How Brokers Operate: Some Stats

Mortgage-Brokers-Personal-ServiceThe vast majority of mortgage brokers recommend suitable mortgages, according to a new report from the Mortgage Broker Regulators’ Council of Canada (MBRCC). That’s vital because, as MBRCC Chair Kirk Bacon states, “Unsuitable mortgages can have a devastating financial impact on borrowers and their families.”

To find out how brokers operate, regulators surveyed 1,113 of them in Ontario, Alberta and Newfoundland. They discovered practices that were mostly reassuring, with a few stats you may find surprising.

These were some key findings:

  • 55% of Ontario brokers said brokering wasn’t their primary source of income
    • Note: The number was only 11% in Alberta and 25% in Newfoundland
    • It would be interesting to know how many consumers are willing to entrust their biggest debt to a part-timer
  • 53% of brokers maintain records of why they make the recommendations they do
    • That’s a problem, regulators say. “…There should be written records” of how the broker’s recommendation corresponds to his/her needs assessment of the borrower, notes the MBRCC
  • 34% of brokers have been licensed for at least five years
    • In other words, only about 1 in 3 brokers have had clients renew a 5-year mortgage
    • This stat primarily includes Ontario brokers (Alberta was excluded from this question)
    • Out of active Ontario brokers, only 1 in 3 do more than 25 mortgages per year
  • 81% of brokers say they “always” search for suitable mortgages from the lenders available to them
  • 69% of Ontario brokers use more than three lenders “on a regular basis” (76% in Alberta)
    • 7% of Ontario brokers use only one lender on a regular basis (and they call themselves brokers?)
  • 40% of brokers do independent research on mortgage products “daily”
  • 2 in 3 Ontario brokers say they represent “both” the lender and borrower
    • 30% say they represent only the borrower
    • 4% say they represent only the lender (if only these brokers admitted that to clients)

The MBRCC outlines three factors in recommending a suitable mortgage:

  • Appropriateness of the mortgage, given the borrower’s needs/circumstances
  • Affordability of the mortgage, given the person’s ability to repay it
  • Alternatives available to the broker
    • Some consumers are under the misconception that brokers recommend mortgages from all lenders. Very few do. In fact, the majority (53%) of brokers say their role is only to educate clients on the mortgages they, the broker, can directly sell
    • While regulators don’t expect brokers to know all products, they do, however, expect brokers to recommend the most appropriate mortgage that they have access to

One other key takeaway from the report involves setting expectations. The MBRCC says it’s vital for brokers and customers to have “a common understanding” about the type of product(s) or advice being provided by the broker. You don’t want a situation where clients think they’re getting objective advice but the broker does 80% of his/her business with one lender. Disclosure is everything.

So, what can consumers draw from all this? Well, there are always exceptions and other criteria apply, but if you’re looking for the best possible service and advice, odds are you’ll get it from a broker who:

  • Makes brokering their full-time income source
  • Has been in the business for at least five years (or is under the direction of a broker who has)
  • Compares all of their lenders to see which offers the most suitable mortgage (or knows which do, without needing to compare)
  • Documents why they make the recommendations they do
  • Regularly uses more than 3 lenders
  • Follows the rate and mortgage market daily
  • Does a comprehensive assessment of the borrower’s needs and mortgage affordability
  • Believes they represent the borrower, but recognizes their obligation for full disclosure to the lender

Sidebar: Here’s more on the report if you’re interested: Link

The MBRCC says it is also “currently working together to develop national licensing education standards and a harmonized course accreditation process.” That’s a sensible move that should eliminate untold overlap in the licensing process, as well as inefficiencies that prevent brokers from operating across the country.

Rob McLister, CMT

  1. 53% have other professions.

    Honestly, that number is interesting and thought the number would be lower.

    I suppose having people in other professions is a good thing. It may mean mortgage professionals are writing mortgage business to help compliment their other lines ? If so, the quality of business surely is better too.

    1. @Victor

      Like a realtor who is also a mortgage broker?

      I don’t think you can wear two hats that require full-time attention and stay on top of your game in each. While the realtor is selling houses half the time, a dedicated mortgage broker is becoming more experienced and knowledgeable in mortgages. You can’t compare the two.

      1. @ Mr. Melanson,
        Good point about realtors, and I agree. In their defense, realtors pre-qualifying their own customers for a mortgage is important to their real estate business. . We have seen realtors hand-off mortgage clients to our other agents, just so they can do the proper job in both sides of the real estate transaction–realtor and mortgage.

  2. If a Mortgage Broker is doing it part time, it’s because they want to. Perhaps they are working towards full time. If they are doing it part time, however, that means they have another source of income. It also means they are not relying on the mortgage commission for their livelihood which, in my thoughts, would make them more desirable to use. They are not going to push something on me just to make a sale.

  3. No point in re-launching the full time / part time debate but thanks to Rob for putting the info out. It is interesting how many do less than 25 mortgages a year. That means many are doing 12 or less. I don’t know how anyone could keep up with all that goes on in the mortgage world on 1 or 2 mortgages a month.

  4. I think as long as you do your research into which broker is best suited for your needs, they should provide you with what you and your family needs. In this day and age, we have a powerful tool, the internet, to search and read up on certain companies/people. Thanks for sharing this post, it was interesting to see the statistics of these Canadian provinces.

  5. Some people are in this business for the wrong reasons and most of the time the reason they have a license is because they want an additional income stream despite the fact they already have full time work. Instead of wasting money on licensing fees and E&O for one or two deals a year, why not work out a referral arrangement with a competent professional if you’re only after money? tThose who are part time are not dedicated to doing the full time work it takes to succeed in this business…. that is a full 50-60 hour work week and possibly more at first. When you have another income stream coming in you become complacent about succeeding. It goes from being your core activity, which is what it should be if you are a true sales professional, to being a hobby or just another thing to call yourself to generate a little extra income. The problem with that is while you think that you are doing the smart thing, all you are really doing is a great disservice to your clients. Does a true sales professional in any profession really call themselves a professional by doing two or three deals a year? Going out there with your nuts all in is the only way you will succeed because you don’t have a choice. Failure is not an option. But when you have other ways to make money, the drive to become great (thereby truly looking after the best interests of your clients) takes a back seat. A mortgage is the biggest financial decision most consumers will make in their life time. If you are a consumer taking advice from someone who is doing this work on a part time basis, don’t be surprised if you end up in a product that wasn’t right for you that can end up costing tens of thousands of dollars to get out of down the road. I have seen the consequences of people working with part time Realtors, either because they are family or a friend and they feel obliged to work with them…. it’s a decision they regretted! Apply the same logic to mortgage, insurance, investments, etc.

    James Melanson:

    Your logic is a bit misguided…. given the income potential in this business anyone who is not in this business full time to capitalize on the full earning potential should not be in this business to begin with. Those who say they get into business whether it’s mortgages, real estate, insurance, you name it, because they want to help people – that’s great! But how can you help people when you only do two transactions a year, and would you as a consumer trust someone with that level of experience to facilitate a transaction worth hundreds of thousands (if not millions) of dollars?

    1. Thanks for the Post Lior. There are always exceptions to the rule but your reasoning is nonetheless valid. The problem is, even if an agent is a great part-timer, he/she is in a small minority and it’s hard for consumers to find that exceptional individual. That’s why most folks are better served by going with the odds and choosing an experienced full-time professional — for the reasons you stated.

      This is by no means meant to write off part-timers and new agents. We all started at mile zero. But until you can make it full-time and get a few years under your belt, there are other roles (entry level underwriting support or deal fulfilment for example) where you can amass the experience needed to properly counsel borrowers.

  6. I don’t think its a question of part-time vs full-time since that does not define your competencies, however, it may be percevied as such.
    I believe the industry is lagging in regulatory bodies. Regardless your status as a broker, all professionals need to be better regulated to ensure they are offering an optimum service to the public.

    1. Do something part time and you get part time results. There is no way an agent can work 20 hours a week and amass the same results and experience as if they worked 40 hours a week.

    1. I don’t know any successful full time brokers who have gone part time. Nor does it make a difference. As I suggested before, it is almost impossible for a broker to keep on top of changing trends, policies, products and pricing by working a fraction of the time.

  7. Many assumptions are being made. Not all full-time sales people put in the effort to keep on top of trends and new products as is being suggested in these comment. “40% of brokers do independent research on mortgage products “daily.”

    A good point was brought up earlier that if you are a full-timer, your sole income relies on making deals for your clients, which would put into question how much you are actually working to find your client the most suitable product vs. just making deals to get your next cheque.

    As a person who is genuinely interested in the Mortgage industry to help people, in an honest and up front fashion, I would be starting out as a part-timer. Why? Because I have a mortgage of my own and expenses I need to cover somehow until I gain the experience needed to make enough deals in a year to support basic necessities of living. I have a full-time job, but am extremely flexible and can work remotely at any time. I am also a do it right or do not do it at all personality so I would invest my time and energy into attaining this license only if I feel I could do it well and be a successful, and honest, tool for clients.

    What defines a successful person is their drive and work ethic and I think it’s slightly ignorant to assume that someone who does this job full-time is automatically considered with a higher drive and work ethic than someone who may need, or choose, to do it part-time.

    IF anything, for a part-timer to invest the money and time to earn their license suggests a pretty different story to me. They do not need to do this, they want to! People who explore new ventures because they want to, typically invest more effort and really have to grind to get anywhere. I would prefer that approach and drive than working with a full-timer who is relying on you to keep their lights on and may have some ‘go-to’ lenders and products that they fall back on as easy sells, instead of actually digging, analyzing and presenting what is best for their client.

    That’s just my two cents, which is obviously biased, but I have thought about this at length since I would love to eventually transition to make this a full-time career if/when it makes sense to do so down the road. Granted, any part-timer should be working closely with a seasoned mentor, who can provide the experienced advice to match the fresh drive and excitement of a newbie.

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