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For many years, you have dreamed of becoming a mortgage broker — to be self-employed, to be a problem solver, to have more than one product line available to you, to have flexibility in the hours you work, to build an asset.
Finally, you are in a position to leave your job and start your business. But which business model best fits your needs?
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Choosing the right business model is very important; a mistake can be costly and changing business can result in periods where you cannot write loans while you wait for accreditations to be transferred. Do your research and compare the models.
There are other things you need to take into consideration as well as the model. What are the values of the organisation? Do their values match your own? Do you like the people you’d be working with especially the leadership team of the company? Is their approach to customers the same as your own? Relationships can often overcome perceived shortcomings in a business model but rarely does a business model overcome shortcomings in relationships.
Wholesale or Retail Aggregation
The first decision to be made is whether you want to operate under a whole aggregation model or a retail aggregation model.
Some of the differences include:
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Wholesale |
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Retail |
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Benefits · Your own brand · Higher rates of commission · Less management · Choice between your own ACL or your aggregators · Mentoring program cost if applicable |
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Benefits: · Leverage off an established brand · Potential for leads · Support structure · Compliance framework · Often mentoring program is included if applicable |
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Considerations: · Little support · No leads · If you use your own ACL you need your own compliance framework |
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Considerations: · Lower commission rate · May be more restrictive in arrears such as marketing · May have contractual obligations such as minimum performance |
Wholesale Aggregation
Should you choose to go down the wholesale aggregation path, consider your needs and preferences in regard to the following:
- ACL and compliance – do you want to have your own credit license or use your aggregators? If you have your own ACL, you are responsible for the compliance frameworks. If you prefer to use an aggregator’s ACL, have a look at their compliance framework before committing to them. Is it user-friendly, is it efficient, is it automated, do you feel it is sufficiently comprehensive or is it too onerous?
- CRM – the CRM you work with is one of the most important tools for business efficiency, business building and client engagement. Give careful thought to what you want out of your CRM and create your wish list. When considering aggregators, check the functionality of their CRM against your wish list. Have a play with the systems and compare them against each other. If you are not sure what you want out of a CRM, you can build your wish list by seeing the options and comparing them against each other.
- Support structure – we have already determined that support structure will generally be minimal compared to that of a retail brand, but it should still meet your needs, no matter how meagre your needs may be.
- Lender panel – does the panel meet your needs particularly if diversification is important to you, with products such as personal loans, commercial loans and equipment finance.
- Commission split and fee structure – wholesale aggregators will have a mix between commission split and fees. Determine what the structure of your own business is likely to be (e.g. will you have staff, use your own ACL, what settlement volumes do you expect etc.), and then ensure the commission split or fee structure meets the structure of your business. Do you prefer a lower fixed fee structure with a lower commission split or a higher fixed fee structure with a higher commission split?
Retail Model
Retail models have further options to consider: employee (yes, I know, you had decided you wanted to be self-employed… but you are now getting cold feet), sub-contractor or franchisee.
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Employee |
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Sub-Contractor |
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Franchisee |
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Benefits: · Base income/retainer · Some operating cost may be covered by the employer
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Benefits: · Lower cost to entry · More flexibility |
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Benefits: · Trail ownership · Able to sell a going concern and trail · Limited number may be available · Territory protection in some models · Greater support · Greater legislative protections |
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Considerations: · You will not own your trail · Less flexibility
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Considerations: · You may not own the trail · Your operating costs are your own · Contractual obligations · Uncertainty with contract security |
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Considerations: · Contractual obligations · Ability to exit and keep trail may not be possible in some models · Cost to entry 
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