Marketing, Promotions and Regulation – The Life of Your Business

Regardless of who in the Mortgage Brokerage industry you talk to, one of the common themes expressed by all is the constant need to market your services and attract new potential clients, whether borrowers or lenders, as the case may be.

During the last few years there has been a major shift in marketing methodologies. This seismic transformation speaks to future changes in the industry presaged by some rather remarkable emerging trends.

There are three major trends I can identify that will change the life of the average mortgage broker in ways you might not have guessed. Whether I’m right or wrong, only time will tell, but either way brokers should pay attention.

First Major Change

Everyone is aware that advertising and marketing itself is undergoing radical change. Just putting an ad in front of a potential client is no longer sufficient in attracting significant business. A combination of internet sourcing of news and information, and decreasing reliance on tradition media, means that marketers need to become much more sophisticated in the future than they have been in the past.

Mortgage brokers are included in this evolution. The shift in media methodology is leading to increased use of social media including things like Facebook and Twitter. It’s a lot more work than just running classified ads in the weekly papers or even buying clicks from Google, or other online resources.

This trend will accelerate with the current meltdown of traditional media ad revenues, increasing rather than recovering after the recession is over. The amount of money spent on advertising and marketing won’t go down, it will simply move into new areas of electronic media.

Second Major Change

The day of the truly independent mortgage broker, unattached to a major franchise or national organizational may well be coming to a close. There were many reasons why our company acquired a brokerage franchise with a major player (Dominion Lending) but the single most compelling reason is that there is strength in numbers. Being a part of the largest company in the industry wins points with lenders, insurers and the public.

Bonus structures with lenders and selective agent arrangement make it more likely for a broker to be successful if they have greater access to a number of lenders. Back office technologies and intranet resources are now essential, rather than simply nice.

A national advertising program to backstop our own marketing efforts, most particularly to emphasize the national brand, is helpful in establishing a broker’s bona fides with new clients, many of whom he will never meet in person.

No individual broker will be able to sustain a marketing effort sufficient to combat market awareness without a major player behind them. Public awareness of the majors will make it increasingly difficult for an independent brokerage firm to be able to reach their target audiences.

Third Major Change

Financial services agents and brokers in other closely related fields have undergone a process recently started by mortgage brokers in Canada. Mutual fund industry self governance in the form of the MFDA (Mutual Funds Dealers Association) and other industry associations have taken on responsibility for their own regulatory enforcement.

In Canada there is effective mortgage regulation basically in three provinces, BC, Alberta and Ontario, each with their own regulatory framework. Efforts at the national level by provincial Premiers are leading to increasing free trade sentiment across the country. There needs to be consistent regulatory oversight in financial services from coast to coast.

The immediate consequence of this is the increase in regulations and oversight by various provincial authorities. One aspect of this is that mortgage brokers can expect to see more frequent audits and more ambitious regulators over time. Current fraud cases in the public eye have increased pressure on regulators to show that they are indeed on top of the bad apples in business.

The largest effect of these changes in regulatory affairs will be the increasing role of compliance in dealers, and the necessity to allocate additional resources to it. Mutual fund dealers discovered that the only way to afford proper compliance was to be large in size, so that the compliance costs could be spread over a greater number of agents.

Conclusion

A combination of powerful forces are causing major shifts in the mortgage brokerage industry leading to increasing consolidation into a few mega brokerage franchise or national companies. Traditional advertising techniques are giving way to social network marketing and other nascent trends. An increasing cost of infrastructure and backend administration is making the lives of small brokerage companies more and more untenable.

Bigger may not always be the preferred way to go as a broker choosing an associated firm, however in terms of the future of the industry larger brokerage companies will have a significant advantage. This is why we are seeking to grow our agency to a substantial size so that we can provide the type of services and support needed in today’s highly competitive and increasingly regulated marketplace.