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A broker charging a fee-for-service/advice is a hot topic of conversation at the moment so I thought I’d share my insight. [note: I am talking about charging a fee for advice in addition to receiving a commission – not in replacement of commission]

I think that until a client has to reach into their pocket and pay you some money you really don’t know if they value your advice and time. At the moment a mortgage broker doesn’t have to charge a client a fee and I think that’s a double-edged sword. Obviously, the benefit is the service is free which makes it easy to sell. On the other hand the downside is that the client doesn’t necessarily have to consider the value you provide. Research (as discussed in a great book, Predicably Irrational – highly recommend) suggests that two price points; free and 1 cent – are perceived as completely different by most humans – even though the difference in dollar terms is only 1 cent.

Also, I believe that charging a client for advice increases a brokers’ self confidence in the value they deliver as a broker. Good brokers deliver heaps of value and I think many brokers underestimate the value they provide.

For this reason, I believe charging a fee for certain services is a good thing – not because of the incremental revenue but because of the stronger relationship it creates with clients. It forces the client to recognise the value you provide. And it forces the broker (you) to clearly communicate their value proposition. This result is a stronger (stickier) client relationship. The downside of doing so in this environment is the extra compliance with NCCP – providing a credit quote, etc.

If we start charging fees we’ll look more like professional advisors and less like sales people. What’s your experience?

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Do our clients really know?

Posted by Jul17, 2012 Comments Comments Off on Do our clients really know?

One of our biggest challenges as mortgage brokers to the balance the competing priorities of:
• Taking accountability for getting the job done (loan settled); and
• Educating the client about what we can and can’t control.
I was reminded of this tug-of-war today while reading Seth Godin’s blog (anyone that knows me knows that I think Seth Godin is a genius).

Lender delays and mistakes can cost us a lot in terms of goodwill. As brokers, we know that there’s a lot that we can’t control in the loan process. Sometimes we need to work really hard just to achieve an average result (approval time). The problem is that clients don’t see all the hard work behind the scenes. Worse still, they might think we’ve done nothing.

Clients expect a broker to work hard and solve problems – that why they come to us in the first place. So we should never communicate about the work we do as if it’s something special or unexpected. However, that definitely doesn’t mean we should not communicate at all.

I believe that brokers must let clients know what we do and how long it takes. Educate your clients about exactly what you do and why. Doing so will reaffirm the value you bring to the table and why they should always come back to you for future lending. Also, the law of reciprocity suggests that since they have received value at no cost to them, that they’ll be obliged to give you something in return – referrals.

What do you think? Do you tell clients how much work you do? How?

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It’s the leads you say ‘no’ to that matter

Posted by Jul15, 2012 Comments Comments Off on It’s the leads you say ‘no’ to that matter

For a long time I have said that the amount of profit that a broker makes is mostly determined by the leads (prospects) he’s decided not to peruse, not the ones he does. Our industry is characterised by the “win some, lose some” methodology. That is, some deals are very profitable because they don’t take a lot of time to write. On the other hand, you lose money on other deals that are either complex, the client is difficult or the bank plays games. At the end of the day, you hope you make money – i.e. that there’s more profitable deals than non-profitable ones.

In my experience, many brokers seem to chase each and every lead without having regard to its potential profitability. For example, a broker that has little experience and knowledge of the commercial market might spend hours researching and chasing a commercial lead. In my opinion, that’s doomed for failure. Sure, you might actually win the deal but how much profit will you make if you add up the hours you spend on it? You have to have the discipline to say no to these types of leads.

I’m not suggesting that you should make money on each and every deal – I think that would be difficult (impossible). However, be mindful that is only takes one or two poor quality (unsuitable) prospects to wipe out one month’s profit.

So what do you need to do? In short, you must protect and value your own time. You have a lot of value to offer the right prospects. Wasting your time with the wrong prospects helps no one – least of all, you. You don’t have to say “no” to prospects that aren’t suited to you – just say “not me” and find them an expert that can help them (and take a commission split if you want to – which will be all profit mind you). More on this topic in my next post…

I invite you to share your expereinces or thoughts.

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Building a profitable broking business is all about R & V

Posted by Jul06, 2012 Comments Comments Off on Building a profitable broking business is all about R & V

In life I think we tend to unnecessarily overcomplicate things. It has been reported that Sir Richard Branson likes to see business plans that fit on one page. I think the reason for this is that it forces people to communicate in simple terms and simple business models tend to work the best. I think mortgage brokers can include this lesson in how they run their business.

Building a mortgage broking business is relatively simple but it’s just that there’s lots of noise that can distract you: social media, sales tactics, looking for the magic lead generation solution and so on. As the 80/20 rules suggests, 80% of your results come from 20% of your activities. Those activities, in my experience, tend to be only two things; building Relationships and giving Value.

If you focus on building a relationship with your clients, rather than selling then a mortgage, the magic of trust occurs. The client will trust you, care for you, respect your time and advice and, importantly, refer business to you. Relationships take time and energy. They are not hard and nor are they an urgent tasks… but they are very important.

Giving value first is probably the easiest way to build a relationship in my experience. Focus on what the other person’s problems are, help them with a solution and you’ll be well on the way to building a trusted relationship. But don’t be solely focused on mortgage elated problems. Lots of clients have lots of problems that don’t relate to mortgages. For example, maybe they are scared about being able to manage cash flow, maybe they don’t know if they are paying too much for a property, or maybe they need to sell a property before they can do business with you. It really doesn’t matter what it is. I’d bet that you probably have the experience and contacts to help many of your clients with solving their probably. This is a perfect opportunity to give value first.

So if you want to write more business, spend 80% of your time developing relationships and giving value first. Jump on the phone and spend 2 hours a day calling your clients focusing on R & V. Do this, and you’ll be flooded with business. I can guarantee it.

What do you think? Is it that simple?

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Why the banks can’t compete with brokers

Posted by Jul02, 2012 Comments Comments Off on Why the banks can’t compete with brokers

I read with great interest an article written recently by Stuart Grimshaw, the CEO of Bank of Queensland (BoQ). I was particularly interested for two reasons. Firstly, I’m a student of the Net Promoter Score methodology and have recently implemented it in my business (more on this later). Secondly, the reasons he cited for why he believed BoQ could win customers away from the Big Four Banks are sound in my opinion and even more applicable to mortgage brokers. Click here to read the article.

Mr Grimshaw suggests that the trend in banking is moving towards “a heavier emphasis on personalisation in financial service” and that people were seeking a “trusted relationship with their banker”. He went on to suggest that BoQ is well placed to achieve this through its owner-managed branch model because it means that branch managers hang around for longer and can build personal relationships with customers. He believes that regional banks like BoQ are nimble and small enough to compete at this level. I agree with him.

If BoQ believes that size and ownership structure have positive impacts on the ability to deliver sort-after, tailored, personalised and trustworthy banking services then mortgage brokers are a step ahead of the regional banks and probably two steps ahead of the big banks.

The Net Promoter Score methodology proves that loyal clients (call Promoters) are more profitable, do more business, buy more products, generate 80% of the referrals you receive, cost less to service and so on. It is proven that the key to generating more Promoters is simply to deliver a better service experience. Brokers have the most control over service delivery compared to their competitors. Let’s make the most of it!

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