“No matter how great the talents or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant!” Warren Buffett. I saw this quote at the weekend and apart from making me chuckle, it really resonated. Not because I am going to get 9 women pregnant, but because it’s a hot topic in my circles. I have been talking with a number of new brokers recently that are keen to reap the rewards NOW. Our industry (mortgage broking) more than many others can make this tough.
If you work in a shop and sell a jar of Marmite, the earnings are there straight away (OK I know that there are a lot more costs involved, holding stock, shop overheads etc, but let’s keep it simple for now). In the Australian mortgage broking industry, brokers are paid by the lender once the loan has settled. This can have a long lag time. I’ll give you an example. Let’s say that I meet a client in September, they have found a property to buy with a 30-day settlement date of the 3rd October (in most cases this would be the shortest time offered). But once the loan has settled, it’s not just a matter of “thank you very much Mr Broker, here is your cash for a job well done!” No, not at all! Every lender is different and has to reconcile all of the settlements before paying, some will reconcile daily or weekly whilst others will reconcile monthly. Once reconciled they will pay the broker’s aggregator. In the case above, imagine that the lender reconciled once a month on the 2nd and paid on the 9th October a week later, unlucky me! I just missed out this month, that means that my settlement will not be reconciled until 2nd November and paid on the 9th November. Once the aggregator has the funds, they also have to reconcile as above. Now, I am playing devil’s advocate here but it could happen at an outside chance that the aggregator reconciles once a month also and it just so happens that they reconcile and pay on the 8th November. Now I am really unlucky, no point putting a bet on Spurs to win next weekend! Finally, the commission hits my account on the 8th December just in time to do some Christmas shopping.
From meeting the client and being paid for my services, I have had to wait 3 months! I am just grateful it was not a 90-day settlement! Not to mention the time it took to get the lead in the first place in finding potential referral partners, gaining their trust, waiting for the business to come.
When a broker first starts out, the cost is not in the set-up of a mortgage business, its actually quite cheap in comparison with the Marmite seller, give me a laptop and a phone and I am away! (almost). The cost is in the lag time.
I have a couple of points to make here;
- New brokers joining the industry; don’t kid yourself, this is a tough gig and requires hard work and perseverance, but above all patience. If you can set yourself up so that you do not have to rely on income from the broking business for the first 6 months, then you are putting yourself in a much stronger position, the last thing you want is to be worrying about finances when you start up a business! Desperation creeps in and that is the enemy in sales! Before you start, make sure you have a plan in place;
- Put together a list of all the people that you know with their email and telephone numbers so that you can tell them of your new venture and keep them up to date.
- Start talking to people on the lead up so that you can potentially have deals ready to go, refinances should be fairly easy to come across in the current market, rates are lower than ever, if people have not looked at their mortgages in the last couple of years, you are sure to be able to save them money.
- Think about who could refer to you that you know. Do you know an accountant, real estate agent, conveyancer, developer, builder etc.? Start engaging them now.
- The second point is for existing mortgage brokers; A successful month in broking can mean that you now are spending a lot of time processing deals, following up lenders and lots of admin, your eye has been taken off the ball. When things quieten off, you sit back and relax for a while, you deserve it after all you have had a great month or two. But the problem is within the lag time we discussed earlier. If you now put your feet up, don’t service the referral partners or stay in touch with clients, then the pipeline soon dries up and you are having to do it all over again, it will be another 3 months before you see any upfront commission. The key is to continue prospecting even in the busiest of times, block it out in your diary and stick to it religiously. Everyone has a different way of doing it, 5 calls a day, block out 1 morning a week, it doesn’t really matter, whatever works for you. I personally prefer small chunks rather than one big prospecting session. But be consistent and stick to it, your business will thank you for it.
In summary, nothing happens overnight (apart from sleeping), you need to work at it, don’t give up, it will happen! Remain with your eye on your “why?”, make sure you have a consistent sales process to follow and as long as you are talking to people, you are at risk of doing business, be open to the opportunity!
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