
Over 50 industry figures commented on the piece to express their views. One former Mortgage Choice broker wrote that the “173 Mortgage Choice franchisees would be better off changing aggressors and changing now. There are plenty of better competitive alternatives out there. A little research and few phone calls is all it takes to find out what else is available”.
However, others expressed their satisfaction with the franchise model.
“I have owned a Mortgage Choice franchise for nearly four years and the model has assisted me in building a successful business that I am very proud of,” one broker said.
“These recent media allegations are not a reflection of my experience with Mortgage Choice or a reflection of how I do business, and it’s disappointing that I am put in a position to have to defend this. Doing the right thing by our customers and being known for this is how my business has grown, and this will continue to be our priority.
“Mortgage Choice committed to reviewing the remuneration model some time ago and they have been working closely with franchisees to achieve the best outcome for all.”
Victoria-based Mortgage Choice Bayside franchisee Tim Leonard commented that while the current commission split is outdated, the group is “well down the path of change”.
Mr Leonard said: “We have a very tight family of franchisees who have a collective mindset to do what is best, at all times, for our clients. We just need to get our remuneration model sorted. To anyone suffering from the stress of running a business, I feel deeply for you. It’s not an easy thing to manage month to month. Broking is a fantastic industry that benefits all Australians looking for a fair go. All broking aggregators need to work together to restore credibility to our industry and back one another. There is an enormous amount of opportunity out there for all of us to prosper alongside our clients.”
Former Mortgage Choice franchisee and award-winning broker Aaron Christie-David touched on franchising in a LinkedIn article back in November.
He believes the turnkey systems and processes, marketing support and building a strong local presence are some of the key benefits.
However, a lack of brand control and conflicting profit split arrangements are some of the downsides.
“This is cited as the number one reason for franchisee dissatisfaction,” Mr Christie-David said.
“If your business grows and becomes self-sufficient (less reliant on leads or you have mastered your processes and scaled your business), then splitting your profits with the franchisor will become a friction point.
“You need to envision that you will be successful, so it is worth reviewing the franchise agreement about future revenue splits if you become less reliant on their support model.”
Loan Market executive chairman Sam White told The Adviser that his franchisees are paid between 80 per cent and 92 per cent of their commissions.
“We have always wanted to have volunteers, not conscripts, in our business. That is an important part of our culture. We don’t have lock-ins,” Mr White told The Adviser.
“Any of our franchisees can give us 14 days’ notice and leave. If they leave, they keep their trail, keep their clients and there are no exit penalties.”
The only time a broker’s trail will be held back is if there have been instances of fraud, Mr White said. Otherwise, Loan Market continues to pay out trailing commissions to brokers after they have left the group.
He added that while his group doesn’t set minimum sales targets for its franchisees, he does see value from a professional standpoint in seeing more customers more often.
“Going forward, in this environment, brokers will need to be part of a business that sees customers regularly,” the CEO explained.
“If you are only seeing customers once a month and doing a deal every two months, you’re not going to be as professional as someone who sees clients every day. If you are on a team seeing 10 to 12 customers a month, you will keep your skills sharp.”
The group also allows brokers to cast their marketing nets as wide as they wish.
“There are no restraints on where Loan Market franchisees can market their services,” Mr White said.
“Once you have a core group of clients, they refer new clients, who come from different geographies and regions. It’s about customer relationships, and those relationships don’t have territories.”
Aussie Parramatta franchisee Ross Le Quesne believes a fair remuneration structure should accompany a solid CRM platform and branding to allow a franchisee business to attract and retain talent.
“Good franchises first and foremost are the brand. You want to have a trusted brand,” Mr Le Quesne said.
“Secondly, it is the systems and processes that a franchise delivers, so it is the ease of doing business, you want a great CRM, you want a loan system that works, you want a great follow-up system for your clients, you want a good marketing platform so you can continually market to your existing customers and prospects.
“Obviously, remuneration is important and something that is fair and something that is sustainable long-term.
“You want to be able to retain good staff and good brokers; if you have a reasonable remuneration structure in place, it gives you that ability.”
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James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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