24 July 2012
Referrals continue to drive profit growth for mortgage brokers, according to the Macquarie Practice Consulting 2012 Mortgage Broking Benchmarking Report, with the top two reasons for growth cited as referrals from existing clients (68 per cent) and from formal referral partners (53 per cent).
The report, now in its second year, further demonstrates the importance of referral relationships by revealing the close link between formal referral arrangements and profitability, with firms that have joint venture arrangements, an ownership stake in a referral partner, or a documented, formal arrangement, typically having higher average profits (between $103,000 and $188,000) compared to those with loose or informal arrangements (averaging profits of $70,000).
Fiona Mackenzie, Associate Director, Macquarie Practice Consulting, said the focus on referrals among many brokers will support future growth and success across the industry:
"The majority of brokers recognise the role that referrals play in supporting their business, which is an important first step towards maximising referral opportunities and realising the significant benefits that these opportunities can bring.
"The next step is to assess your existing and potential referral partners to ensure they are the right fit for your business. You need to ask yourself if you connect well on a personal level and whether your offering fits strategically with their business model and client base. To formalise the relationship, you need to invest time in preparing your pitch, but when you meet with your potential referral partner, it is just as important to listen and ask questions. These relationships take time and energy to create and maintain, so you need to be prepared to commit wholeheartedly."
The report also revealed that the biggest challenge within a broking business is attracting enough new clients, with 58 per cent of brokers stating that this issue is likely to impact them in the next 12 months. Closely following referrals, the internet was cited as the next main source of new business, particularly for larger broking firms.
Ms Mackenzie said the internet offered a compelling opportunity for brokers:
"When we look at financial decision-making, people first and foremost speak to their family or friends, but this behaviour is closely followed by conducting an analysis of costs and undertaking online research1.
"Our benchmarking report revealed that leads from the internet have increased this year for larger businesses, by approximately one third, which suggests that these brokers are capitalising on the trend towards online research, and attracting clients through their own web presence. Having a credible and accessible online presence is critical as it helps to build confidence among clients; it doesn’t have to have bells and whistles, it just has to engage and clearly articulate your offering."
While sources of business leads continue to be top of mind for many brokers, they are also concerned about the potential impact of a continued soft property market (68 per cent), reduced investor confidence (51 per cent) and uncertainty over future commission levels (35 per cent).
Despite these challenges, the majority of brokers are continuing to see bright times ahead, with 73 per cent feeling positive about the future. Further demonstrating their optimism, 76 per cent of brokers expect to grow their revenue in the next 12 months, with more than one third anticipating growth to be 20 per cent or greater.
The 2012 Macquarie Practice Consulting Mortgage Broking Benchmarking Report gathered insights from almost 200 mortgage broking businesses across the country. The annual survey aims to create industry benchmarks which brokers can use to measure performance and progress across their business.
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