Hi Everyone
I know there are a few mortgage brokers on this forum and I was wondering whether I could get some advice.
I am looking at a Smartline franchise. They reckon that with a set up cost of $20 to $20k you could be making $150k+ a year.
I don't have a banking background, but am a lawyer and have a business (marketing) degree.
I am just wondering if it is possible to make much as a broker and whether the fact that I don't have a banking background will be a major disadvantage.
Also whether a smartline franchise is the way to go or if people have other recommendations.
Thanks for your time
Ben
Hi Ben,
Having no banking background is not an issue, the areas of expertise that give you an advantage as a broker, in terms of the service you provide, are knowledge of accounting, taxation and superannuation. You don't ned to be expert in any of these, but you do need a solid basic knowledge.
Financial success comes down to your ability to attract clients directly and/or through referal sources. If you consider a franchise then the franchisor should be making this part of the operation more simple. Personally I see aggregators as a necessary evil and wish to pay as little as possible to them, in return i expect nothing but access to the lenders that will not deal directly. If you want a lot of support then probably you should be prepared to pay. Smartline has a good reputation and has a lot of high volume brokers, so they must be OK.
$150K per annum is pretty low, you would want to be aiming to earn more than that.
I hope this helps.
Regards
AlistairHi Ben.
A big 'DITTO' on what Alistair has had to say and your legal background will prove very beneficial in your clients mind as they realise you are not just someone who walked off the street, did a few weeks to get their Cert IV in Fianancial Services, and then tell them what is best for them. I must also agree that you should be aiming much higher than a $150K income with your background. I would not recommend Refund Home Loans as a Franchisee – they keep your clients and they lock your trails in if ever you decide to leave.Thanks Allistair – I appreciate your comments.
I guess I have a reasonable understanding of tax and accounting issues. Probably not too much in relation to super. I guess that relates to self managed funds borrowing and the rule relatinig to that? I could probably get my head around this.
Did you find it hard to start off? Are there lots of brokers out there struggling? I mean if everyone is making well over $150k than this would seem a pretty good business, considering the start up costs are low and you don't necessarily need a degree or anything.
thanks again.
also I know the conveyancing that I have done that banks are pretty hard to deal with, in relation to actually getting the loan approved within a short period (a typical finance clause is 14 to 21 days I guess) and then getting them to settle the thing can also be difficult. Does this wear you down after a while?
Ben you just get to learn who to deal with and who to steer clear off.
DD is important and if you have a good rapport with your BDM and you feel that they can genually add value to your business by getting things actioned then they are worth getting to know. So many BDM's are like wooden puppets and we dont even let them through the door.
As the buys said to be arning $150K and then having expenses come from that well i think i would be spending my money elsewhere.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ben,
Knowledge of Super is more around setting up structures for people who are able, or soon will be able to access super. This changes the way their money should flow, so it is an important aspect of loan structuring. It's not difficult to learn, and you need to know about it to offer a good service to such people. This group also tends to have a greater amount of money, so from a selfish point of view you want to be able to service them well. This knowledge gives you a great competitive advantage over your average broker or loan officer amongst high net wealth clients.
In terms of starting off, I had the great advantage of having a father with a very successful town planning consultancy and a long list of property developer clients who hated their banks. This is what prompted us to set up the finance business. I made more than $150K in my first year trading, in fact I pulled over $30K commission from the first loan i wrote, which was for a $10 mill development.
To hit $150k in upfronts commissions you need to write about $30 mill of loans, this is far from a huge amount. Its gets easier as you go along and your trail book builds. As an example if you wrote $30 mill, the next year your trail book would be worth about $45K, so you would only have to write $20 mill to maintain your income at that level.
Most brokers never get anywhere near this sort of income, but there are a lot that write massive amounts more. It all comes down to your ability to market yourself to new customers and provide a good service so you get referals.
Regards
AlistairWell put Alistair!
Thanks Alistair. So if you just looking at res loans of say $500K a pop – you need to do 60 a year to write $30mil and take home a 5% comm of $150K. This is quite a few loans to write – more than one a week. Obviously writing the loan would be fine, but finding that many loans a year could an ask I suppose.
Is 5% the norm for all brokers or does it change with differnt models/franchises?
I understand what you say re trails – so if you build it up over a few years you could have quite a good passive income coming in. Though it is all about getting started I suppose.
Hi Ben,
Different lender pay different amounts and have different structures for their payments also eg Westpac pay 0.5% upfront and 0.15% Trail, CBA pay a higher upfront and trail, but no trail the first year, Homeside base the trail % on the number of years the client has been with them. With commercial loans the broker generally has a greater say in their commission levels, but different lenders have different profitability models for broker introduced loans and its pretty important that you clients are getting something at least as good as what they would get through a branch and its a good idea if they get better.
Aggregators generally take 20% of your commissions as their payment, plus they charge monthly fees, but some charge a fee per payment and others a set monthly fee. High volume brokers get a better deal always. Each Aggregator has a different model in terms of how much assistance they give you and this is reflected in the fees they charge. Most don't charge anything upfront, so for $20K you'd want pretty good service.
REgards
AlistairHi, I am interested to this topic actually. Currently I work in a mortgage company (lender- not mortgage broker), as an Accountant (working towards completion of CPA Aust). I also have responsibility as an assistant to the Fund Accountant for a boutique super fund and currently also undertake a study for Diploma of Financial Services (Financial Planning) with ASFA. Knowing that a mortgage broker can earn good amount of money and the requirements seem suit me well (of course I still have to learn a lot – 2 years ago graduated with Master degree in Accounting and 2 years work experience) is awesome.
What do you guys think I need to develop my skills more at ? I am pretty familiar with few structures e.g unit trust, discretionary trust, company and of course the taxation benefit and the accounts. Maybe I can be a mortgage broker soon
Thanks Ben for asking a good question.
Thanks Ben for asking a good question.You must be logged in to reply to this topic. If you don't have an account, you can register here.
