In 2007, Dan Eisner appeared on Dragons’ Den. His idea was to expand his well-branded, high-traffic retail mortgage outlets, and staff them with salaried mortgage advisors. The Dragons thought it was a great idea and made him an offer.
That deal didn’t end up working out (more on that) but Dan’s firm, Calgary-based True North Mortgage (TNM), has come a long way in a short time.
The company presently has four storefronts. On February 28, TNM will open its fifth and sixth locations in:
Vancouver, BC: On 1055 West Georgia Street
Halifax, NS: On 1949 Upper Water Street
This expansion is further validation of TNM’s model, which is a fair bit different than the industry norm. More on that below.
In speaking with Dan, it’s clear he’s a laser-focused entrepreneur. He’s got an Ivey MBA and an acute understanding of branding and service. In the interview that follows, Dan shares some atypical insights about TNM’s model and Canada’s mortgage industry as a whole.
CMT:Dan, Thanks for the time. First off, a question about your new storefronts. TNM has a strong Internet presence. Why did you decide to invest in bricks and mortar instead of leveraging your online reach?
Dan:Our clients lead us there. It was clients who told us they weren’t comfortable with a company that is purely virtual. The Internet is a scary place for many people and, as mortgage brokers, we need a lot of personal information that clients are hesitant to provide.
We felt clients wanted something a little more bank-like to abate their privacy and trust fears. They liked the rates that only a broker can provide, but they wanted convenient locations that only banks have.
CMT:Naturally, not all clients are uncomfortable with arranging mortgages over the net. What ratio of your business are Internet clients that you never meet??
Dan:Something less than 30%. But even the online-only clients still seem to appreciate the fact we have stores.
CMT:What is TNM’s long-term goal in terms of number of storefronts and annual volume?
Dan:We want to grow responsibly and organically. This means waiting for the right locations to come along. It also means growing only when we have the right staff in place. Our growth is limited by the number of high quality employees we can attract, hire and train. We have no set storefront goals or volume targets, but we do eventually want a True North Mortgage location in every major Canadian city.
CMT:Can you share your volume for 2010, and TNM’s percentage volume growth from 2009?
Dan:We expect to achieve mortgage volumes in excess of $200 million in 2010. This would equate to volume growth of around 50%. We don’t provide services to subprime clients.
CMT:Why does TNM use only four lenders?
Dan:Although we have access to many lenders, we primarily use 4 different lenders. We have selected these lenders based on their focus on good credit clients and their ability to provide superior rates, and good terms and conditions for our clients. From our point of view, focusing on 4 lenders has several advantages:
1. Most importantly, it allows us to extract the absolute best mortgage rates from these lenders.
2. It allows our staff to be focused, and be super knowledgeable about the lenders we primarily sell.
3. We get preferential service from these lenders which translate into more exceptions for our clients and faster turnaround times.
CMT:Doesn’t having more lenders mean more choice for the client?
Dan:The lenders we have chosen can provide the full gambit of products that any good credit client could want. If we did any subprime business, I could see the need to add more lenders, but we just aren’t going in that direction.
CMT:If TNM had done the deal with Jim, Arlene and Kevin from the Dragons’ Den, what effect do you think it would have had on the TNM look today?
Dan:Of course, I can’t really say for certain. Jim, Arlene and Kevin are interesting and unique individuals, but none of them had the mortgage industry experience that we needed to really propel True North Mortgage forward. Quite honestly, I don’t think True North Mortgage would look that much different today.
CMT:TNM pays its brokers a salary as employees, instead of giving them a split as independent contractors. How does this further TNM’s interests and are there benefits to the client of doing this?
Dan:Building a trusting relationship with clients is fundamental to any business but is even more important in the mortgage industry. When I came up with the concept of True North Mortgage, I really wanted the following statement to my clients about trust to ring true:
“We will give you advice on how to get the best mortgage even if that mortgage is not provided by us”
I know that many 100%-independent commissioned mortgage brokers do subscribe to this policy. But I believe that it would be near impossible to build a national mortgage company that lives up to this statement that is populated by 100% commissioned staff. I did not want to create the Future Shop equivalent in the mortgage industry.
Having salaried agents allows us to better work cohesively as a team; it also allows us to speak with one voice when negotiating with lenders.
CMT:How important is the Internet to TNM’s business?
Dan:Clients want it all. They want convenient locations, they want the best rates, they want toll free numbers and they want to be able to access us through our website. Our web presence is very important as part of our overall service offering.
CMT:How are Internet leads different than walk-in customers? Can you speak to their rate sensitivity, closing ratios, etc?
Dan:We deal with “A” clients and rates are always important to “A” clients, whether they find us online or walk into our stores. That being said, some Internet leads are especially rate sensitive and often forget about the benefits of pre-payment options, no additional fees, or access to the lender. As a result, our closing ratio on Internet-only leads is not as high as walk-in or referred clients.
CMT:Do you have any tips for brokers who want to compete on the Internet?
Dan:You better have a good rate and a system that can handle low value, high volume leads.
CMT:With competition intensifying on the web, do you envision a day when rate discounting will eliminate some brokers?
Dan:I think a number of industry trends are conspiring against the smaller, low volume agents. These include:
1. Higher volume requirements from lenders
2. Increased training requirements and increased licensing fees
3. More and more rate discounting online and offline
I believe new agents entering the business, or current agents who are struggling, must come up with a plan to either compete with lower rates, or find a strategy that takes them out of the rate game.
To be clear, their strategy has got to be more than just “offer really great service” or “be the best we can be” or even “Be a one stop shop”. Successful brokers in the next 5 years will be doing business significantly differently then brokers in the last 5. Gone are the days when brokers can get by with leads from realtors.
Brokers who think that online customers and offline customers are not the same, have not learned the lessons provided by full service stock brokers vs. online trading, or travel agents vs. Expedia.
CMT:Why has TNM chosen to be independent versus signing up with a national network or superbroker?
Dan:We see little value in joining a superbroker. We recognize that superbrokers could give us better access to other lenders, but these are lenders we don’t use or wouldn’t use.
It is important to our clients that we remain independent. It’s also just as important that we remain independent in the eyes of our lenders.
CMT:Thank you Dan…
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