It is an exciting time for the mortgage broking industry with brokers poised to play a critical role in Australia’s economy in the years to come. As Australians homeowners and those looking to get their foot in the door weigh up their options post-covid, the percentage of home loan settlements finalised by mortgage brokers continues to rise. During a time when uncertainty reigns about whether rates will rise, mortgage brokers are more essential than ever.
Mark Bouris recently sat down with Michael Russell, managing director of the national mortgage broking franchise, Money Quest. Michael has over 40 years of experience in the financial services industry, including 20 years involved with mortgage brokers. Mark said, “it would be remiss of anybody to do a podcast in relation to the broker market without talking to Mike Russell.”
With a wealth of experience between Mark and Mike, they discussed the differences between joining an aggregator and a franchisor organisation.
The differences between joining a mortgage broker aggregator and a franchise mortgage broker
Having spent nearly seven years as CEO of Choice Aggregation Services, Mike made the shift to Mortgage Choice, and with that, he went from a mortgage aggregator service to a franchise aggregator.
He said that it wasn’t until he left the mortgage broker aggregator for a franchisor in Mortgage Choice that he truly understood the benefits of a franchisor network: “I was very naive when I was running an aggregation business. I really didn’t understand why anyone would join a franchise when they could be part of an aggregation business perhaps on a higher commission share. But my eyes were really open to the benefits of franchising and transitioning more from a mortgage broker to a business owner.”
In 2015 he took up his current role with Money Quest, another franchisor organisation and he spoke of the significant benefits of becoming a franchise owner, as opposed to remaining a mortgage broker with an aggregator or a large firm.
He said, “All mortgage brokers, whether they’re employed as mortgage brokers for a business or if they’re working in an aggregation environment and they have a direct agreement and they are a single mortgage broker, one of the challenges that aggregation businesses have is they’re very good at providing tools of trade and compliance support. But what they’re not good at…is helping people transition from becoming a mortgage broker to a really successful thriving business owner.”
That is what franchise aggregators such as Yellow Brick Road do well, “they lay a pathway, they know what they need to do to transition someone from being a mortgage broker who aspires to be a business owner and manage staff and change their business when that opportunity arrives in their business.”
The key difference for Mike is that franchise networks like Yellow Brick Road or Mortgage Choice know “how to assist people to create thriving businesses where they themselves can really work on the business more than just in the business,” he said.
“We teach them the soft skills about how to go about marketing in their local community, we teach them how to go and prospect and secure good referral partners. We teach them the self-discipline of doing what they don’t like doing.”
“That’s particularly pertinent for bank managers, for example. We love recruiting bank managers into the franchising environment because they already have secured or got hold of that professional competency of home or business lending. But what they need to be taught is how to become a business owner, all those soft skills that are very important.”
Why mortgage broking businesses fail
Many factors build a successful business, and as a franchisee, you become your own business owner, so it’s crucial to have the tools and support structures to build a successful business.
Mike said that is one of the key differentials of joining a franchise network: “Yes, you need systems and policies and procedures and all of that. But what you need is the willingness of people within your franchise business to sit down and roll up their sleeves and do a business plan with you and then monitor that business plan whether it be weekly, fortnightly, monthly, until we are comfortable that you’ve got hold of it.”
Having support from a team of people within the head office of a franchise organisation allows you to meet with your support team who can sit down and help you “write your marketing plan and be there with you to execute that marketing plan and teach you the importance of putting blocks in your diary each week, even if it’s three hours, Monday from 10 am till 1 pm, where you’re going to get on the phone and do your prospecting and marketing.”
“What we don’t like is looking at settlement graphs that are jagged, sharp teeth, which show that ‘yeah, this month while my settlements were really strong, and then they fell, why did they fall?’ Because when you’re busy writing loans, you forgot to do the prospecting and marketing. You said ‘I’m too busy for that.’ So what happens is you pay the price of not doing your prospecting and marketing every week.”
So what is the single cause of failure for a mortgage broking business not meeting its potential? A failure to invest.
“The single cause of why mortgage broking businesses fail to achieve their true capacity is they’re either undercapitalised through circumstance, in which case we can’t hold anything against those people, or they’re undercapitalised through choice.”
“Now those businesses that are undercapitalised through choice…when it’s your time when you have that opportunity to step-change [or invest] and if you don’t invest in your business when you should, guess what, you’ve missed the opportunity and you’ve only got yourself to blame.”
For Mike and Mark, that is why it is crucial to have the support of a franchise organisation such as Yellow Brick Road or Money Quest, because as a franchisee, you have the support of an organisation devoted to seeing your business grow.
Mike said that Money Quest focuses on teaching their franchise owners to “see big step changes”, in other words, to identify the right times to invest.
“Businesses generally see really good linear growth. And we try to teach really good linear growth. Now within that linear growth, that will mean that business owners will need to step change [invest]…when they think about putting staff on they [or] when they want to ramp their marketing”, said Mike.
Naturally, investing in your business will come at a temporary cost, but as Mike said, that is where the franchisors or the organisation give franchisees “the encouragement, the knowledge and the wisdom” to be confident to make that investment at the opportune moment.”
Tune in to Mark and Mike’s full discussion about what to expect as someone considering a career change to the mortgage broking industry.