B2B Bank has made an equity investment in Verico Financial Group, one of the country’s largest mortgage broker networks.
B2B, a subsidiary of Laurentian Bank, is buying a non-controlling interest in VERICO. Co-founders Colin Dreyer and John Kelly remain the majority shareholders in the company and will stay on to manage the firm.
No deal particulars were announced as of yet, but it’s nonetheless a testament to the broker channel that a bank would believe enough in it to make a public investment of this nature.
For more, here’s a Q&A session with Colin Dreyer and John Kelly about what this means to VERICO, its brokers and the industry at large.
Question: Colin, you were 53 years old when you started VERICO. Any retirement plans?
Answer: Formally, none whatsoever. In fact I expect to be chairman of the board of VERICO for at least the next 10 years — and for the time being I am quite happy as the CEO of VERICO. In fact, my business has always been one of the great interests, and joys, of my life. I’m proud of VERICO and our brokers so it’s a very rewarding time for me right now.
One of the advantages of having spent a lifetime as an entrepreneur is that I now have the ability to decide my work/life balance. For the past several years I have focused much more on spending quality time at VERICO. The VERICO management team is very capable and experienced. Consequently, I’ll engage at a higher strategic level and leave some of the day-to-day issues in their capable hands.
Q: John, what do you attribute the success of VERICO to? And what’s in the future?
A: In short, our people. VERICO’s success is entirely a credit to the quality of professionals that make up our membership. When we started VERICO we launched with the rather lofty tag line “Truth, Trust & Transparency.” We meant this to be our promise to our brokers, and I’m proud to say that we have never wavered from that aspirational ideal.
Colin and I are both long-time mortgage brokers and this pedigree means we were well aware that this is a people business — and as such, it’s all about reputation. We recognized that our brokers’ reputations with their customers and referral partners is the bedrock of their success. Being selective in who we align with and living up to our promises over the years has enabled us to attract a network of the most respected and successful brokers in Canada. We are very proud of that.
In terms of the future, it’s still all about reputation, particularly in a time when word of mouth now travels at the speed of social media. Going forward, we believe that the Internet will play a significant role in customer origination. However, success is still all about customer satisfaction and this is determined by how well our brokers are able to serve their customers’ evolving needs.
We believe that brokers who skillfully offer a wide range of products, services and solutions to their customers are ultimately delivering a better and more “whole” customer experience. That’s a key to our future success as an industry, however, this success also relies on mortgage brokers evolving to become credible and trusted advisers on a wider range of financial and insurance products. And this is where reputation makes the difference.
Q: Colin, can you speak to the VERICO B2B Bank announcement. What does it mean for VERICO Canada, VERICO mortgage brokers and your existing lenders?
A: The B2B Bank investment in VERICO Canada is very positive. It’s not just symbolically positive but also provides VERICO Canada with greater depth and resources to help our brokers serve their customers better. This is all part of our overall long-term plans. We are reinvesting to ensure our brokers have access to the necessary range of financial products, tools and systems they will need to compete and win in the future.
Q: John, how does the B2B Bank announcement impact your broker/owners and their agents? In the past when banks like HSBC have purchased a broker company, it didn’t seem to pay off.
A: I would agree, but let’s be clear that this is not the HSBC/INVIS purchase. In the case of INVIS, they were purchased outright by HSBC and it would appear the bank had clear expectations that owning INVIS also meant owning their agents’ loan volumes. But brokers always push back against that sort of thing for all the obvious reasons. In the end, top-down institutions like the Big Banks are not well suited to managing or owning independent and entrepreneurial-minded salesforces like those found in the broker industry.
The difference here is that B2B Bank is making a financial investment in VERICO Canada. The existing VERICO Canada management remains in place. It’s also important to make the distinction that VERICO Canada is a brand management company that administers the VERICO Network of independently owned and operated brokers.
So in short, the structure and expectations are very different. Our brokers remain independently owned and operated and will align with the lenders they prefer, including B2B Bank if they choose. But they are not associated with, or otherwise obliged to, this investor in any way. B2B Bank knew this going in so there will be no dashed expectations here either.
Q: John, so why did B2B Bank invest in VERICO Canada?
A: Well presumably they believe we are a sound investment, but of course there is much more to it than that. This investment evidences their commitment to the broker channel and also to the VERICO network of mortgage brokers. Yes, they have an interest in getting their fair share of loan volume, but this won’t be at the expense of our network’s major lenders.
VERICO Canada wants to develop new and innovative partnerships with Lenders that are mutually beneficial. This means collaborating with our lenders to construct and deliver new banking, insurance and investment cross offers that differentiate and enhance our brokers’ value proposition to their customers. It’s a progressive evolution that will ultimately enable our brokers to broaden their business scope and profitability.
VERICO has just launched BRINCO Insurance to the network. This is also an important step in ensuring our brokers can expand their business to include life and property insurance in the future. The common objective is more points of profitable connection and relevancy with their customers.
As a branchless bank, B2B Bank is focused entirely on doing business through correspondent intermediaries like mortgage, deposit and investment brokers. Consequently they have a strong interest in supporting these independent advisers and investing in new ways to generate mutually beneficial advantages. That’s what this investment is all about for B2B Bank — and VERICO Canada too.
Q: Colin, can you comment on the state of the mortgage broker business now, and your expectation for the future. The last several years have seen the industry subject to dramatic change… How will all this play out?
A: Being a long-term entrepreneur, I believe, helps give me perspective, balanced judgment and the ability to identify latent opportunities. The mortgage broker industry is a very vibrant business that is maturing and reinventing itself at the same time…it is poised for a new level of growth.
I am very optimistic about the future of the industry. Understandably, we will continue to deal with regulatory changes but overall our opportunity to engage the consumer in a more pro-active way with a broader level of products and services is very exciting.
Whether you are a bank, monoline lender, insurer or independent mortgage adviser, we all share the common goal of providing financial services to the consumer.
At the present time, independent mortgage brokers have a 25% market share, 42% with first-time buyers. With today’s consumer touch programs, added products and services, we have every opportunity to expand our business and continue to provide value to our lenders/suppliers/insurers.
Education, knowledge, training, support, consistency and value-added products have been and will continue to be the key factors of this business and we at VERICO Canada intend to be at the forefront of aligning key products and services to our members so they can meet the demands of today’s consumer.
Lenders are reliant on our industry to provide them mortgage origination. They want us to continue to do a good job of that; and to help us, they provide us all the products that we need to be successful as an industry….how can we not see this as an opportunity?
We have multi-channel, multi-billion-dollar financial institutions supporting our industry….what greater opportunity or support do we need?
Changes, challenges and alternate ways of interacting with consumers will always be there. But the only restriction we have in our industry is our behaviour.
I think we, as an industry, are at the level to concentrate on our expansive opportunity to ingratiate ourselves to Canadian consumers and continue to develop our industry as a “profession.”
We have come so far as an industry….I am betting we can still go a lot further!