After months of preparation, Manulife Bank officially entered the broker channel today.
It is a major win for brokers and the bank alike. The former gets important new balance sheet products to sell (e.g., the Manulife One) while the bank gets a dramatic boost to its distribution capability.
Here’s a quick rundown on what you need to know as a broker:
Broker Access & Training
- Approved brokers must complete a certification program for the Manulife One. It covers how to sell the M1, the types of clients suited for it and the process of inputting a deal. Manulife VP of Retail Sales Jeff Spencer says the bank will be “very selective” about who gets to sell the M1, which is different from most readvanceable mortgages. “Manulife One is a solution to run your entire life from. It’s not a line of credit, it’s not a traditional mortgage.”
- The majority of brokers will not have direct access to Manulife, but some will have indirect access through broker network deal hubs.
- “We do look at this as being an exclusive opportunity to deal with Manulife and Manulife One products,” says Spencer. “Because we are looking to have deeper discussions around cash-flow management, debt management and the tailoring of Manulife One to individual client situations, we think it’s important to keep it exclusive.”
- Paradigm Quest will underwrite and fulfil Manulife’s brokered mortgages. The partnership lets the bank scale much faster, ensures a familiar process for brokers and ensures resources aren’t diverted from its adviser channel. “We’ve been working with advisers for a long time,” Spencer says. “We do not want to upset those relationships.” More than 70% of Manulife’s mortgage business comes from adviser referrals. (We’ll publish more insight into the Manulife/Paradigm agreement this week.)
- “Once deals have funded, the servicing will [be done by] the bank,” confirms Spencer.
- Manulife mortgages are full-featured products with what we call “fair penalties” (relative to its Big 6 bank competitors anyway). In other words, prepayment charges aren’t based on inflated posted rates, but rather the discounted rates on Manulife’s website.
- The Manulife One will be offered through brokers in first position only. An M1 in second position “hasn’t necessarily produced the right type of results for us,” Spencer says. “We haven’t seen enough actual first positions ending up with us in the longer term, and that’s obviously the main reason for coming out with the product.”
- Broker clients can get an M1 with one all-in-one account and one sub-account at closing. After closing the client can call in to open additional sub-accounts. The $14-a-month fee covers multiple accounts. (By the way, if there’s one thing that critics and competitors will target, it’s this fee.)
- “Manulife One for Business is a product that we’re making available to the broker community as well. That will be a phased-in process. That’s a separate project from this one. We’re handling all that underwriting in-house.” This commercial version of the M1 goes up to 65% LTV and is currently in pilot with two firms.
- Manulife will not offer rental financing or non-M1 conventional financing at launch, but hopes to add those products later this year.
- The Manulife Select high-ratio mortgage can be configured as a hybrid mortgage with part in a fixed rate and part in a discounted variable rate.
- Manulife’s Select mortgage comes with a high interest savings account by default.
- Brokers are compensated on the approved limit of the M1. They make 15 bps more if at least 25% of the M1 is in a fixed-rate sub-account.
- The bank is offering special incentives for broker-owners. “We want to support the person who’s paying the rent and has the sign on the door,” Spencer says.
- Manulife has a mini sales army of 95 business development managers and 16 district regional vice presidents, notably more than most broker lenders. These BDMs will work with both brokers and advisers. They’ll go the extra mile, Spencer says, by giving brokers ideas on data mining client databases, giving presentations to influencers and referral sources, and providing brokers with detailed debt management training, among other things.
Manulife is clearly entering the broker market with full force, and after considerable planning. It’ll be intriguing to watch its impact on lender market share over the next 18 to 24 months.