Mortgage leads are profitable but mortgages themselves are much more so. It’s not a complete shock then that RateHub.ca, a lead-generation company, is starting its own brokerage.
RateHub, a leading mortgage rate comparison site, hasn’t publicly named the new brokerage yet, but says it will launch later this year. It will be managed by former True North Mortgage principal James Laird. Site founder Alyssa Richard will remain the CEO.
The new brokerage will be virtual (i.e., no storefronts) and headquartered in Toronto. Richard says it will buy leads from RateHub on the same terms and price as the site’s 45 other brokers. The company was careful to stress that the new brokerage will have no preferential treatment in acquiring leads from the site.
“The best thing for the consumer is to have a site with lots of choice and lots of providers,” Richard says. “There are plenty of leads to go around. We couldn’t even come close to fulfilling all the leads ourselves.”
“Some of our brokers can’t even [advertise] the lowest 5-year fixed rate for a full day because they get too much volume,” she adds.
RateHub says the brokerage announcement was “well-received” by most existing broker clients when it told them earlier this week. The company, which competes with RateSpy.com and RateSupermarket.ca, says it wants to be as transparent as possible. But not everyone is on board.
“We are disappointed to see James join RateHub to build their lead fulfillment arm,” said Dan Eisner, CEO of True North Mortgage and reportedly the site’s biggest advertiser. “This arm will be in direct competition to us and other mortgage brokerages that advertise on the site.”
He added that the non-arm’s length relationship could “confuse clients and eventually lead to the demise of the site as brokers and clients leave.” Furthermore he also questions that the new brokerage will pay for leads in the same way as other brokers, noting, “It would amount to no more than taking money out of their left pocket and putting it into their right pocket.”
Interestingly, Laird announced that he was leaving his chief operating officer role at True North just 19 days ago. In addition, he already owns a stake in RateHub.ca and retains a minority ownership in True North.
One decision that’s surprising is that the two organizations will not be separate corporations. RateHub’s brokerage will clearly affiliate itself with RateHub’s rate comparison site. That will undoubtedly concern some competitors, to the extent that it gives RateHub a brand advantage. Little edges are especially important when multiple brokers are advertising similar rates, which happens frequently.
“I wish James and Alyssa all the best at this new venture,” said Ron Butler of Butler Mortgage, one of the industry’s largest lead purchasers. “[They] have always put the consumer first and I have every reason to believe they will continue to do so. But…I worry that if I am the consumer and I see zero or very little difference between two rates, won’t my instinct be to press the button that is the same logo as the website?”
But we suspect there’s more to the naming decision than meets the eye. According to Laird, when he made his investment in RateHub he ensured that his participation in “A-side” mortgage origination with RateHub Inc. was exempt from his non-compete clause with True North Mortgage. So it sounds like (and we don’t know this for sure) choosing another name for the brokerage may not be an option.
To those who wonder whether the new brokerage will squeeze out competitors by posting the lowest rates throughout the site, Richard says flatly, “Winning all rate categories would alienate our current broker customers. That won’t happen.”
In this author’s view, anyone who operates a rate comparison site has no chance (long term) if his or her site isn’t fair and objective. Brokers and others will see right through you otherwise. For that reason we’d be surprised if RateHub jeopardized its cash cow lead-generation business by exploiting its advantaged position and disenfranchising its lead buyers. (Full disclosure: This author also owns a mortgage rate comparison site, as well as a mortgage broker that advertises on that site and RateHub.ca.)
How RateHub Works
RateHub.ca gets hundreds of thousands of page views per month. That generates 4,000+ leads (i.e., web leads, phone calls and web clicks) per month, 71% of which are for 5-year fixed mortgages.
Its rate tables show the lowest rate on top and consumers pick which mortgage provider they wish to contact. The most popular and competitive rate categories are, not surprisingly, the 5-year fixed and 5-year variable.
The majority of leads go to the provider with the lowest rate. When there’s a tie, the providers are randomly rotated. Richard says that second-place rates also get a sizable minority of leads, especially when the provider has a great brand, like banks and major online brokerages.
The company also purchased a credit card comparison website in November and will roll out comparisons of credit cards, GICs and savings products later this year, putting it in more direct competition with RateSupermarket.ca, the granddaddy of Canada’s financial products comparison space.