Retention Teams Have Never Been Stronger

Our retention rate on mortgages is well into the 90s…

-Scotiabank’s CEO Rick Waugh (Source)

Lender-retentionIt’s getting tougher to woo customers from their lender at renewal. Banks in particular are doing an exceptional job at convincing borrowers to stay on board, as the quote above confirms.

Waugh’s number is notably higher than most industry statistics. Last spring, CAAMP found that 86% of mortgagors stayed put with their bank at renewal. Scotia’s low-to-mid 90% number is phenomenal.

Some might expect client retention rates to decline with ever-increasing competition. But, for the most part, that hasn’t happened.

Many lenders have invested enormous sums in retention and continue to make incremental improvements to their retention rates.

These lenders are:

  • refining their predictive models of consumer behaviour (e.g. who is most likely to buy other products, pay a penalty, be rate sensitive, etc.)
  • proactively contacting borrowers sooner
  • offering earlier and earlier renewals (without penalty)
  • immediately calling clients who request payout statements
  • refining phone scripts and customizing them to each client
  • holding retention reps individually accountable (S&P writes, for example, that “MCAP has a six-member mortgage retention team; each account manager has an assigned portfolio and is responsible for managing a letter and telephone campaign…”)
  • improving training procedures
  • honing their ability to foster client relationships
  • improving psychological tactics to discourage consumers from switching
  • making more rate exceptions
  • bundling more “special offer” products with mortgages.

It is well known that retaining an existing customer costs less than acquiring a new one. And losing a customer costs the most of all (because it’s harder to convince departed clients to come back again).

As time goes on—especially if mortgage volumes shrink—it’s likely that brokers will increasingly consider lenders with trailer fee compensation programs. Trailer fees are relatively easy money and few mortgage originators look forward to crossing swords with a retention team.

The problem is, trailer fee lenders have fewer products and often have inferior pricing than the major banks (especially on terms other than five years). A challenge remains for such lenders to access equal or better mortgage funding on a range of terms. That’s easier said than done, however, given that much of that funding must come from the very banks they’re competing against.


Rob McLister, CMT

  1. Thank you Rob for another interesting information. I am a typical real estate investor who did all my income properties with a mortgage broker. During last two months I did two renewals (with taking some equity out)and both banks offered me better deals. In both cases it was P-0.5% on a 5 year closed variable mortgage. The best rate my mortgage broker could do was P-0.4%. Also, both banks paid for appraisal.

  2. The Banks won’t consider a trailer fee model unless Brokers are willing to accept lower compensation up-front, or unless Brokers take on renewal responsibilities. Brokers have done it to themselves by not building stronger relationships with lenders (i.e. having this conversation with them about this gery issue) and not policing those who have made a living churning their books. Firstline is the classic example of what happens when a lender finally decides to put a huge effort behind retention, and how that can negatively impact brokers.
    It’s time for brokers and lenders to sit across the table from each other and discuss this from the perspective of finally sharing the client, and how each can offer better value to the other. It will ultimately be better for the client, as renewals tend to be a simpler process. Lenders would probably embrace broker-processed renewals, as they are most likely cheaper for them (with reasonable yet reduced compensation to the broker). Failure to have this conversation will ultimately result in a further shrinking broker market.

  3. Victor give your head a shake!!!
    Brokers trip over themselves to send business to
    banks, as opposed to mono-lines, get the “big” upfront fee & bank gets
    a 90% ( if there numbers are to be believed)renewal rate. Why in the name of basic math would a bank offer trailer fees? For crumbs you brought them 10 deals which they will cross sell to death. Your 75-86 bps is chump change to the banks.
    We spend our time & money prospecting for mortgage clients, send 10 to BNS & 5 years later you get one back to place elsewhere. Not the basis for a long on going business plan. Brokers,support the mono-lines if you want a future.

  4. Your are right Bill, it really depends who you work with. One broker look at all docs first (paystubs, rental agreements, total # of rentals, credit core, subject property, TDS)and THEN offer the rate. Another broker promises the rate first and then asks for the documents. The latter often causes frustration and delays. From my personal experience on renewal with the same lender the amount or required docs is significantly less than to originate the mortgage with the new lender.

  5. Why would banks EVER offer trailer fees if the they retain 94% of their mortgage renewals. There is some sort of disconnect in thinking here. Seriously, senseless, if you were a bank CEO you would giggle at the thought.
    As for why we support banks, easy answer: rates and product: as of today’s date the lowest 5 – year fixed rate in Canada is offered through brokers by a big 5 bank, standard product not just purchase, not just insured, no “cant’ be between 75% – 80% LTV” stuff. Plain vanilla, easy to work with and best rate PERIOD. Excellent product and a strong contract with a great client experience post sale.
    We are brokers and the thing we must put above all things is: best deal for our clients. If we need to bake all the future commission considerations into our decisions about what to offer clients we betray that trust.
    I have listened to this debate for 18 years and here’s what I learned: the brokers who consistently offered their clients the best deal year after year (rate / contract / customer service) without focusing on the future commission on renewal: all of those brokers are the biggest brokers in our business today and they will continue be the biggest. Fear of retention teams should never effect our judgement in recommending a lender. The only question to consider: what is the best deal for the client.

  6. Interesting comments about supporting the mono-lines. Two of the most aggressive retention teams in my world are First National & MCAP.

  7. Can’t confirm but opposed to Scotiabank renewals I can say that due to product reasons we may have to move clients from First National to another lender upon renewal. If a client now wants/needs a LOC and are with FN it’s a perfect excuse to move them away.
    Until non-bank lenders’ PRODUCTS can mirror the banks’, it will be the same old story.

  8. i get concerned with comments that suggest “a good excuse” to have my clients switch, or ill find a product that the existing lender doesnt have and present that, to be competitive at renewal time. As mentioned by Rob above and others, if the needs of the client are being met, why is there this push to transfer, unless for the broker’s benefit. Sometimes helping the client renew for “free” and then “demanding” / “asking for” 3 to 5 referrals over the next 5 years is more profitable in the long haul

  9. “I have listened to this debate for 18 years and here’s what I learned: the brokers who consistently offered their clients the best deal year after year (rate / contract / customer service) without focusing on the future commission on renewal: all of those brokers are the biggest brokers in our business today and they will continue be the biggest. Fear of retention teams should never effect our judgement in recommending a lender. The only question to consider: what is the best deal for the client.”
    Truer words were never spoke!

  10. Hi Glenn. You have a great point, but the problem I see with banks is that they don’t necessarily honor their own mortgage specialists. They woo high achievers on board with a strong signing bonus and then bit by bit take away the incentives. I see it happen over and over again. Bank policy changes often and it is usually about clawing back.

  11. One other thing that is leading Scotiabank to a 90%+ retention rate is their STEP product. Most of their mobile mortgage specialists and branch reps ALMOST ALWAYS put these clients in a STEP product… meaning the mortgage gets registered as a collateral charge.
    With a collateral charge mortgage at renewal time, if our client wants to go elsewhere, they’ll have to pay for new legals as we can’t do a straight switch. Other costs involved include a discharge fee and possible appraisal cost. Add that all up and a switch to a lender with a .05% savings on the interst rate, just doesn’t make too much sense. Plus, the majority of clients really like the flexibility of the HELOC (even though the majority of these clients should NOT even be in this product to begin with).
    In addition to Scotia’s STEP, think of all the lenders offering these HELOCS – RBC Homeline Plan, BMO’s Readiline, CIBC Home Power Plan, TD’s HELOC and Manulife ONE.
    If I was a lender, I’d do the exact same thing to help increase my retention rate.
    It’s a trend that I don’t see stopping anytime soon, and if anything, a trend that is still moving upwards.

    1. I came from a major Bank lender as a Mortgage Specialist. I will say this, great products yes, however zero opportunity for renewal’s, blended rates or portability options. So you are constantly scrambling for new business and fighting the branch and brokers for the same business; where as a broker if you use that same lender it’s the same result, but have other options and many of them. So why pigeon hole? Expand your options, never depend on getting those client’s out of their bank or you will just burn rubber for nothing.

      1. Hi Curt, Despite 80-90%+ retention rates, you’re absolutely right that renewal business is a key reason many bank reps quit. I’ve always found it interesting that more retail lenders don’t pay meaningful trailers to their specialists. It would serve as both an incentive for originations and a retention strategy for skilled personnel.

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