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ISCOVER
Seasoned pros reveal how they thrive in tough times. Jessica Darnbrough reports
THERE’S NO doubt that it is a tough market at the moment.Auction clearance rates have fallen from 80 per cent this time last year to just 50 per cent today.
House prices have also fallen, with statistics from RP Data showing property values across the combined capitals fell 2.1 per cent over the March 2011 quarter, while sales volumes in February 2011 were 13 per cent lower than February 2010.
In addition, consumer confidence continues to plummet, with sentiment in Australia now sitting at a two year low.
According to the latest Westpac Bank Melbourne Institute Consumer Sentiment Index, confidence has slipped 17.9 per cent in the last 12 months.
The European financial crisis combined with the ongoing impact of the seven interest rate hikes between October 2009 and November 2010, and uncertainty about the introduction of a price on carbon, are all undermining the confidence of consumers.
So, it should come as no surprise to find more Australians prefer to save rather than spend.
A new survey by Loan Market Group found 76 per cent of Australian borrowers want to increase their level of savings in 2011.
It is fair to say that it’s now harder than ever for brokers to make a living out of residential broking.
But while times are undeniably tough, there are still opportunities for brokers in the current market – provided they know where to look and what to do.
The Adviser spoke to some of Australia’s best business writers to uncover their top tips for achieving success in a flat market.
BACK TO BASICS
ANY BROKER worth their salt will tell you that the best way to generate business in a flat market is to touch base with your existing client database.
But what touch points do Australia’s best brokers use in order to stay in contact with their clients?
Wells Partners’ director Greg Wells says phone calls, monthly or quarterly client newsletters, Christmas and birthday cards and yearly loan reviews are all touch points brokers can utilise in their business.
“Staying close to a client via the telephone, email or calling personally on them are all positives things showing the client you very much have an interest in what is happening in their life and if they have any issues or concerns that you can assist with,” Mr Wells says.
“It is not all about selling, it’s about building a rapport as a trusted advisor. Get that right and not only will this lead to enquires, but it will also lead to referrals, as existing clients generally love to share great experiences with family and friends.”
Mr Wells regularly sends out a client newsletter that is filled with “topical and helpful articles”.
In fact, according to Mr Wells, topicality is the key to a successful client newsletter.
If a client doesn’t feel they are getting value from the email, they won’t read it.
“Newsletters are a good tool to add to your business,” Mr Wells says
“It forms part of your client retention strategy to ensure your business shares some of the ‘mind space’ of your client so when they think finance they think of you.”
MEET YOUR MATCH
MOST BROKERS will already have a good relationship with another industry professional, be it a real estate agent, financial planner or accountant, that refers them business and vice versa.
But in a flat market, these industry professionals are likely to find the going just as tough as brokers.
And, if you are new to the industry, it might be difficult to find a real estate agent or otherwise that doesn’t already have a referral relationship with another broker.
So what’s a broker to do?
Well, according to Buyer’s Choice managing director Mick McClure, brokers should look outside the square for inspiration.
“In a flat market, you can’t rely on real estate agents to refer you business,” he says.
“You have to build referral partnerships with those that are still writing business, such as renovation specialists.”
Mr McClure says in times such as these, people would prefer to renovate their house, rather than upgrade into a new one.
“Of course, once they get a quote from a kitchen or bathroom manufacturer they opt not to progress with the renovation. Why? Because they don’t have the finance. This is where a broker can come in handy,” he says.
Of course, Mr McClure says there is a trick to building a sustainable and sound referral partnership with another industry professional.
“Don’t ask them for their business. Instead, tell them what you can do for them. If they think they are doing you a favour, they will be less likely to refer you business,” he says.
And Mr McClure should know.
With15 years experience under his belt, he currently writes between $4 and $10 million a month – a large portion of which he attributes to his referral partners.
DON’T ASK, DON’T GET
REFERRAL PARTNERS aside, most brokers will tell you that the next best place to find business is in their own backyard.
Repeat and referral business from clients is a broker’s bread and butter.
But how can brokers ensure they receive their client’s repeat and referral business?
“You just have to ask for it,” Connective principal Mark Haron says.
But while it may sound simple enough, some brokers struggle to ask their clients for referrals.
Terrified of seeming “pushy” they often decide not to ask the question at all.
But, according to Mr Haron, there is nothing for brokers to fear – provided they ask the right way.
“The key is to not seem aggressive when asking for a referral. The best brokers proposition the ‘referral conversation’ in a completely unthreatening, passive way,” he says.
“Good brokers will bring up referral opportunities in their opening discussion with the client. They will say something like: ‘my business is built on service. So, if you think I have provided you with good service, please tell your friends and family. If you would have liked me to do anything differently, let me know because I am always looking to improve myself, and my clients’ happiness is my number one priority.”
MIX IT UP
WHILE SOME brokers will comfortably generate enough business through client referrals, others prefer to hedge their bets and invest in a comprehensive advertising campaign.
Mortgage Success’ director Katrina Rowlands is one such broker.
While the majority of the Wollongong-based broker’s business is repeat and referral, she says it is important to have a strategy in place that will help generate new leads.
“In a flat market, it is important to have a strategy in place that can push business through the door,” she says.
Ms Rowlands has developed what she calls an “awareness campaign”.
She uses various mediums to advertise her company, including print, radio, online and bus shelters.
“I mix it up. I don’t run the same one page advert every single week in the exact same newspaper,” she says.
“The more you advertise across various mediums, the more likely you are to catch the interest of potential home buyers.”
But whatever “advertising awareness campaign” you look to implement, Ms Rowlands says the key is to be passive in your marketing, not aggressive.
“A lot of brokers think they need to put a call to action in their advertising campaigns. This has never worked for me. Instead, I gently let potential clients know what services I offer if they should ever need them.”
GET AMONGST IT
BUT, IF you don’t have the budget to implement an “advertising awareness campaign”, don’t fret, says Ms Rowlands.
“There are plenty of other techniques brokers can implement to ensure they are constantly generating new business leads,” she says.
Some brokers, for example, like to engage the local media and offer their services as a spokesperson for the financial services industry.
One of the most underused weapons in the broker arsenal in terms of local area marketing, is scoring free PR, courtesy of the local media.
Savvy brokers understand that successfully engaging the media can help them build their brand, reputation and credibility within the local community.
While some brokers are wary of engaging the media, achieving good results through PR is a lot easier to do than most people realise.
Ms Rowlands is called on to give her opinion in the local press.
“Good brokers know this business inside out, so they should not be nervous about talking to the press,” she says.
“The more you engage the media, the more likely you are to be seen by the local community as a professional who understands the business of mortgage broking, and the current property landscape.
CHOOSE WISELY
OF COURSE a strong public profile and a solid advertising campaign will only take a broker so far.
To close the deal and generate repeat business opportunities, brokers need to be backed by a good team of people.
Quality staff is vital to the ongoing success of a brokerage, says Tiffen & Co’s director Gerard Tiffen.
“The best tip I can give to brokers looking to be successful in a flat market is ‘hire good staff’,” Mr Tiffen says.
“Staff are the backbone of any brokerage. They have the ability to make or break a company. Don’t be afraid to pay that little bit extra for the right person. Hiring good employees will pay dividends in the end.”
PLAN AHEAD
IN A tough market, it pays to plan ahead.
A well-structured business plan can help a broker stay on the rails, meet their self-imposed sales targets and forward plan for the future, rather than worry about the present.
So, how should you go about setting realistic targets for the year that lies ahead?
First up, it is useful to remember that not everyone will meet their targets first time, every time.
That said, as long as the targets chosen are realistic, they are usually achieved.
To set targets that are realistic and achievable you must also consider the factors outside the control of your business and how that may impact demand. These, of course, include the health of the global economy as well as events nearer home.
One of the key reasons to set business targets, however, is to help you stay on track in the face of major market fluctuations.
Broking is affected by so many variables that it’s easy to become a victim of the market rather than a master of your own destination.
Rate changes, housing supply and demand and consumer confidence all have a nasty habit of fluctuating, and if you’re not focused on business goals you can quickly find your performance wavering.
According to FrontRunner Consulting’s Doug Mathlin, one of the most effective methods for setting targets is to base them on past sales performance.
You might be all revved up for the year ahead, with grand plans to work harder, smarter, or both, but your success can best be measured against how you’ve succeeded in the past.
Sales targets need to be based on tangibles, and the best place to start is to consider the overall desired result.
“The next step is to write down what you want to achieve in a few key words. The trick is to keep your business plan simple, straight to the point and, above all else, flexible,” Mr Mathlin says.
“Things change, so don’t lock yourself into achieving just one goal. Instead, form a clear idea of what you’d like to achieve with your whole business.”
DIVERSIFY OR DIE
GOOD BROKERS will tell you that it is impossible to thrive in the current market if all you offer is the humble home loan.
In a flat market, savvy brokers look to diversify their core services to include insurance, financial planning or commercial lending to name but a few.
But how do you know what areas to diversify into?
Mildura Finance executive director Peter Schroeder says the key is to “keep it simple”.
“While some people are comfortable diversifying into financial planning, brokers that attempt to become a jack of all trades run the risk of becoming a master of none,” he says.
“Diversify into areas that don’t require a lot of further education, such as insurance or car finance. Once you have mastered that, then you can look to accounting, financial planning or commercial lending.”
And it seems a majority of mortgage brokers agree.
According to a new survey conducted by Wealth Today, 68 per cent of brokers feel that the average mortgage professional can no longer earn an income from mortgage broking alone.
Moreover, 90 per cent do not expect to see their commissions increase in the near future. As such, many feel the time is right to diversify their core offering beyond the humble home loan.
LOVE THY NEIGHBOUR
THERE IS no doubt that diversification is now common place in mortgage broking.
But while most brokers have no trouble diversifying their core offering, many do have difficulty asking for advice from other brokers.
And, according to Doug Daniell from Walker and Miller Mortgage Broker Training, this is one of the best techniques a broker can employ.
Mr Daniell says good brokers often have good relationships with other successful brokers in the industry.
“You can ask them for advice, ask them for their top tips and then implement them into your own business,” he says.
Which is exactly what Katrina Rowlands does.
Ms Rowlands has a strong relationship with elite business writer and Mortgage Choice franchisee Wendy Higgins.
“We have a similar business model, so I have been able to learn so much from her. I think it is important for all brokers to have a mentor...someone they respect and learn from,” she says.
LOOK ON THE BRIGHT SIDE
IT MAY sound cliché, but a positive attitude is perhaps the most important weapon a broker can possess.
Clients prefer to deal with someone that has a passion for what they do.
Moreover, clients are more likely to return to a broker that has a positive outlook and a love for their job.
They are also more likely to reuse a broker that has a good knowledge of the industry.
It may seem obvious, but the better educated the broker, the better they will do in business, Empire’s chief executive Chris Gray says.
According to Mr Gray, with knowledge and training come greater business opportunities.
“Residential mortgages differ to investment home loans. The differences may be subtle, but they do exist. And with the advent of the internet, you can bet your bottom line that clients are more educated than ever before,” Mr Gray says.
“They want to use a broker that possesses a sound knowledge of the industry. They want to feel as though their broker knows more than they do and can really help them make the right decision. After all, buying a house is one the biggest decisions a person can ever make.”
