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As a mortgage broker, have you ever prepared a pre-approval for an investment loan and not seen your client again?
Ever seen the trail disappear from a client you thought you had a good relationship with?
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Who do you think your client has the strongest relationship with – someone they buy a $450,000 property from or you, the person writing the loan?
I think mostly the strongest relationship is with the salesperson and not with you as their broker.
Have you ever bought a new car and noticed that they won’t give you their best price until you are ready to buy? Good car salespeople know they have the best chance of getting the sale if they see you after you have completed the rounds of the car-yards. It’s the same with brokers attached to property spruikers – most spruikers have brokers on staff and they get to go last, which puts them in the prime position to write the loan instead of you.
There is a clear potential conflict of interest when a company selling a property writes the loan, as low valuations can be hidden among the client’s home equity.
After the consultant convinces your client why the person in the next room is the best person in Australia to arrange their loan, from a client’s perspective it’s hard to resist. And you know what else really hurts? That broker has every incentive to bring the client’s other loans across – the ones you wrote – and you lose the trail.
Recently, I had a meeting with two of the big four banks, who have recognised a significant gap between the number of pre-approvals they do and how many turn in to loans. If it’s happening to them, it could be happening to you.
So what can you do to prevent it?
Stay in touch with your clients and tell them about the clear perceived conflict of interest, so that if they find themselves being pressured to use another broker they may remember your warning and still use your services. Be proactive, and recognise that if you have a client database, some are looking to buy an investment property right now – and there is every chance they will end up in the arms of your competition. To avoid this, find a property investment company you can trust and refer your clients to them. There may even be a referral fee in it for you, but recognise that a fee out of proportion to the work done by you is a sure-fire sign of a company you should stay away from.
If you are willing to proactively protect and grow your client base, the secondary issue becomes finding an appropriate investment company that will actively protect your reputation. Like any business relationship, there is a reputational risk of being associated with companies who behave unethically.
For example, I recently heard of a situation where a broker recommended a client engage a property sales company which duly attempted to offload one of their lemons. Fortunately, the deal was able to be rescued during the cooling-off period, but the ongoing ramifications have been severe for the broker who has lost a lifetime client and the associated referrals that would have come their way. The client is now working with my company to find a suitable property and is dealing directly with the banks to organise funding.
Feel free to email me at
Michael Sloan, founder and managing director, The Successful Investor
Michael Sloan is the founder and managing director of Australia-wide company The Successful Investor. Michael is a qualified financial planner, mortgage broker and investment property advisor. Michael holds a full real estate licence and has many accreditations and awards to his name, including Mortgage Lender of the Year.
The National Australia Bank appointed Michael as an external property investment advisor to their customers; his articles can be found on NAB's website. His appointment to NAB is a reflection of Michael’s strong ethical standards and wealth of property experience.
Michael’s core values at The Successful Investor are trust and integrity as the company helps everyday Australians create wealth through well-planned property investment strategies.
Michael presents at property forums and workshops Australia-wide, teaching people about property investing from the basics to more advanced strategies. These events are educational-based, without the pressure to sign up or buy on the day. He has a direct tell-it-like-it-is style and shares his knowledge candidly. He believes property investing is more achievable than most people think. His goal is to make sure investors don’t stuff it up!
