Mortgage Apprenticeship

Apprenticeship-Mortgage-BrokerPlumbers can’t get a licence without an apprenticeship.

Makes sense. You wouldn’t want a botched pipe job putting your house under water and costing you thousands.

The advice of a mortgage banker or broker could cost you just as much—if it’s bad.

That might make you wonder: Why is there virtually no legislation to ensure that bank reps and brokers have the practical knowledge to advise you properly?

We as brokers do have to write a licensing exam (depending on province). That, however, doesn’t prepare us to skillfully counsel you about:

  • term selection and suitability
  • mortgage restrictions
  • refinance analysis
  • mortgage portability rules
  • prequalifying with atypical income or credit
  • credit rebuilding
  • financing condition removal
  • porting default insurance
  • …and dozens of other mortgage topics where advice could cost (or save) you thousands.

Few things would boost our industry’s creditability more than practical training requirements. A 12- to 24-month apprenticeship under an experienced sponsoring broker would ensure new brokers have a minimum degree of competence when advising consumers.

At the moment, our industry relies on a system whereby someone who passes a background check, completes a licensing course, and joins a brokerage firm, can counsel you on a transaction worth hundreds of thousands of dollars. Poor guidance generally goes unnoticed because, most of the time, customers don’t even know they’ve received bad advice.

Fortunately, the majority of practicing mortgage professionals are experienced and highly capable. But it takes time and a lot of mistakes (often at customers’ expense) before most new brokers have the skillset needed to be proficient.

Having a senior broker review and sign off on a new recruit’s applications for 12-24 months would be one way to help clients avoid paying for inexperience.

Rule of Thumb:  Never be afraid to ask your bank rep or broker:

  1. How long he/she has been a full-time mortgage professional
  2. How much volume he/she has closed in the last 12 months.

If the individual has been full-time less than a year or has closed less than $5 million of mortgages in the last 12 months, take extra care when evaluating their expertise.

Rob McLister, CMT

  1. The ‘mentoring’ system isn’t working! There are many reasons for that, but here’s an idea: Right now, the big national companies (‘superbrokers’) pay salaried individuals to recruit new mortgage brokers, so why not also have a salaried person ON STAFF available to coach brokers one-on-one through their deals? This is the only way to learn the business, and I have been suggesting this for YEARS! The real problem is that no one is willing to spend money on practical, real-life training. I know what it’s like out there with ALL the companies because I trained brokers from ALL the companies across Canada for almost 3 years. But a 3-day basic-training session isn’t enough. New brokers with no support behind them damage the reputation of ALL mortgage brokers. Training and support for brokers is AS IMPORTANT as recruiting, but no one seems to see that. Our industry is on a slippery slope down to the level of the stereotypical used-car-salesman…

  2. Instead of asking funding volume and experience being a full-time mortgage broker, maybe you can suggest asking what makes them a qualified broker. I have been a broker’s assistant for three years and did my due diligence in training. I worked with many brokers funding over ten million dollars a year and I can tell you they advise their clients poorly on a daily basis. A lot of successful brokers are just good sales people and don’t stay educated on what is happening in the market. They deal with one lender and submit all of their clients there regardless of their clients’ needs. A lot of newer brokers are at least making the effort to learn every day and stay educated. I would suggest when talking to a broker, ask them how many lenders they use a year, what they do to stay up to date with mortgage trends and if they are taking any continuing education. Rob, when you were a new broker, would you have advised people not to work with you due to your amount of closed deals?

  3. Hi NB,
    Appreciate your perspective. There are always exceptions and in your case you’ve been lucky enough to be a broker’s assistant for three years. That is untypical but it’s nonetheless a valid point to discuss with clients who ask about your qualifications.
    In many cases, however, (not necessarily yours) there’s a difference between assisting a broker and personally advising clients and taking responsibility for a deal.
    Many brokers don’t have your kind of training and therefore some objective measure of experience is necessary (take your pick: years in business, years under a mentor, volume, # of deals, whatever). There are a lot of good tradespeople without credentials as well, but society deems it appropriate for them to be licensed with 2-4 year apprenticeships. Standards have value, despite the exceptional cases.
    I’ve said many times that I would never have chosen myself to arrange a mortgage in my early days in the business. Most new brokers have no idea what they don’t know because you learn by doing, as scenarios come up. The problem is, most new brokers haven’t seen enough scenarios…and mistakes when advising clients can be very expensive.
    In any case, I wish you nothing but great success as a broker.
    Cheers for now,

  4. Bravo Rob you have identified an ongoing issue that has been apparent to me since the mid ‘s 90’s when I was founding director of CIMBL (CAAMP today). This topic was recently discussed with some other long time industry participants and we all recalled how we got started as ‘trainees’ working with lenders.
    Unfortunately this type of “trainee” program is not out there today. Other professions such as Chartered Financial Planners and the Appraisal Institute of Canada require a combination of industry specific education and apprenticeships over several years offering a path to a career but why not the mortgage industry?

  5. I’ve always said that mortgages and financial planning should go hand in hand. After all, taking out a mortgage is a form of investing and the decisions should be based on much more than just the “salesmanship” of an individual. You wouldn’t invest $300,000 of your money without having a proper, thorough, and perhaps most importantly INDIVIDUALIZED plan so why take out a $300,000 loan backed by the theoretical value of bricks and drywall based on just a rate? That doesn’t make any sense at all.
    If financial planners are required to take all these courses and exams and gain three years of practical experience before they can even call themselves a CFP, why not apply the same logic to mortgage bankers regardless of whether they work for a bank or brokerage?

  6. Although I agree with the above, don’t you think it may open up a can of worms if brokers but not realtors (who are also considered professionals) have to enter apprenticeship programs?
    I always tell new brokers it’s better to work as an assistant to a high volume broker for at least a few years (as I did) to learn the ropes and avoid as many mistakes as possible. However, the fact is many see the dollar signs for closing one deal (and the disproportionate amount of time required to make the same amount of money) and think they can do it on their own.

  7. Great topic. I’ve felt that our industry has ignored this issue for far too long. Until new brokers meet legislated training requirements, consumers are at risk. Period.
    For that matter, Realtors should also have to apprentice. Their advice can easily save or cost people as much as a mortgage broker.

  8. I remain unconvinced that a formal licensing regime would be the best way to go about addressing this issue. It would likely be great for established brokers and agents (because there would be fewer of each and most would get a larger slice of the pie), but would in all likelihood drive up costs for consumers.
    Something that may be more practical would be strengthening already existing designations like AMP. An analogy would be that you don’t have to be a CA to prepare tax returns, but consumers that see value in getting the highest quality advice can easily identify qualified individuals.
    It would then be up to the designating organization to advertise that brokers/planners holding their designation meet the highest standards in terms of training, experience, etc.
    Ultimately, consumers (like me – I’m not employed in the industry) need to take some level of ownership over their decisions. They’re the ones that have to live with the terms of deals that are signed.

  9. Rob, great discussion topic.
    I find in my experience that often the same brokers who complain about a lack of training and support demand 90+% splits. If this is true for some of your readers then I would encourage them to ask if they think they should invest in their own careers. If however they are on a less then 85% split then shame on their broker for not providing adequate training and they have a right to be concerned with their lack of support.
    Another worthy discussion might be why brokers are so resistant to investing in their own training? In my experience there are great resources available, some are even FREE and yet they get very few people to even invest time let alone money?
    I think when brokers can not see clearly to invest what is often the amount of one commission to learn from the excellent quality training that is available in this industry from outsource providers then I am afraid we may be having this conversation again in a few years when our market share has dipped another 5-10%, as it has in the last few years.

  10. I’m a fairly new mortgage agent, and you’re right – the education we get to become an agent is not near enough. I took it upon myself to study under a broker in town for several months before I even took the licensing course. For the next 2+ years, every deal I do, I do it with the broker along side me. She mentors me through each step of each deal. As the number of deals I do increases, our split changes (starts out 70/30, then increases to 75/25, etc). I think a model like this would work well for all new agents.

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