Citibank together with The Adviser asked Australia’s top five Young Brokers of the Year for their thoughts on the market, product innovation and problems that might affect the industry. Here is what they had to say....
My Mortgage Freedom
Club Financial Services
How much training should a broker have before they start meeting clients?
SO: I believe it takes anywhere between six and 24 months for a broker to really learn the ropes and know what the industry is all about before they go out there and start conducting client interviews. You start out as you mean to go on, so you should make sure that when you start you are comfortable with the industry and confident in your knowledge, so that you provide the customer with the best experience. Sometimes I think people go and out and conduct interviews too early, which can be detrimental not only to them but to the industry as a whole.
AA: I agree – you have to understand the back-end processes and indeed everything about the industry before you can push people into the field.
Of course, if brokers need to be trained for 12 months or longer, then what is the incentive of getting into the industry? It is a hard industry in which to make money.
How did you come to be a mortgage broker?
LP: I was actually studying social work at university and in my final year I decided that I didn’t want to be a social worker, so I got a job at a bank. Soon after, I moved into a BDM role and it was at that point that I got talking to a broker, who asked me if I had ever considered being a broker [myself]. I confessed that I had not thought of it until now, but I made the move and I think it was the right decision for me.
SO: I am looking into the MFAA Certified Mentor program. I think it’s a really important thing for brokers when they enter the industry to have a mentor that they can learn from. It is good to have someone who knows the industry who can teach you, rather than learning ad hoc and on the job.
AM: You’re right. Regardless of whether you have just come out of uni, or you have a background in finance, you really don’t know what to expect from an interview until you have them. It is very hard to build credibility straight away. It is not enough just to know the mechanics of loan writing; you also have to have confidence in your presentation abilities as well as sound industry knowledge.
JE: I know when I started in this industry at the age of 19 that earning the respect of my clients and gaining credibility in the industry was the toughest part of my job. Luckily for me, my dad is a well-respected broker operating out of a regional area, so when I started in the profession, everyone in the area knew my dad and gave me respect by proxy. They knew he was good at his job and so assumed that I too would be good at mine. That said, it was still hard to be thrown in the deep end. At the beginning of my career, I was only expected to do admin for my dad in the store. However, our shop was featured on A Current Affair one day as a good news story and from then on, business exploded. As a result, I was forced to take on a much larger role much sooner than expected. I went from being the admin person for one month to writing loans. I simple didn’t have much of a choice. I had to do as much research as possible, but I was lucky enough to have the excellent support of my dad.
Do you wish your break into broking had played out differently?
JE: For me, it was a great learning experience and probably the best thing that could have happened. I had to do the research and was forced to learn quickly. That said, because I wasn’t formally trained before starting in my career, I may have lost a few clients along the way because I didn’t seem 100 per cent confident in what I was saying.
SO: Where formal training is really important is during the interview process. There will be times when clients will object to certain things you say and you have to have the confidence and the knowledge to overcome these objections and put to rest any concerns the borrowers might have. I would love to have had more knowledge in this area at the beginning. I think it is right for a broker to sit in on interviews with a mentor in the early stages. They should see how the experienced broker overcomes objections and how they deal with anxious clients.
CK: I agree. I spent the first two years attending all of my father’s appointments. I spent two years in administration; two years working in the back office, processing loans; and then two years attending appointments, learning all I could from my father and my mother who have been in the business for many years. Once I had done that training, I knew I was ready to go out there and meet with clients on my own. I knew how to overcome any objections, I knew the industry inside out, and I was confident in my skills as a broker.
Once you have the confidence to meet with clients and talk to them about their home loan needs, how much does age become a barrier?
SO: I definitely thought I would have more issues, but I haven’t really had any. At the end of the day, if you are confident in your abilities and you know your stuff, borrowers will respect you and want to do business with you. Age really isn’t as big a factor as people make out.
AA: I agree. While I have never really found my age to be an issue, I also haven’t let it be one. I try to do things to avoid it ever being an issue. I align myself with referral partners who are around the same age. I find that this works in my favour because clients are not only used to dealing with people around a certain age, but the referral partner is happy to pass their client on to another professional who is around the same age. It really is an easy transition. In addition, by aligning yourself with people around your age, you are aligning yourself with the industry of the future. They, like me, are really just starting out in their career. They will be around for some time – they are not about to retire.
How do you attract new brokers?
SO: We don’t have a recruitment system. All our growth has been organic. Initially, we took on a banking representative – she had great customer service and great knowledge. We don’t advertise, but we find that the majority of loan administrators and brokers come from banking backgrounds.
I guess we are also able to attract new to industry recruits by offering them a salary. By doing this, we offer them security too. This is not an easy industry to break into. If you are commission-only, it can be several months before you make any money, which can be tough for a young broker just starting out.
CK: We have brought on family and friends in the past. Similar to Simon, all of our recruitment just happens.
JE: Driving recruitment is hard in this industry because, as Simon said, brokers are generally out of pocket for the first few months at least. They don’t tend to make any money, which can be tough if they are young and are not backed by considerable savings. To rectify this problem we have, in the past, offered people retainers and salaries to work for us. That said, if you are going to pay people a wage, you have to make sure you will get your money back. It is tough to find people who want to work for no money. In my first year in the profession, I earned $19,000 and I worked full time. I had to pull beers down at the pub on weekends just to make ends meet. But that was my choice to do that. You have to find people who are willing to take what they can get, work hard and persevere. Everything comes in time. After a few months, you start to build a client base and before the end of a year, you have built some good relationships that you can rely on for business. In mortgage broking, success doesn’t happen overnight; it takes perseverance and dedication.
AA: It is very much a cottage industry. There are a lot of small players —brokerages with just one or two brokers. Moving forward, I expect to see greater consolidation. When that happens, I will not be surprised to see more young brokers entering the industry because they know that when they come into the profession, they will receive support from mid-size to large aggregators.
Do you think the industry would be able to attract more new recruits if it was to introduce a fee for service?
SO: I see what you are saying, but I think an industry-wide move towards fee for service is a way off yet. Brokers struggle to attract clients when they don’t charge for their services, so I am not sure how successful fee for service would be in attracting new recruits to the industry. Unless a customer has a good level of comfort with you, you really cannot charge a fee.
AA: For the right broker, they can charge it, but I agree with Simon that it is not for all brokers. My concern regarding fee for service involves commissions. If everybody started charging a fee for service, I would be worried that Australia’s lenders would significantly reduce or remove their commissions altogether. For the younger brokers coming in, it will be very hard for them to charge a fee because I believe it is all about your experience.
What does it take to be a good broker?
SO: Brokers need to be willing to learn and prepared to put in the hard yards. They have to have a good sense of ambition, but be prepared to learn from others. While it is good for brokers to have a banking background, it is not a pre-requisite. Brokers also need to be well presented.
Do you use social media to generate leads?
AA: There is definitely a space there for branding, but generating direct leads is hard. I don’t find massive cut-through with our various social media websites.
JE: I agree. It is good from a branding perspective but not for generating business. That said, when I see a friend post ‘I have just bought a house’, I will send them a private message telling them that if they need any help with financing, just to give me a bell.
What can non-majors do to ensure they generate more business from brokers?
SO: If non-majors could prove they are efficient and consistent, they would definitely receive a lot more business. In today’s market, there is very little that differentiates lender product from lender product. Because of this, I will always put my business with the lender I know will push it through faster. We often hear about turnaround times, everyone harps on about it but that is just because it is a real issue. If the non-majors were faster in delivering an answer, they would get a lot more business. In addition, if they provided good, fast service on a consistent basis, they would also generate a lot more business that way too.
Upfront valuations are also key. I know a lot of brokers would prefer to put their clients with distributors that provide them. Finally, support is crucial. We want to be able to work with BDMs and state managers to get loans approved. I think smaller lenders are in an excellent position to provide better service than their major counterparts. They are smaller, so they have the ability to be more nimble and more involved.
Of course pricing helps, but in today’s market it is not everything.
Do majors and non-majors require different things?
SO: Not really. All lenders require slightly different things.
AA: In my time, I have only written a few deals with the majors because I tend to work a lot with non-majors and non-bank lenders. Why? Because I have good relationships with the credit managers. In addition, I have good relationships with my BDMs. They are there when I need them and they are always happy to help me wherever they can.
JE: I agree. I love BDMS who return my calls immediately or take my calls when I ring. I prefer to use lenders that I know will provide me with good service and will help me push my deal through quickly. I am also really loving lenders who have desk-bound BDMs. I know that I will always have a BDM who can help me when I call. They will always answer the phone, which is what we want from our BDMs. We want them to help us write good business.
What product innovations would you like to see in the market?
LP: I would like to see a redraw function on a fixed rate product. Westpac currently offers something like that and it is very effective, but I would like to see more lenders following suit.
JE: It would be good to have a basic product with an offset account – something where you don’t have to pay the professional package fees.
SO: I work with a lot of young couples who are not yet married and would really like two offset accounts. I just think that would work very well.
LP: I agree. As young brokers we tend to work with a lot of young couples and I know they would really like two offset accounts – it just makes managing money so much easier.
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