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On Monday night, two leaders in our business will receive one of the highest honours in Canada’s mortgage industry. Both will join an exclusive group of 40 individuals who can call themselves Mortgage Hall of Fame inductees.

Gary Mauris, co-founder and President & CEO of Dominion Lending Centres and Art Appelberg, president of Northwood Mortgages, will be inducted next week at an awards ceremony during Mortgage Professionals Canada’s 2016 Mortgage Forum.

Both men have each contributed immensely to the growth of Canada’s mortgage industry. Here’s a closer look at their storied careers, and thoughts from each of them on what they learned along the way.

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Art AppelbergArt Appelberg, AMP

President of Northwood Mortgages and an MBA graduate of the Schulich School of Business at York University, Art Appelberg has built a 30-year career in banking, accounting, credit risk, mortgage origination and lending. 

An entrepreneur at heart, Art became an independent mortgage agent in 1989. Seeing its potential, he went on a year later to establish his own brokerage, Northwood Mortgage. Since then, Art has grown Northwood into one of the premiere full-service mortgage brokerages in Canada, winning many industry awards, including CMA’s Lifetime Achievement and CAAMP-IMBA’s Outstanding Contribution to the Industry awards.

In his 10,000 sq. ft. mortgage office, Art also houses a successful mortgage investment company. More recently, he opened an in-house financial centre to offer his clients a one-stop-shop for all their financial, legal, real estate, investment and insurance needs.

At the core of Art’s strategy is his belief in nurturing the concept of a “Professional Community” that incorporates full-time mortgage placement officers, as well as trainers for all Northwood Mortgage agents.

With a passion for fresh industry ideas and a never-ending appetite for continued growth, Art continues down a road of success in this business, one he believes promises tremendous opportunity to come.


Read CMT’s one-on-one Q&A with Art


 

Gary MaurisGary Mauris, AMP

Gary is the co-founder, President & CEO of Dominion Lending Centres, a company he started from nothing ten years ago with partner Chris Kayat. Today, the DLC group of companies accounts for almost 40% of all broker originated mortgages in Canada.

Gary has entrepreneurship embedded in his DNA, having sold two prior successful companies to the public market. He’s been a finalist for Ernst & Young’s Entrepreneur of the Year and earned the 2016 Tri-Cities Chamber of Commerce Business Leader of the Year. His companies have won too many industry awards to count, and DLC has been recognized by Profit Magazine one of Canada’s fastest-growing companies.

As a business leader, Gary is called upon to share his views with media throughout Canada. He was part of the 2011 Pre-budget Consultation process with the-then Federal Minister of Finance, Jim Flaherty; he was selected to be part of CBC’s “Face the Nation” in 2016 and he had an open and frank discussion with Prime Minister Justin Trudeau on topics key to our industry.

Gary has led multiple socially conscious initiatives, including being co-founder and president of I AM SOMEONE Ending Bullying Society. He recently co-founded “Bikes for Kids,” a National program that collects new bicycles for underprivileged children across Canada. Whether it’s in or out of office, Gary is one of the most accomplished recipients ever to win MPC’s coveted award. 


Read CMT’s Q&A with Gary


Story by Steve Huebl & Robert McLister

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business acquisitionThere’s a race underway in the broker industry, a race for scale. Brokerage firms are uniting to achieve better economies in a shrinking margin environment.

And the mega-network trend is fast becoming a three-horse race, with DLC, Group Multi-Prêts Mortgage Alliance (GMP) and VERICO being the volume leaders, in that order.

Earlier this month GMP announced that it had narrowed the gap with volume front-runner DLC by purchasing 100% of Invis and its sister company Mortgage Intelligence. That purchase made Group Multi-Prêts Mortgage Alliance the largest full-service brokerage operation in Canada with 3,000 brokers and loan volume of $22 billion annually. (DLC says its run rate is $39 billion this year.)

We caught up with some of the key players in GMP’s acquisition: Luc Bernard, President and CEO of Group Multi-Prêts Mortgage Alliance; Michael Beckette, CEO of Mortgage Alliance; and Cameron Strong, CEO of Invis Mortgage Intelligence (Invis-MI).

Here are excerpts from that conversation:

On the impetus for the acquisition

  • Cameron: “…we looked at it and said, ‘…It makes a lot of sense for these full-service companies to combine and come together.’ We thought that the clear winners were going to be the brokers here…”
  • Michael: “It’s not about consolidation…Invis-MI was never for sale. It’s about opportunity…I think that’s [a distinction] that’s really, really important.”
  • Luc: “I can confirm that the organization [Invis-MI] was not up for sale. It was really through discussion and sharing the vision that we kind of reached a meeting of the minds. The rationale behind the transaction is quite simple. The [broker] ecosystem is evolving rapidly. We had another proof [with the latest mortgage rules]…In order to mitigate those [challenges] and capitalize on new opportunities, and allow essentially our brokers to capitalize on these opportunities, size does matter now.”

On the need for a strong full-service brokerage for consumers

  • Cameron: “…the changes and legislation never stop, as you know. The complexity of mortgage rules keeps growing, and it’s difficult for some people with [unique] financial situations (like self-employed borrowers)… I think that’s what makes brokers more valuable as specialists. Brokers and consumers face an ever-changing business and regulatory environment… We don’t believe (the consumer) can do this alone. We think the full-service model is effective and resonates, and we think that that is an important model going forward.”

On how GMP will compete with growing online competition (i.e. discount brokers, banks’ forays into the online channel, rate comparison sites, etc.)

  • Luc: “There are many segments, and we’re going to adapt our offering to segmentation. We’re not going to disclose our strategy… but we have the talent, we have the cash, and we have the technologies to support our brokers in reaching the consumer [online]…”

On the benefits of creating a larger brokerage

  • Luc: “Size brings you data, big data, and that gives us and the broker the ability to better understand and anticipate the need of the consumer.”
  • Michael: “Size matters as far as investment and technology services…[It] matters as far as the relationships that we can develop with lenders…One of the benefits of size that has not been available in the brokerage industry is the synergy of resources. We’ve got two profitable companies coming together to invest in systems, services, resources and products for brokers instead of doing it on an individual basis…”

On eliminating duplicate technology and excess staff

  • Michael: “I think it’s very, very important to understand that there’s two types of synergy, and the type of synergy that we’re focused on is on the revenue side, and investing twice as much in developing resources rather than looking at, ‘Okay. Slash this. Slash that.’”
  • Luc: “Each company has their best practices…so it’s now time to cross-pollinate those best practices across the organization. For instance, in mobile applications, lead generation, integrated technologies and new revenue [opportunities]. Those are the things we’re going to look at and make sure every [broker] in the group will have access to those…and to the best practices that are already in place.”

On the purchase price

  • Luc: “…it’s in line with the transactions that involved another company last June [DLC]…The price that was paid to acquire 100% of the shares [of Invis] was in line with the market. Let’s put it that way.”

On plans to better equip brokers

  • Michael: “We, as an organization, need to arm our brokers with the opportunity to be able to deliver a service the way the consumers want it delivered. So if somebody wants to go online, we have to arm our brokers so that they can be in that space. If our brokers want to get business from referrals from realtors, we want to help them do that. If our brokers want to develop their local marketplace and create a brand, we want to help them do that.”
  • Luc: “…we’re deploying a new revenue strategy based on the success Cam and his team have had throughout the years…a new…approach when it comes to distributing the insurance product.”

On future opportunities

  • Luc: “Our objective is to double the size of this organization, so now we’re roughly at $22 billion (in volume). We would love to reach the $40 billion mark in probably three, four years… but 50% of this growth would come from other acquisitions and 50% would be from organic growth.”

 

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Andy CharlesI had a chat with Canada Guaranty CEO Andy Charles today. Like most industry leaders, he’s concerned with maintaining stability in Canada’s high-value housing markets.

As a mortgage default insurer, Charles knows a thing or two about risk mitigation. So we asked him for his take on raising minimum down payments in order to create a risk buffer and slow real estate valuations. He made three points of note:

  1. Regulatory changes over the last several years have made the first-time homebuyer a modest player in the overall housing market:“The changes made to the high-ratio mortgages (first-time homebuyers) the past several years (reduced amortizations, debt servicing restrictions, etc.) have served to significantly reduce the size of the first-time homebuyer segment. It now represents just 30% of Canada’s housing market with the significant majority of home financing utilizing conventional mortgages.”
  2. Increasing the minimum down payment would materially hurt Canada’s smaller urban housing markets:“Raising the minimum down payment to 10% would have the unintended consequence of negatively impacting housing markets in almost all other areas of the country. Home prices are soft and either flat or moderately decreasing in almost every city in Canada other than Toronto/Hamilton and Vancouver/Victoria. Housing markets and first-time homebuyers in Montreal, Halifax, Calgary, Edmonton, Winnipeg, Regina, and Saskatoon, not to mention other smaller cities, would very likely experience negative economic impacts due to increasing the minimum down payment at a national level.”
  3. GTA/GVA price increases are not being driven by the first-time homebuyer:“The large increases in single-family home prices in the GTA/GVA markets are not being driven by the first-time homebuyer with a 5% down payment. The 5% down payment segment of borrowers are generally not purchasing single-family dwellings in the GTA and GVA markets, as a very significant portion of these homes are priced above the $1 million value restriction for high-ratio purchases. Raising the minimum down payment in these markets would have very little, if any, impact on the trajectory of GVA/GTA single-family house prices in the foreseeable future. The average mortgage size of the first-time homebuyer is approximately $300,000.”

Charles added in closing:

“While I share the concerns regarding these specific markets, we take the view that raising the minimum down payment will penalize the first-time homebuyer, risk dampening already soft housing markets in most of the country, and will do little to help achieve the desired public policy of moderating the price growth in the GTA and GVA markets.”

Charles is one of an increasing number of industry leaders publicly weighing in on mortgage policy as of late.

 

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Kathy GregoryManulife had a big decision to make: how to enter the broker channel as quickly and efficiently as possible.

Part of the challenge was how to scale its underwriting operation to handle the flood of new broker business. That led to a conversation with Paradigm Quest, a firm that processes, funds and services mortgages for third parties. That conversation ultimately resulted in Paradigm handling all of the underwriting for Manulife’s brokered residential mortgages.

It was the second bank announcement of its kind, following First National’s successful underwriting partnership with TD in 2014. For firms like Paradigm, First National and MCAP, 3rd-party underwriting presents a key strategic growth opportunity, and they’ve made material investments to service new lenders.

In our crystal ball, this is just the beginning of underwriting outsourcing. It’s a matter of time before more lenders realize the economics for themselves. In turn, it seems likely we’ll see more lenders enter the broker space in this very same manner. 

For more on this trend, and the Manulife deal in particular, we spoke with Paradigm Quest CEO Kathy Gregory. Here is that interview:

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CMT: This is the second household name bank to outsource its broker underwriting. Is this becoming a trend?

Kathy: Outsourcing business services is common practice already…[and it] isn’t new to the Canadian mortgage market…We currently have multiple clients who outsource their underwriting and servicing business too, for both mortgages and lending…If you look back over the past 20 years, closing services, appraisal management, collections, payroll services, call centre activities, credit card processing, etc. were all conducted internally across most lenders. Much of these services are outsourced today…Outsourcing other service elements of the mortgage process can only enhance the evolution and innovation of the mortgage experience for borrowers via new technology. This is what we are solely focused on and [it] will ultimately benefit the entire market, including the originator and borrower.

CMT: What is so appealing to lenders about offloading the key function that mitigates their risk (underwriting)?

Kathy: Outsourcers are specialists in the services they provide. Their focus is to provide their partners with optimal business solutions. We are the domain experts in the mortgage space, both from the borrower and originator experience as well as risk management. It is expected that business process outsourcers (BPOs) will perform much better than corporations who decide to outsource.

BPOs continually strive towards process improvement and these improvements translate to big wins for their corporate partners and their borrowers. Bottom line is, we aren’t competing for IT resources within a larger organization. Paradigm has placed huge emphasis on investing in our technology and processes and this has demonstrated significant value to our corporate partners in enhancing their day-to-day operations and ensuring their portfolio’s consistently outperform the market.

CMT: In general terms, what are the economics that make outsourcing underwriting so attractive?

Kathy: I won’t compare actual cost savings, as they vary significantly by client. It is obvious that when you outsource, you are looking for a lower cost solution. However this isn’t generally the only key driver. There are two other key elements and improvements for organizations looking to outsource. First, speed to market in terms of technology development and process change. Our end-to-end platform is a lending platform and has a rules-based configuration. Thus providing the ability to better execute new initiatives, improve the originator and borrower experience. Second, our key focus and expertise on a single market, along with our domain expertise allows us to singularly focus on mitigating specific risks associated with the [mortgage] business

There are a lot of friction costs associated with revamping internal processes to meet regulatory requirements, or for cost savings. Often there is a learning curve associated with process engineering. [Lenders] typically incur huge costs with hiring consultants, forming internal process engineering committees and training staff. When you outsource to a BPO, much of that friction is taken away…

Paradigm logoCMT: Do you think lenders will ever underwrite offshore, in places like India or the Philippines?

Kathy: It’s one thing to outsource non-customer facing processes outside of Canada, e.g. IT development, but it is much more difficult when you [must] have contact…with both borrowers and originators. There are not only language issues, but cultural issues depending on where overseas you outsource to. Additionally, there are significant offshoring regulatory restrictions when it comes to customer data that make this difficult. When you layer on the unique regulatory requirements of the mortgage business in Canada, I am doubtful that customer facing outsourced processes will become a trend. As for Paradigm, we are very proud of our roots as a Canadian Company, and…as the founding CEO of this company, outsourcing jobs away from Canadians is NOT an option for me.

CMT: How far away are we from fully-automated underwriting for clean AAA deals?

Kathy: I think Canada is very close to seeing the introduction of much more mortgage automation in the very short term, as it relates to the client experience. PQ has emphasized the importance of digitizing our process for the last several years because we understand the importance that technology will play in the upcoming years. This market evolution is evidenced by the recent Quicken Loans launch of the Rocket mortgage. Canada is very close to seeing something similar.

However, fully automated underwriting with little or no touch points in the due diligence process seems unlikely in the short term. After the U.S. crisis where common sense lending took a back seat, risk mitigation is critical across this market and will continue to be…

CMT: Thank you, Kathy.

 

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Martin_Reid_Home_TrustEarlier in the week we ran an interview with Home Capital Founder Gerald Soloway, who’s retiring this spring. His career accomplishments leave big shoes to fill, and that’s where our next interviewee comes in.

Home Capital’s soon-to-be-CEO Martin Reid is dedicated to boosting the company’s broker market penetration and driving its stock to new highs. But that won’t be without challenges.

We were curious about Martin’s take on some of the risks Home Trust faces, so we asked him about them, and he graciously answered.

Here is that interview:

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CMT: How has last year’s experience with document fraud made Home a better lender?

Martin: While Home Trust has always had a strong risk-management focus, it is fair to say that this incident has served as a catalyst for us to broaden our scope and further strengthen Home for the future. At the same time, we understand that it is critical that we not lose sight of the need to maintain a strong, broker-first focus for which Home has long been known. We feel that the revamped processes we have put in place achieve this balance and we are very pleased with the progress we have made on this front.

CMT: Why are the shorts wrong about Home Capital?

Martin: In my view, the shorts are not just wrong about Home Trust, but they’re missing the mark on the entire Canadian housing sector. Certainly house prices will fluctuate in response to market conditions, but the Canadian housing market is not repeating the experience that led to the U.S. crisis.

One of the leading contributors to the U.S. housing collapse was a dramatic increase in lending to unqualified borrowers. In Canada, mortgage lending may be on the rise, but with the regulatory tightening of the last few years it has been to high quality borrowers who are purchasing properties in an active, robust market that continues to be supported by strong fundamentals.

There are other important differences as well, not the least of which is that in Canada, you cannot simply walk away from your property without suffering significant and long-lasting damage to your credit. Alberta is an exception in this regard, but during the height of the crisis in the U.S., holders of underwater mortgages were handing in their keys in droves. This led to an oversupply of properties adding further downward pressure on prices.

CMT: What is it going to take to knock down the Toronto and Vancouver housing markets, and how do Home’s stress tests suggest it would fare in a 20% correction?

Martin: As long as demand for homes in Toronto and Vancouver continues to significantly outpace supply, we expect prices to continue to rise in these two cities, albeit likely at a slower pace than what we have seen the last couple of years. In fact, in Toronto February results show that sales were up 21 percent while prices rose 15 percent compared to February 2015. Given this level of activity there is no indication that the supply-demand imbalance is set to narrow any time soon. This is especially true of the single family homes.

It is worth noting that while detached units remain in high demand, the luxury condo market in both cities does appear to be over-supplied and this could lead to a levelling or softening of prices. This does not represent a risk to Home Trust as condos represent only about 7% of our business with much of that in townhouse-type condos.

Factoring a 20% correction in prices into our models, we would obviously see an impact on our business but it would not automatically result in a dramatic increase in losses. It might require a slight adjustment to our work priorities around originations and possibly an increase to the collections side of our business. Canadians will typically continue to make their payments even when the value has dropped. Even so, a 20% retracement is highly unlikely in the face of the significant demand for resale properties, and until this demand eases, a correction seems unlikely. What we are more likely to see would be a levelling off of prices in the Toronto and Vancouver markets.

CMT: Where are the biggest growth areas going forward? Is “A” lending, with all the competition, still a promising long-term profit generator?

Martin: Our primary growth area will continue to be our traditional “Alt A” business. We obviously know this segment well and feel there is significant capacity to expand in the coming years as more borrowers find they may no longer qualify for prime mortgages.

Regulatory tightening in the past as well as the Big 6 banks tightening in response to a slower macroeconomic environment will cause more strong quality borrowers to fall short of the lending criteria required by the large banks, hence providing the opportunity for Home.

We also expect to see an increase in the ranks of workers categorized as self-employed, as well as new Canadians with limited Canadian credit history. Both groups have traditionally been under-served by the major financial institutions and for these borrowers we have our Classic mortgage product.

While the “A” side has not been our core focus, it does allow us to offer a full suite of competitive products to the mortgage brokers. In 2015 we launched our “Ace Plus” product that caters to those individuals that just barely miss qualifying for a prime insured mortgage. This is really new territory for Home and we see lots of growth in this product in 2016. We see an opportunity to attract more borrowers who just miss qualifying for an insured mortgage with the banks.

CMT: Thank you, Martin.

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Gerald SolowayIf you look at all the people still in the mortgage business, few have changed the lending landscape like Gerald Soloway.

A former lawyer, Mr. Soloway built a small savings and loan company with 12 employees into Canada’s largest alternative lender with 700+ employees. In the process, he created over $2 billion of shareholder value.

Gerry was a trailblazer in lending to self-employed borrowers and those with meagre credit histories. His Home Capital Group is a testament to the successes possible in non-prime lending.

We were thankful to have a few minutes of Gerry’s time last week for some Q&A. He shared thoughts on industry regulation, Home’s risk-management improvements and the changes brokers can expect in the years to come.

Here is that interview…

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CMT:  Gerry, it’s been almost three decades since you started Home Trust. If you had to look back and pick the two or three biggest changes you’ve seen in the mortgage industry since then, what would they be?

Gerry:  There have been many changes to the mortgage industry over the years, but if I were to narrow it down to just a handful of the events that I believe have had the greatest impact, I would say it is the tremendous increase in the use of mortgage brokers. As more borrowers discover the benefits of working with a mortgage broker, I expect we will see an even greater number of individuals bypassing their financial institution in favour of dealing with a broker.

This rise in the use of brokers goes hand-in-hand with the increase in the number of responsible borrowers who, despite having an adequate down payment, and who have the ability to manage their payments, still get turned down by the major banks. These individuals deserve greater consideration and this is where mortgage brokers working with lenders like Home Trust provide an invaluable service.

It goes without saying that there has been tremendous regulatory change in the 30 years that I’ve been in the business and there is little doubt that more changes are coming to our industry. I see this as an opportunity for the broker community as borrowers will need the specialized services and knowledge of a mortgage broker to help them navigate the requirements.

And of course, I must mention the extremely low benchmark interest rates and the effect this has had on the industry for close to a decade now. I know there are many out there that are too young to remember the sky-high rates of the early 1980s, but it was not all that long ago that rates touched 20% and remained in the double digits through the 80s and well into the 90s.

CMT:  Why was now the right time to retire as CEO?

Gerry:  I would have thought that for someone approaching their 78th birthday this summer, that it would not be any great surprise to be contemplating retirement. My wife of 56 years and I are both in good health and it just seems that now is a good time to not be working full time.

This decision was very easy to make knowing that Home Trust is in good hands with Martin Reid at the helm supported by an extraordinary team of talented professionals. Martin has been president for six years and both the board of directors and I have the greatest confidence that he will lead the company to even greater success in the coming years.

Of course, I’m not retiring entirely; I will have the opportunity to continue to serve Home as a director and I am looking forward to working closely with the board and the senior management team.

CMT:  In hindsight, what would you have done differently to mitigate the fraudulent applications sent to Home Trust in 2014-2015?

We do acknowledge that the issue with the suspended brokers highlighted a need to improve our process around income verification. Although our practices at the time were consistent with industry standards and requirements, this event has underscored the importance of continually reviewing and evaluating risk-management controls.

Risk management is critical to our business and Home Trust has always had well-defined protocols in place. We have been particularly diligent in our appraisal process and we use a group of outside appraisers who have proven themselves to be very careful and accurate in their evaluations. We also have our own in-house appraisers who review this work and on the rare occasion where there is any concern regarding the accuracy of the original appraisal, one of our Home Trust appraisers will conduct a follow-up.

As part of our credit check on all applicants, we pull credit bureau reports directly so we can ensure that all borrowers have a solid credit history. This is also a critical step in validating the credit worthiness and background of  all our borrowers.

As a result of this experience, we have since enhanced our processes and strengthened controls including the direct confirmation of income before advancing the mortgage on all applications. I believe it’s worth mentioning that our response to this situation was widely supported by the broker community.

CMT:  What’s your prediction for how industry competition will evolve by 2020?

Gerry:  I expect there will be a number of changes in the industry over the next few years but these are really just a continuation of the events we are seeing now. I strongly believe that the number of clients requiring the services of a mortgage broker will continue to increase in the years ahead. This will be due largely to the regulatory changes that have tightened the lending criteria thereby making it more difficult for individuals to qualify for an insured mortgage.

In fact, I think it is entirely possible that requirements for insured loans could see a further tightening. I would not be surprised to see the minimum 10% down payment now required on the portion of the price exceeding $500,000 to be extended to the full price of the property.

Because of the regulatory burdens placed on regulated deposit-taking lenders, I do not anticipate an increase in the number of regulated lenders; in fact, there may well be a consolidation in the numbers as small companies may find it too difficult to be profitable on a small-scale basis. This was precisely what led to Home Capital’s purchase of CFF Bank last year and we are well on the way to fully integrating CFF Bank into Home’s operations.

Finally, it is a certainty that the Internet will continue to play an increasing role in our industry. The ease with which lenders and brokers can connect and transfer information has revolutionized the way we manage our business and has led to a dramatic increase in efficiencies. Home Trust continues to leverage these technologies with the development of tools like our new online broker portal, Loft, which greatly improves the ease with which our team interacts with the broker community. Of course, nothing will ever replace the personalized service and the individual relationships we have developed over the years.

CMT:  Many thanks, Gerry.


Coming Soon: CMT will feature its chat with Martin Reid, Home Capital’s upcoming CEO, later this week.

 

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Paul Taylor HeadshotAfter a 5-month search and a laborious selection process, Canada’s largest mortgage association finally has a new executive leader.

Mortgage Professionals Canada announced today that, effective Monday, Paul Taylor will be its new CEO.

Taylor, 40, comes with ample organization experience. He was formerly the Director of Operations for the Insurance Brokers Association of Ontario (IBAO) for 5+ years, and in the association’s management for five years before that. Coincidentally, IBAO is the same group that former CAAMP CEO Jim Murphy moved to last July.

We had a chat with Paul to get his take on some important issues that Mortgage Professionals Canada members are pondering these days. He graciously agreed, and here is that interview:

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CMT: We appreciate your thoughts on these topics, Paul—especially since you’re not officially in the saddle just yet. Let’s start with an “easy” one. What do you feel are the top two or three issues Mortgage Professionals Canada needs to address for its members?

Paul: Our two main priorities at Mortgage Professionals Canada revolve around public relations and government relations. On the consumer-awareness front, our new revitalized Mortgage Professionals Canada brand offers more opportunities than ever before for us to proactively reach out to Canadian consumers and explain the value of using a mortgage broker. In 2014 our Value of a Mortgage Broker Consumer-Awareness Campaign made more than 14 million viewer impressions via online, digital, mobile, social media and print mediums, both nationally and locally. I will be connecting with the media and helping generate articles to put the spotlight on our industry so we can continually demonstrate our value.

When it comes to government relations it’s more important than ever to ensure we’re representing members’ needs, with both the provincial and federal governments and with regulators, in order to continue providing Canadians with access to choice, advice and affordable financing options throughout the mortgage process.

 

CMT: OK. Any idea how long it might take to see further meaningful progress on these issues?

Paul: These two key objectives at Mortgage Professionals Canada are ever-evolving. A lot of meaningful progress has been made over the past year, prior to my arrival, with such things as the launch of our new brand, the consumer-awareness campaign and our involvement in government issues like B.C.’s disclosure rule change discussions. Federally, the board and staff at Mortgage Professionals Canada have already started our work with the new government. We look forward to continued cooperation in Ottawa, and to ensuring that the importance of the broker channel and the mortgage industry remain at the forefront.

We will continue to create/evolve programs and lead discussions to better our industry and educate consumers.

 

CMT: What elements of your insurance association experience can you leverage to help Mortgage Professionals Canada further its goals?

Paul: The pillars of the respective associations’ goals are essentially the same: Provide advocacy for the membership to government, regulators and consumers; develop and provide meaningful education to members and promote overall professionalism of the industry; and continue to ensure value of membership to attract new, and retain existing, members. Throughout the 10 years I worked at IBAO, I spent time in roles managing education, developing and implementing member services offerings to improve membership value, and coordinated and delivered messaging to governments and regulators to promote changes in regulations for the benefit of brokers and their consumers. Mortgage Professionals Canada has a great team of professional association staff already in place who are skilled in their respective roles. My experience will hopefully help the team work together to elevate the existing membership offering in these three key areas.

 

CMT: How has online technology changed the insurance business–e.g., Has technology created disintermediation or compensation/margin compression in the insurance market? Do you see any parallels or key differences with the mortgage business? 

Paul: Insurance brokers, much like mortgage brokers, are entrepreneurial in nature. They are also the sales force of the insurers they represent. Many of the brokers themselves are champions of technology and are innovating daily to capture consumers who may desire a non-traditional purchasing experience, either through web or mobile technology, or through social media and targeted niche purchase groups. Technology is not in of itself a threat or a creator of disintermediation, but brokers do need to experiment with various marketing and sales practices that are non-traditional if they don’t wish to be left behind. Brokers are just as capable of owning space in these areas as insurers, lenders and banks, and, in most cases, they’re better suited to that space and role as the sales presence.

There are more similarities than differences. The nature of the independent advice mortgage brokers provide as part of their overall service is a key differentiator that needs to be vehemently promoted to consumers regardless of the technology involved in a sales or service model. The basic value proposition of the broker needs to remain forefront regardless of any technology implemented to improve a consumer’s overall experience.

 

CMT: True enough. Last question: How closely do you think provincial broker associations and Mortgage Professionals Canada should work together? Or are they sufficiently productive working apart?

Paul: In December we were pleased to announce a formal partnership with the Alberta Mortgage Brokers Association (AMBA) in order to work together to streamline events and collaborate in other areas. This is definitely a step in the right direction. All members benefit when industry associations collaborate and we will continue to explore any opportunity that creates greater efficiencies for the industry.

 

CMT: Thank you Paul.

 

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DLC signing

Dominion Lending Centres’ President and CEO Gary Mauris (left) and co-founder Chris Kayat signing the deal to acquire Mortgage Architects.

Canada’s mortgage behemoths have long been the likes of RBC, TD and Scotiabank. But as of today, they have stiffer competition: Dominion Lending Centres (DLC).

After months of negotiation, DLC has won the bidding for Mortgage Architects (MA), one of Canada’s top national superbrokers with 1,287 mortgage agents and brokers.

That now gives DLC’s three brands (Dominion Lending Centres, Mortgage Centre and Mortgage Architects)

  • 4,800 combined mortgage agents
  • Control of ~40% market share in the broker channel
  • A whopping $32 billion in annual mortgage volume

According to its press release, this transaction makes the DLC group the largest mortgage originator in the country. (We didn’t have data to confirm that as origination numbers for the major banks are tough to get.)

Either way, $32 billion is sheer enormity, and a remarkable feat for a company just 10 years young. That scale, and the economies it provides, may well prove pivotal if the mortgage business becomes increasingly commoditized in the eyes of net-savvy consumers.

The move could also make lenders and funders take DLC’s influence on the market much more seriously. More on that in days to come.

For more on what this all means to the market and agents, we spoke with Gary Mauris, President and CEO of DLC. Here is that interview.

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CMT: Thanks for sharing your thought process on this, Gary. First things first. What were the key business reasons for doing this deal?

Gary Mauris: We are very committed to this space and think the brokerage channel has a very bright future. Where other competitors have been downsizing, selling outright or selling majority positions, we have been actively investing in this space and will continue to do so in the future. Mortgage Architects was one of the companies that we have had our eye on for some time. They have a very experienced management team, a head office staff that knows our business well and most have been there for a very long time. The network itself is extremely deep in talent. The brokers and agents are some of the best in the space and have an excellent reputation for performance and professionalism.

CMT: Your market share has risen from roughly 28% to about 40%. What type of revenue opportunities or benefits might the company and its agents realize as a result of that added scale?

Gary Mauris: Our consolidated market share will top 40% with this transaction and we believe this solidifies our belief and commitment to the industry in general. There has been some chatter about possible headwinds coming our way with regards to rising interest rates, the cooling of the Canadian housing market and the price of oil in this country. We believe there is strength in numbers and it’s during these times of potential change where being part of the market share leader is most valuable. We are currently number one with 18 out of the top 20 lenders in Canada and we expect this to grow with this acquisition. As an agent, benefits include access to lenders, preferred pricing and products, technology synergies, and brand and financial resources that allow us to continue to innovate, advertise and create new tools…All three brands will now have access to Insureline, our new national Property and Casualty Insurance brokerage, another terrific first for the Canadian Mortgage space.

CMT: Is there any talk about folding the Mortgage Architects and MCC brands into DLC? If not, why does it make business sense to run three separate brands?

DLCGary Mauris: MA will continue to run independently and as its own brand. MA agents and owners love the MA brand and have been operating their business under this banner for 10 years in some cases. MA, Mortgage Centre and DLC have all co-existed for many years in markets across Canada, and converting one of these brands to the other would be unfair to our owners and agents already operating in those markets. We may look at things like consolidated payrolls, shared head office space and marketing synergies for the organizations, but Mortgage Architects will continue to operate as it always has with the same team in place. The only thing we will do with MA is bring it more stability and a brighter future through increased technology, mortgage products, ancillary products and market share leader strategies.

CMT: I’ve heard a few lenders express worry that DLC is getting too big. What do you think they mean by that? I can only assume they fear a bigger DLC/MCC/MA using its massive volume as leverage to negotiate better economics. Should they be concerned?

Mortgage-ArchitectsGary Mauris: We have amazing lender relationships and believe it is the cornerstone of our success. We preach to our networks how critically important these relationships are and constantly remind our agents/owners to find ways to become better partners with our lenders. We have longstanding, deep, open communication with our lenders and I don’t think that they should ever have to be worried about how big we become. On the contrary, we believe they look to us as long-term distribution for their products and recognize that we are committed to them and our industry.

CMT: MA brokers have always had a tight relationship with Radius Financial. What will become of that relationship now that DLC owns MA?

Gary Mauris: MA agents will be able to maintain and even build the relationship that they have with Radius. Radius will continue to be one of our partners and we look forward to building an even stronger relationship.

CMT: Do you foresee DLC breaking the 50% market share barrier, and would that likely be done with future acquisitions?

Gary Mauris: We love the broker space and will continue to grow both organically and via acquisitions. We believe the best years for our space are ahead of us and [we] will continue to make strategic alignments that reflect our commitment. Mortgage brokers are a pivotal part of mortgage financing in Canada and provide consumers with choice, competitive pricing, lower overall costs, expert unbiased advice, flexibility in product offerings and convenience. We believe Canadians will continue to support our industry and that the positive increase in consumer consumption (as reported by CMHC) will continue. Ottawa’s mandate is to provide consumers with choice and to limit monopolies, and they are especially sensitive around the big financial institutions.

CMT: Thank you, Gary.

Sidebar: Pacific Mortgage Group, Mortgage Architects’ former owner, is also selling its mortgage lender, Radius Financial. There has been no announcement on who is buying it. Mortgage Architects has been key to Radius’s distribution strategy, with Radius being MA’s in-house lender since its inception in 2008.

 

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Ryan W SmithEver-evolving mortgage rules and lender guidelines can be a lot to take in, even for the most experienced brokers in our industry.

Now imagine that you’re just beginning your career as a mortgage broker. Not only do you have to wrap your head around these changes, but you have a host of other challenges: finding business, learning lender and insurer guidelines, competing against online discounters, creating an Internet presence, building lender status, and so on and so on.

For young brokers, it’s important to know how other new agents are handling these challenges. So we decided to reach out to Kamloops, B.C., broker Ryan Smith. Smith has been with The Mortgage Centre team in Kamloops for just seven months and has about 30 active clients. Here’s his view of life as a rookie broker…

 

CMT:  You made a big career change to become a mortgage broker. How come, and what were you doing before?

Ryan:  I was in retail sales for about 10 years. About five years ago I decided that I couldn’t see myself doing that when I was 40 or 50 years old and started looking at real estate as an option. I looked into real estate investing, getting my Realtor’s licence, and a few other things. When it came down to it, I just liked the idea of being the support crew. I liked the idea of being the guy that comes up with solutions for people…In terms of choosing to become a mortgage broker over anything else, the main reason is, I get to be an important part of the biggest financial decision people usually make .

 

CMT: What have been your biggest challenges in the business so far?

Ryan:  I think my biggest challenge has probably been marketing. I think in B.C. our training program and the standards we hold our brokers to are fairly high. I found that once I got into this, I had the tools I needed in order to process the deals, underwrite and create files. But we weren’t necessarily trained on other aspects of the business, like how to find clients and how to retain them for the long term.

 

CMT:  You target a specific demographic. How has that worked so far?

Ryan:  I think it’s working really well. Focusing on a niche market has allowed me to become really good at what I’m doing. I think too many brokers spread themselves thin by trying to [juggle] too many things. For me, to think I can be an expert in reverse mortgages, construction mortgages and purchase-plus improvements all at the same time would be foolish. It’s not to say I don’t understand the concepts, but I think it’s important to excel in a particular area and make sure I…have a good grasp of the programs and policies before expanding or moving on to something else.

 

CMT:  What percentage of your current clients would fall into the ‘Millennial’ age group, that is, in the 18- to 34-year-old range?

Ryan:  I would say an honest 75% at the moment. I’ve wound up dealing with people who are out of my niche, out of necessity [to] help the clientele that comes through the office. But of the clients that come [from] my own resources, I would say 90% are my age group, that Millennial group.

 

CMT:  As a new broker, how do you find keeping up with lender or insurer guidelines?

Ryan:  One thing that has been a big learning curve, and that I’ve had to work really hard at, is understanding all of the unique policies between all of these different lenders. And not only going through their guidelines and understanding what their policies are, but reaching out and making connections with the BDMs and underwriters. I think most brokers would agree that in order to get deals done effectively and get [more difficult deals] through, you need exceptions, and you need to have a really good relationship with your BDMs and your underwriters. But as a new broker, you don’t always have the opportunity to be putting through deals every single day of the week, all week long. It’s taken a bit of time to go out and make [that] contact.

In terms of the basic guidelines, you know, B-21 and those sorts of things, that’s the way I’ve always known it. So, it wasn’t a big adaptation for me to [realize] that this is the way things are going to be going forward. Unlike more experienced brokers, I haven’t known it any differently, so I don’t struggle with it…

 

CMT:  Does technology play a role in expanding your network?

Ryan:  Absolutely. Technology is a big part of my business and a huge part of the way brokers work. In terms of communicating between myself and lenders and clients, I’ve been using things like DocuSign, for example. It’s very rare that clients come and sit down in my office anymore. By comparison, some brokers are not really comfortable with that. I think maybe they [don’t understand] that this technology is secure, and legally binding, and makes life easier for everyone involved.

For me personally, what’s really working is taking the old-school mentality that most established brokers have of building a network [and referral business] that’s going to support you in the long run. I’ve found that I’m able to make that work, but I’m doing it in a different way. For me it’s a lot of social media…I think that’s been one of my biggest lead generators. It’s things like my Facebook group, Pinterest, Twitter, you know, all these sorts of things where my generation is flocking to…where we’re spending our time. It’s a really inexpensive way to stay in front of people. Even in the day-to-day business, communicating with my clients, whether its Millennials I work with or the older generations, I’ve found that the majority of people now are as comfortable—or more comfortable—communicating over text or email as they are picking up the phone and making a phone call. That was a real eyeopener for me actually.

 

CMT:  You run your own website, ryanwsmith.ca, which includes a mortgage blog (www.kamloopsmortgageadvisor.ca). Why did you start the blog and what has your feedback been like?

Ryan:  It’s actually been getting a really good response. My intentions from the beginning were to educate people and put information out there in a way that’s easy to understand—not just for clients, but for Realtors and other professionals as well. I try to go through topics that clients have questions about, in a way that lets them take their time and read through it on their own schedule.

 

CMT:  Has your online presence paid off?

Ryan:  Definitely. It’s one of those things where, when you’re able to position yourself as an expert, in any given business, people will automatically build a level of trust. I want people to inherently understand that I know what I’m doing. That can be difficult to accomplish as a young person getting into a new business…

 

CMT:  How have you been able to compete with online discounters and well-established traditional brokerages?

Ryan:  The two fall into two very unique categories and you have to approach them differently. I knew going in that this was going to be a competitive business. In terms of the online discount brokerages, I feel like the position I’m placing myself in is not a direct competitor to them. With my clients, I try to clearly separate what I do from what they do. I’ve never been a rate shopper in my own life, and I don’t feel like many of my clients, if any up to this point, have really been rate sensitive per se. It’s more important for them to feel that they’ve gotten the right information, that they can trust the information I’ve given them and that they’ve received different options…

In terms of the more established brokers, that’s a more difficult nut to crack. To a certain extent it’s understanding what’s made them successful and trying to turn that into something I can not only replicate, but improve upon. Before I ever got started in this business, I interviewed quite a few different brokers in my local area and said, “Hey, what does the workday look like for you? What is making you successful?” I took notes and tried to get an understanding of what was working for them. That actually benefited me…

 

CMT:  If you could change two things about the mortgage broker industry and how it deals with new brokers, what would it be?

Ryan:  I would encourage a lot more hands-on training for new brokers. I made the fortunate decision to attend an MBABC course very early on. Some brokers in my office warned me that there might not be much to learn, but I showed up and the course was fantastic. It was exactly what the licensing course was missing. It talked about how to use D+H Expert, it talked about underwriting guidelines, income qualification. These are all things that they touch on in the licensing course, but they never show you how to use them to process a deal, talk to clients, understand which lenders they fit with, etc.

For new brokers coming into this, I would definitely highly recommend getting involved with some of the organizations, whether it’s CAAMP, MBABC, RECA or whoever. Take some of their courses because what they’re teaching is a completely different type of learning than what the licensing courses are teaching.

 

CMT:  How did your expectations of becoming a mortgage broker compare with how it actually unfolded?

Ryan:  When I first entertained this as a career, every person that I spoke to in the industry said, “Be prepared to go your first year without doing any deals at all.” It took a while for me to swallow that. But once I prepared myself for this worst-case scenario, and realized that I’m still going to be able to do this next year even if that worst case occurs, then everything else fell into place.


 

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iStock_000046042722MediumBefore you can generate mortgage leads as a broker, people have to know you exist and what you stand for. One person who knows how to make that happen is Invis-MI‘s Kelly Neuber.

Fresh off a Canadian Mortgage Award win for best industry marketing, Neuber is a student of mortgage promotion. We caught up to her this week for advice on how to capture mortgage shoppers’ attention. Here’s that interview…


1. Kelly, if we’re being honest with ourselves, how well would you say the mortgage broker industry markets itself, relative to other financial services industries?

Quite well, actually! Obviously the biggest difference between us and the banks is that the banks control their distribution so they can implement marketing campaigns exactly as they want them. We work with independents that aren’t controlled, but are instead supported. They implement what is best for their individual business and their target markets. Banks have the ability to localize their marketing, but they mostly implement national campaigns. The trend, of course, is local marketing and that’s where we do a great job as an industry. That said, we still need to raise awareness of what mortgage brokers do, and it’s unfortunate that our industry still hasn’t managed a concerted broker awareness campaign.

 

2. How has mortgage marketing changed since the turn of the millennium?

It has changed dramatically yet, in many ways, stayed the same. It’s obviously more online now, with pay-per-click marketing, email marketing and social media. When I started in 2002 it was all print handouts, postcards, flyers and newspaper/radio advertising—all of which can still work, it’s just not as prominent now. There’s also a greater focus on more targeted messaging to specific markets.

Fifteen years ago, we knew customer relationship management (CRM) programs were the key to the future. That hasn’t changed. Picking up the phone and calling clients for a pre-approval or an annual mortgage review still works too. I know lots of brokers who make time every week to call clients and prospects. As tough as that can be, they won’t give it up because it still works. And while direct mail isn’t being done as much anymore, it’s remarkable to see how a great customer mailout can really stand out—since there is so much less direct mail overall.

Lastly, back in 2000 much of a broker’s marketing was still geared to being a second option when you’re turned down by a bank. Today, agents go after that “A” client, which has been a very significant change in broker marketing.

 

3. Can the typical individual mortgage agent be an effective marketer, or do you need specific skills, education and background to effectively plan strategies that persuade today’s consumers?

I think first and foremost you need to be a salesperson. You need that relentless attitude about seeking out business and knowing when to go after the sale. New brokers have to be in that “try everything and get dirty” phase. Stuff won’t work and there will be rejection, but over time they learn what works best for them. I find that some brokers struggle because they aren’t salespeople. They tend to hide behind a bunch of other time-consuming activities. There has to be a natural sales aptitude. Either that, or you need to hire a salesperson.

Once that’s covered, the next most important decision is to identify what works best for your personality—because you want to be focused. In other words, clearly define which customer groups you’re targeting, develop a comfortable way to ask for referrals, and leverage your past experiences and your personal/business networks.

Brokers then need to determine which mediums to use, be it email, web leads, social media, advertising, working with Realtors or financial planners, and so on.

A marketing plan also helps. It focuses your time, energy and dollars. And it gets you to stop and think about your market potential, where your business is today and where you want to be tomorrow. Then you can track results, so adjustments can be made.

 

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4. What are the two biggest mistakes mortgage agents make when marketing themselves or their firms?

I would say not being focused and having too short of a time horizon. You can’t do everything. It’s better to do some things really well. Being focused applies to the target audience, the message itself and the medium used to get that message to your audience. Success takes consistency and time. I’ve seen brokers do very little volume for three straight years and suddenly take off and become award winners because they stuck with their target markets and messaging, learned and adapted. Sometimes brokers only think about marketing when they’re not busy. Without consistency throughout the year, it causes volume peaks and valleys…and stress! That’s where automated programs can help because it is consistent marketing over the long term that pays off.

 

5. What types of marketing or messaging should agents create to attract the attention of consumers who are increasingly exposed to interest rate advertising and rate comparison websites?

Differentiating yourself is so much more important than it was 15 years ago, and it’s key to attracting consumers’ attention. In 2000 you could market mortgage brokerage services in general and do well. Now it’s more critical to have customers connect with you, either on an emotional level—because they have a similar interest as you—or on a personal level.

As just one example, one of our new brokers is marketing and blogging #mortgagepug (www.mortgagepug.ca). His pet is his mortgage mascot and companion. The continual reference to his mortgage pug does two things: it’s a targeted message to dog lovers and it is highly memorable because it’s fun.

Another one of our brokers was previously a nurse so he now targets healthcare professionals through social media (@mortgagenurse) and via word-of-mouth referrals. He also showcases his four young children on Facebook, which conveys a family oriented approach.

Research your target market. It’s like your strike zone, to use a baseball analogy, so you have to know it. If you haven’t defined a target market, you won’t know where the strike zone is and you could be throwing balls all over the place.

 

6. Banks spend hundreds of millions of dollars a year branding themselves. The marketing budgets of agents are a drop in the bucket by comparison. Should agents even bother spending their precious promotional dollars on branding, or dedicate those resources to something else?

It all depends where they are in their life-cycle as a broker. We have many successful brokers who have a rock-solid database and that’s 80% of their focus. They dedicate few dollars to promotion because their database keeps maintaining or growing their business. Most of these brokers use a good CRM and/or use our icare program (a system where materials go out on an autopilot basis to generate repeat and referral business). So, most of their marketing dollars are channelled to their CRM.

Some are finding that their book of business is aging or they want more business than what they get from their database, so they implement acquisition strategies. One of our brokers recently bought bus advertising for both retention and acquisition purposes and it’s working for her.

Younger brokers coming into the business, say those in their late 20s, often have large social media networks. They can focus their efforts there at a minimal cost through organic posts or pay-per-click ads. I know lots of brokers who only leverage social media for growth. It costs relatively little and they do extremely well. Having “social capital” when entering this business is a tremendous asset because it provides a full database right out of the gate. If I was hiring a new broker, that would be one of my top questions.

 

7. Are there any guerilla marketing tactics you can suggest to individual agents with minimal marketing budgets?

Guerilla tactics are about getting dirty, and trial and error. Social media is fantastic for those with minimal budgets. It gives you regular top-of-mind awareness with consumers and referral sources. But if you don’t have a large network, you have to give it time. Social media prominence doesn’t happen overnight. Posting quality content is important, but the real key to success in social media is actually being social. It’s “liking” and commenting genuinely on the posts of those you are targeting. Brokers can also blog on their websites and share that content with their social networks. The benefit there is that those posts promote your website—where your “Apply Now” link is located. Social media is a great way to build email lists as well. Just be sure to have a systematic program for staying in touch with prospects so you don’t lose them. And don’t be afraid to talk to successful brokers. You may have an idea that they’ve already tried, which you can then learn from.

 

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8. What’s your view on mortgage agent websites from a marketing standpoint? Many agent websites are essentially electronic business cards with little unique or value-added content. Is that good enough? Or should agents really be making an investment in their websites to make them unique and attract traffic?

All brokers, whether they aggressively want business from the web or not, need that Internet business card, as you say. It’s online credibility. They may think they don’t get business from it but prospects and referral sources will check them out online before calling. If they want it only as a virtual business card, then at a minimum it should have their value proposition, standard mortgage information, online mortgage application forms, calculators, a current news feed and/or an up-to-date blog. And it must be mobile friendly. Savvy customers know when they hit a stale site and it can provide a negative impression. Brokers can outsource content generation for a low cost if needed. You don’t have to try to compete with the rate shopping sites that spend big on content and search engine optimization.

 

9. Is print advertising and radio advertising still effective with today’s attention-stretched consumer, and a good return on investment? Or should agents deploy their marketing dollars to electronic marketing or other avenues?

In some markets yes, print advertising does work because the local paper is well read. One broker told me he still lists in the Yellow Pages book because most brokers don’t do it anymore, and his older market still likes a paper phone book. In other markets, catchy radio ads can work well because people listen to the radio while trapped in their cars. There is no one right answer. What works for one broker may not work at all for another.

 

10. Free marketing services are one of the core reasons to join a full-service superbroker. What kinds of marketing do agents ask you to create at Invis-MI?

The greatest value add that our marketing department provides is that we anticipate what brokers want and need. We have a large body of content and it’s always kept up to date with fresh, timely content added each month. We also send out a monthly marketing communication that is full of suggestions (i.e., ideas for messages, social posts, blog articles, etc.) Brokers then adapt this material to their businesses. We also create an environment of continual learning through professional development days and marketing workshops held across the country. To your point, we handle custom requests from those brokers who need that service. But being a full-service brokerage firm, marketing is just one piece of the puzzle at Invis-MI. A broker’s reason for coming to a full-service firm may not be marketing at all, but compliance and payroll. The truth is, not all brokers invest in marketing.

Well, how nice would it be if marketing was optional for the rest of us?

Thanks Kelly…


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