Survival of the fittest
So the World Cup is upon us and, as they say, may the best (English) team win. We are all hoping our boys will have the fitness, skills and mindset to overcome the brilliance of Brazil and the efficiency of the Germans. But what about our own fitness, skills and mindset – do we have what it takes to succeed in today’s mortgage market?
Let’s go back two or three years and remember how the market has evolved. Under those halcyon days of the MCCB, life was cosy with no sign of today’s draconian rules, access to non-regulated life products, low stress self-regulation and nice easy adverts in the local paper.
So here we are 18 months after the Financial Services Authority (FSA) took over, and running a successful mortgage brokerage is now very tricky. Or is it? Let’s stop for a moment and look at our brokerage through the eyes of a business analyst. We have an almost non-stop demand for mortgages, we have no ‘stock’ to hold on our shelves, we have a ready supply of potential employees, we have ever reducing competition through regulation removing the ‘unsuitable’, we have some of the lowest software costs for benefit anywhere; and we are now allowed to charge and retain fees as well as receive commission from various sources; and yet we still hear of brokers finding business tough.
So how can a broker align him or herself to survive and thrive in this climate? The short answer is to model or copy the thinking and behaviour of the most successful. Success leaves clues; there are almost no new ideas, just old ideas that really work. All of the most successful business people that I have met have a number of common beliefs and procedures, sometimes simple, but applied rigorously. If you are going to be successful, you need to have a clearly defined agenda for yourself and not just be part of someone else’s agenda.
Despite all of the regulatory and technological changes that have occurred over the last few years, I am convinced that the basics have not changed. The broker’s job is to educate him or herself to the highest standard, attract customers, establish needs, present solutions, obtain agreement to proceed, and collect the resultant fees and commissions. So what is the most efficient way to do all of these things? Efficiency is the key word here – we will only be truly successful, if we use our time wisely. Time is that rarest of commodities, we can never get it back once it has gone. Most people will tell you that they would like four or more weeks off each year, and would prefer to work from 9am-5pm or less. If this is really true, then we must adopt the working practices that take us towards our goals not away from them.
So let’s look at the practical steps, starting with attracting new business enquiries. There are loads of ways of getting clients to your door, ranging from alliances with other business, to advertising, referrals, purchasing leads, website and literally encouraging clients to walk in your door. The most successful people will invest time and resources in all of these areas to maximise their chance of success. I would encourage brokers to offer their qualified services to accountants, solicitors, estate and letting agents, general insurance (GI) brokerages and new home builders.
One way I used to impress my clients was to meet them in the offices of the various banks and lenders located in most towns and cities and ‘piggy back’ on the sumptuous surroundings. There is one UK bank that will allow any adviser who happens to have a bank account with them to use their modern interview rooms completely free of charge. This can be particularly useful if you work from home and find it hard to bring clients to your office.
When you first meet your client, after the pleasantries of greeting them I encourage advisers to use the Initial Disclosure Documentation (IDD) and business card to explain the services on offer and to engage the client by offering to be not only their adviser but also the hub of the entire mortgage process. I used to explain to my customers that if they would like me to work for them, that it was my job to listen to their requirements and present various solutions, and that if they choose to proceed with the mortgage I would liaise with their estate agent, the lender, the solicitor, (and their accountant if they were self-employed or controlling directors).
I would explain that I would positively encourage all of the other ‘professionals’ involved in the house buying and selling process to contact my office and not to hassle the client, as I assumed they had their own busy lives to get on with, throughout the process. I would ask them, ‘how does that sound to you’ or ‘would you like us to do this for you?’ When I got a positive response I would ask, do you know how much your stamp duty/estate agents/moving costs/fees, etc, are likely to be? Of course, the answers would all be in the £1,000s. So then I would say: “Well you can rest assured that because the lender pays me a commission for the work I do in introducing the case to them, I am able to keep my fees to you to just £495, and there is no VAT payable on the fee.”
I know from many years experience that charging fees for the work that the broker does is one of the key points of success for many reasons, and not just the obvious financial one. Let me explain what I mean. If you take time to explain to your potential clients what you are prepared to do for them, and how you run a successful, sustainable and compliant business, then your clients are more likely to hold you and your efforts in high regard. If you charge fees, clients will only engage your services if they genuinely intend to proceed with the mortgage, if you don’t then maybe they won’t care if they have to change adviser/lender/property, etc,, half way through, costing them very little, but costing you time, paper, phone bills, salaries and shoe leather.
I always charged fees upfront, when I started the work after the client signed my terms and conditions. I would write 10-15 mortgages a month, this resulted in an average monthly fee income of £5,000 to £7,500, on top of the procuration fee, life, and GI commissions (all of which are not guaranteed). If you are not charging fees collected in part or wholly at the commencement of the work, then I urge you to consider this essential part of running a modern brokerage. By so doing you will be able to declare you are ‘independent’. If you are unsure, why not ask your best client to come and meet you for lunch or for a coffee and ask them for their opinion. You may be surprised just how supportive that they are. In fact, when I asked the same question many years ago, one of my clients said that he was surprised I had waited so long. If you decide on your standard fee, you can always discount it for multiple cases, repeat business or as a concession if you feel it is appropriate to do so. If you are unsure, introduce changes slowly, adjusting your approach to suit the circumstances as you find them. Always make sure that you confirm what you say in writing and get your clients to sign a terms of business.
Occasionally, after I had explained the services and the fees to a new prospect, they would ask if I would consider reducing my fees. I would always look them straight in the eye then, as I do now, and reply: ‘Certainly, no problem, which part of the service (that I had just described), do you not want me to provide?” My reply was delivered politely, confidently and dead pan with no hesitation or humour in my voice at all. Invariably, the prospect would laugh, at which point I would smile too, but the message was clear – I charge a fair fee for a great service. If I reduce the fee, I would have to make reductions in services standards. Think about this, your prospects certainly will. By the way, you may loose some potential prospects by charging fees, but I guarantee you that you will lose less than if you keep on running your business as a charity.
Covering all bases
If you are planning to run a consistently successful business, you need to cover all bases. By this I mean you will need to cater for all of your clients needs regarding the mortgage and related insurances. Think of your client as you would an attractive lover – if you don’t look after their needs, you can be sure that someone else will. If you really cannot bear to be involved in life and GI, go and find a life and GI broker that you can trust, who cannot bear to be involved in mortgages. This could be a marriage made in heaven, as their client bank plus your client bank is likely to be worth more than the sum of its parts.
Write to your existing clients twice a year, send them a ‘newsletter’ with information about relevant topics and send your clients a Christmas card. Work hard to keep your name upper most in their mind, offer a referral service, perhaps you could send a bottle of wine to a client that refers a new prospect to you. Offer a voucher with money off your fees for a review of their insurance requirements. Make sure that you always include your business card and IDD, and have your letters checked for compliance with the FSA regulations, be smart and be prepared to do the things unsuccessful people cannot be bothered to do.
Invest in your staff, train them well, motivate them, reward them with recognition and praise when it is due, organise the occasional Friday lunchtime drinks or evening meal.
I would encourage brokers to run their offices as models of efficiency and tidiness and to be mindful of the impression people get when they first encounter your business, whether that be when they walk in or contact you via your website or by telephone. People do judge the book by the cover, so make sure your cover is in order.
Invest in technology to enhance your business and increase productivity; your staff will achieve more each day if they have proper IT and CT systems to work with. Consider linking your client case management database with your telephone system so your clients details are displayed on the PC screen before you pick up the phone. You can then greet your client by name and have their case status in front of you instantly. Keep clients updated on the progress of their mortgage application by sending text messages. Embrace technology and your clients will buy into your business.
I guarantee you there will be plenty of brokers that won’t act on this advice and this makes things even better for those that do – after all, we have the same mortgage products at the same rates and the advice all advisers should give will be similar in most circumstances. Therefore the things that differentiate you from the crowd will be small but significant details, the actions that successful individuals do to make a difference. These items were described by Sir Clive Woodwood as ‘critical non-essentials’; actions or decisions that although not capable of changing the outcome on their own, are so important when added one on another they make a real difference. Let’s all hope this time Sven and the lads have compiled their own list of critical non-essentials so England can win its second World Cup final in less than three years.