After spending six years as the Chief Operating Officer (COO) of Canada’s largest independent mortgage brokerage, James Laird set up his own mortgage company, CanWise Financial, earlier this fall.
Laird’s success has in large part been due to a mastery of leveraging the Internet leads. In the Q&A that follows, he provides some important insights into setting up a broker business for online business.
Efficiency is half the battle when processing lower-margin online leads. How can brokers make their “production lines” more efficient?
First, outline what the lead-handling process will be. Leads are just that — a lead to a potential customer and a potential deal — so they need to be handled quickly and with skill in order to turn them into actual mortgage applications and closed deals.
Then train all your staff so that everyone has the knowledge and skills they need to move clients through the mortgage sales process quickly and efficiently. The speed with which you get to your lead is very important. If that user is waiting to hear from you, they’re going to submit leads elsewhere — and the first person who talks to them has a leg up.
Successful online brokerages are set up in one of two ways:
1. They have one agent handle the file from the initial lead to completion: The “pro” is that clients appreciate having one point of contact and there is no danger of information being lost when a file is handed off to a different person. The “con” is that your top mortgage sales agents spend too much time handling documentation and not selling.
2. They have multiple staff who take the file from the initial lead to a funded deal. The pro is that your top sales people can sell all day long. The con is that the customer experience may suffer as the lead is passed from person to person. If you have multiple people in your ‘production line,’ then the hand-off process has to be seamless or you will lose clients along the way.
How fast does a broker need to respond to initial inquiries, get approvals, respond to subsequent inquiries and close?
As quickly as possible. When someone submits an online lead application, they want to speak to a mortgage professional right away. They submit leads because they don’t have any offers they’ve decided on yet, so they are still considering all their mortgage options. You want to be the first person they talk to, so speed is vital to every broker who plans on buying leads online.
How do you win loyalty with unloyal rate shoppers?
What it comes down to is your level of customer service. There’s an industry stereotype that online brokering entails poor service, but it has to be just the opposite or you’re not going to close any deals. Good customer service in the mortgage industry is mostly a product of creating a team of educated and experienced mortgage professionals who know how to listen to a customer’s needs and wants, and deliver a cost-effective solution that caters to them. Your team must also be friendly and trustworthy. If they are all of the above, then that initial lead won’t just turn into one closed deal, it will turn into many — with satisfied customers referring friends and family.
You’ve had experience with cancellation fees at your prior brokerage. Do you recommend them today?
I think cancellation fees are something every broker can and should consider. We’ve never used them exclusively at any company I’ve worked for. However, in certain cases, when it’s obvious that a customer is simply using us to get an approval — so they can go back and get their bank to beat the rate — then yes, we have got them to sign something first that says if they don’t close with us there will be a cancellation fee. In these situations, we have the discussion and get them to sign off before submitting their applications.
What are the economics and strategy of clicks (paid links on lead sites)? When does it make sense to buy them vs. not buy them?
What a click does, of course, is brings the customer to your website. For brokers who have invested in their own brand and website, clicks make sense. If you have a nice site that converts well, the click will be worth it. If your site doesn’t look so hot and/or doesn’t convert well, clicks don’t make sense.
What should the average broker using rate sites expect for a conversion rate? (Example: 8:1, 9:1, 10:1?)
I would say 9:1 is reasonable. When you ask about conversion rates, though, timeline matters. If a pre-approval is considered a conversion, your rate will be higher — but that’s not a closed deal. Sometimes it takes two to three years for a conversion to become a closed deal, and the longer your time period, the better your conversion rate will be. So, if we are just talking about closed deals, then 9:1 is fair.
Assuming 9:1, that’s $661.05 as a client acquisition cost at $65 per + HST. Given that, what kind of profit expectations should a broker have if they need to price a 5-year at, say, 2.72% today?
Well, profit speaks to your entire business model, not just the lead-acquisition cost, so efficiency of your entire business is what will determine this. How many staff you have working at the brokerage, how much rent you pay for the office space, how much you pay to build and maintain your website and then any other overhead costs you have — that’s all going to cut into it. But a well-run business can certainly convert a 5-year fixed rate of 2.72% with a tidy profit leftover.