Mortgage Broker Industry - How to get in!

Hi any mortgage brokers here offering some advice on how to get into this industry.

I am in a job where I don't want to be and am looking a career path change.

Can you please advise on what really needs to be done and what qualifications are needed to get into the industry.

What Income you will need behind you before you start out.

Who would you start off with for Training and mentoring - Aussie homes? or anyone else.

What are the real pros and cons of the business, do you really have to great in financial maths or just be able to use a calculator and work out general calculations.

How do you get your leads? Do market yourself?

What are the realistic salary you can earn starting out?

What hours are required to really make it work and Is it an indepedent autonomous job.

I very much appreciate some feedback by brokers who are in the industry as would seriously like to learn about it.

Thanks

 

Trom,
I would start talking with some of the aggregator groups, AFG, PLAN etc. I would also talk to some of the franchise type groups like Smartline, Mortgage Choice etc.
I would also check the main broker body, MFAA. Their website has membership information and they can answer your questions.

The aggregator BDM's will give a far better idea of what is now required than I can especially as WA has a different licencing model that the rest of Australia. That will change with the new laws coming into effect in 2010 and 2011.

Base level qualification is probably cert 4 (mortgage broking). If you go down the MFAA path (also talk to them) then you also need PI insurance, COSL etc (check wth MFAA site).

Basic maths is mostly enough, it is really about being able to market and sell yourself and provide a solution to clients needs. Unless you join a group that provides leads (and generally a low commission split) you need to do it yourself. A relatively high number of brokers start and cannot generate sufficient income to make a living and drop out. The way the upfront commission generally works is that you meet a client, arrange a loan, say settles in 60 days, you get paid at the end of the following month. If you are in an aggregator group (as the vast majority of brokers are), they take their split (main aggregator groups often will keep 20% of what the lender pays). You may not get paid for 3 months after you submit the loan. It takes time to build a client base to start to achieve consistency of income.

Train commission is also paid each month but some lenders are backloading these, so a broker gets nothing for the first year, a small amount per month second year and builds up to 5 years. It is to help stop broker churning. To build a trail commission of say $2k per month, you will need about a book of $20m in loans.

The average broker settles about $500k to $700k a month (from numbers I recollect seeing) so earning about $2k to $2.5k a month. If they are staring with no trail commission, it is not a large income. You need to have about 6 months living expenses available before you chuck in your full time job.

Successful brokers can settle up to $5m to $10m a month, they get paid very well for it but look at the 5% rule, in any industry 5% are very successful, 20% do 80% of the volume, the rest can make a living and some struggle.

Set up costs are minimal, a computer, fax machine and telephone, plus stationary etc. It can be very independent and autonomous but it depends on you and how you like working. I would consider joining an established broking practice and work for experience for a year or two (perhaps part salary, part commission) to get a feel of what is required and whether it suits you.

I hope this gives a feel of what to expect
Good luck.
Greg

 

Interesting post, GregR. While I have no interest in becoming a mortgage broker myself, I've always wondered just how much the average broker makes. $500K - $700K in loans per month is not much at all - that's about 2 loans, maybe even 1! What the hell do they do for the rest of the month?

 

Chase more business...

 

EMP,
The GFC enabled the big 4, by way of smaller lenders not being able to obtain funding, to cut commissions paid to brokers significantly, by up to 30%. It hurt many brokers, especially those new to the industry.
The brokers already established with large trail commissions, it meant little but the newer brokers, it has been a struggle.

As AsxBroker said, they chase more business. Perhaps they try to know a lot more detail on products, read the industry journals, whatever. Business rarely walks through the door, you meed to generate it.

My view of business is that unless you can specialise and separate yourself from the pack, what can you offer different from a bank mobile lender, or a franchise like Aussie or Rams? It is the same for any business, what makes you unique that customers will come to you? It may be your network of previous clients (many brokers are ex-bank staff) or you have or can form strong relationships with referrers like accountants, real estate agents, solicitors or financial planners (but again more are broadening their offering to include loans as well).

It is like any business, establish your plans and work to your strengths and eliminate or reduce your weaknesses. Do your research and make sure you can fund the working capital needed. I have heard the success stories of new brokers achieving $15m settlement in the first year but they are the exceptions.

It can be a very rewarding industry but eyes open.
Good luck
Greg