No longer confined by geographical borders, broking businesses can enlist the help of organisations from across the globe, but is outsourcing right for you?
Outsourcing can be a contentious topic in the best of times, with people decrying the damage it does to local employment while others laud the potential savings and efficiencies.
There are countless functions within the broking industry that can be outsourced and brokers have done so with varying degrees of success, but how reliable are outsourced services and what steps should brokers take to ensure quality control?
Andrew Duerden, general manager of Loanworks says brokers often outsource support roles such as administrative and processing jobs, as well as post-settlement tasks.
“One thing that is probably not so commonly thought of is customer service follow-up calls,” he says. “Another thing we’ve seen very successfully undertaken is annual reviews which brokers always dream about getting to, but usually falls off the bottom of the pile.”
Mr Duerden says many activities, such as database management, are valuable and necessary for brokerages, but can be costly and detract from a broker’s primary role of generating new revenue.
“The reality is, cost is one of the benefits of outsourcing but it’s not necessarily a key driver,” he explains. “The core driver that we commonly see is actually accessing staff – the ability to access staff, either in numbers or skill set consistently and ongoing while not having the headache of maintaining and managing them in terms of HR, payroll and the IT side of things.”
Another key driver for outsourcing is the ability to refocus local staff on revenue-generating tasks while sending off non-dollar-productive functions.
Brokers can also save on office space and other resources needed by in-house staff.
“If you want to expand but you’ve got limited space in Sydney or Melbourne, which costs a lot of money, you don’t want to have support people in your office because you can’t fit them in,” Mr Duerden says.
“The reality is that you’ll save around 60 per cent on labour cost per person that you’re putting on, so you can then redirect that 60 per cent towards advertising, putting on a new broker or expanding into a new state or business line.”
Home Loan Experts’ managing director Otto Dargan has seen first-hand the benefits outsourcing has brought to his clients, his brokers and his business.
“We’ve been able to get support to specialise in different lenders and loan types. We’ve created a post-settlement team that handles construction loans, fixed-rate expiries, annual reviews and product switches,” Mr Dargan says.
“We can have excess capacity so our brokers never have to worry that we can’t deliver on what we promise. We can have data entry completed overnight, which means we can be faster to lodge an application.
“We can even have a full-time auditor who ensures that our team is compliant, and receive feedback on whether they are following our processes.”
Getting the idea off the ground
There are three levels of outsourcing brokers can use, Mr Duerden says. The avenue you choose will depend on your business structure, the level of service you’re looking to offer your clients and how you want to set up the outsourced part of your brokerage.
The first is outsourcing to a company that provides dedicated full-time staff who are managed by you, the broking business back home. This is similar to having in-house loan support except they’re located in a different place. Generally they would still use the same tools and resources as you, their client company.
The second is an extension of this model, except the provider manages the staff and the work processes for you. Here, the broker maintains a set-and-forget mentality rather than taking a hands-on approach.
The third service model is done on a per-deal basis whereby the provider offers a pool of people and delegates the work. This means there are no guarantees about getting the same people for each job, but this model will suit brokers writing smaller volumes who don’t need full-time support staff.
Brokers will find that the key challenge is ensuring they’re ready to make the transition as well as understanding the activities they want to outsource and which model they want to adopt, Mr Duerden says.
“You know what you do because you do it every day, but you’ve never actually sat down and written down a workflow or mind map to show what you do, how long it normally takes, the key tricks and tools you need to be able to do it as well as the error levels that you can’t have,” he explains.
“You should write down the steps involved and put together a little manual… that’s really critical because it allows you to articulate what you’re doing and what you expect.”
Brokers also need to remember to align with a service provider that is similar in experience, size and philosophy and understands their business’ needs.
“If you go with a really big provider and you’ve only got a few people then you’re a small fry to them and your relationship with that vendor is going to be down the bottom, so their willingness to be flexible to your needs is going to be a lot less,” Mr Duerden says. “You want to go with somebody who’s built around the sort of business you want to do – they’ve got experience in what you’re trying to do and they’ve got a track record of being flexible.”
Staying in touch with service providers
Some key factors to keep in mind when outsourcing offshore are time differences, cultural disparities and global events, and how these will impact your business.
Home Loan Experts opened a loan processing centre in Nepal, and Mr Dargan has learnt how to overcome the cultural and communication barriers that may arise when your staff is a full day’s international travel away.
“We tried offshoring to the Philippines and India but both times it didn’t work,” he says. “We just didn’t know how to manage offshore staff.”
Home Loan Experts and their Nepali staff have now nailed down their processes and communication, but it’s not without its challenges.
“We’re now a Nepali business. There’s more staff there than here in Sydney,” Mr Dargan says. “[But] Nepal is out of step with the rest of the world. According to their calendar it’s the year 2072, they are on a time zone that is 15 minutes off their neighbours, their currency is linked to the US for some reason, they have power shortages and internet connectivity issues, completely different public holidays and occasional political instability or petrol shortages.
“To do business in Nepal you have to provide for yourself. That means three internet connections, our own generator, our own petrol supply, policies for working from home in the event of a strike and great planning.”
Mr Dargan says his staff are resilient despite these challenges and the company has worked hard to make sure their offshore training is up to scratch.
“We’ve had some bank staff visit our Nepal office and we’re organising for some BDMs to visit soon as well. We’ll also be loading all of our training into an online platform which allows our support team to become as experienced as our brokers.”
Meanwhile, Mr Duerden’s company outsources to the Philippines since the country’s time zone is the same as Western Australia and most providers there operate on Australia’s east coast time.
“Communication is really straightforward in this day and age,” he says. “With VOIP-based systems, you can talk to them straightaway, irrespective of time zones. Otherwise, you’ve got Skype or some form of video conferencing tool like GoToMeeting or Web Chat. In our service, we strongly recommend video because people generally communicate better when they can see each other.”
Brokers can also share and update documents through cloud systems such as Dropbox, OneDrive and Google Docs.
“It’s really easy to have a central repository to store documents and maintain that security. Most broker systems are now online anyway, so data entry is being done directly on an online cloud-based system. The real trick to it is communication, setting expectations and task mapping. It’s about making sure that your process is well-documented, clearly articulated and the decision steps are well defined,” Mr Deurden says.
Case study: From Sydney to Serbia
Dalibor Ivkovic from xSource says his company has been providing brokers with outsourcing services for loan processing, financial control and bookkeeping for four years, with offices in Sydney and Serbia.
“Our teams help mortgage brokers with preparing the files for submission, submitting them to the lender, tracking the deal to settlement and also handling the customer service in some instances,” he says.
According to Mr Ivkovic, having a Europe-based team means the company operates from 8am until 3am Sydney time five days a week, giving the service a competitive advantage over local operators and those that outsource to Asia.
“If you meet a client at 12.30pm, you’ll get back to the office and structure the deal by 5pm and send it to us, so by the time you wake up, the deal is done,” he says.
“Compared to similar businesses here that say ‘one day of processing’, we deliver everything within 24 hours and about 95 per cent of what we deliver is within 12 hours.”
xSource’s team in Serbia is comprised of processors, customer service representatives plus oversight personnel such as head of operations, head of training and processing, accounts and data security, Mr Ivkovic says.
“In terms of quality, every single deal is double-checked. Similar businesses here in Australia cannot afford continuous quality assurance so they rely on one person who is probably very good. But in data entry type businesses the chances of making an error are pretty high, so we cover that not only with training, but by continuous quality feedback to the processors and team leaders.”
Mr Ivkovic says the company has a dedicate data security officer based in Serbia who chases up any issues and manages all threats and risks.
“With any outsourcing, even if it's domestic, you have to do your due diligence because you are sharing someone's information with someone else,” he says. “Brokers should be asking about training, about data security, principles, recruitment and scalability, so what's going to happen if the group that you’re outsourcing to lose a couple of staff and how easy is it for them to recruit and train new people.”
Case study: A home-grown success story
Voula Kotsiras, managing director of Port Group, has established a unique business model which enables brokers to outsource their loan processing functions without sending the work offshore.
“My entire team is in-house so there's nothing that happens overseas, which means that our brokers have the ability to potentially come in and meet with the staff if need be and it also means that, if there’s any troubleshooting, it can be dealt with in real time here. We get brokers to come in before we onboard them or during the onboarding stage, so they can actually meet the team, know who’s going to be working on their file and build rapport between the broker and the processor.”
Port Group’s process is simple since brokers package the deal and send it to the company instead of entering it into their own system.
“We allocate the deal based on workload and staff for that day. Within 24 hours, we touch the file and if we've got everything we need in order for it to be lodged then it’s done within 24 hours. If there’s outstanding information or things we need to chase then we do so, and we follow it through all the way to settlement,” Ms Kotsiras says.
“The client then gets a post-settlement email and we give them a breakdown of their loan set-up – who it’s with and the repayments. We have a two- to three-day touch point where the files are touched every two to three days and we also keep the brokers updated. We have the ability to do live updates, which also gives brokers the ability to print that information off for their own compliance purposes or we can send email updates.”
Port Group offers brokers the option of controlling the process or giving the company direct access to the broker’s clients.
“For brokers who like to control the process, we send them the information and then they forward it on to their clients. However, most of the brokers are actually happy for us to deal with their clients directly and we basically just represent the broker business, so an email addressed from them with a signature from the staff goes to their client, so it’s like we’re assistants within their office.”
Ms Kotsiras says Port Group’s team is split into two, with one half undertaking the quality control and working with the broker to ensure all necessary information is acquired for lodgement. The other half of the team handles all post-lodgement activities through to settlement.
Putting a face to the name
While it’s not necessary for brokers to meet face-to-face with their outsourcing service provider, Ms Kotsiras says the way she runs her business allows for more transparency and accountability.
“I feel that there are brokers who are very particular and pedantic with their clients’ information and they want to know that it’s not leaving our shores since they’re concerned about the privacy information of their clients,” she says. “It is a niche because I do know that a lot more processing businesses are going offshore since it is obviously a lot cheaper and sometimes it might even be quicker.
“The main difference here is that the people that we’ve got here doing the job are experienced, they know the job, they know what the different systems look like, they know what needs to be in a deal or not in a deal, they know how to flag things with the bank or the lender. It also then means that the broker doesn’t need to be concerned with the privacy information of their clients. It’s not necessarily that I think it’s the best way to go, but it’s the way that I like to run my business.”
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