Mortgage broking has to be a very tempting career for people experienced in the banking sector, given the generous commissions paid by the banks at 0.65%. An experienced bank employee on a $100,000 salary would need to write only $15,000,000 of mortgages per year or about $1.25 million of mortgages per month in order to match that salary.
The bank employee may have been writing $5,000,000 worth of mortgages per month for their bank, and they would back themselves to be able to generate at least a quarter of this business if they were out in private practice. They may have a number of loyal clients who prefer to deal with them whenever they deal with the bank, and they may have a very good reputation in the industry that gives them a lot of confidence as they head out into the business world,
The reality however can come as a bit of a shock, as the industry is very competitive with a small handful of very dominant large companies that win the largest share of all new business. New mortgage brokers discover to their cost that most of their working day and week is spent seeking new clients, which they may find enjoyable if they enjoy networking because this is what this business is about. They will need to build up very strong networks of real estate agents, property developers, banks and financiers, and they will also need to promote their business at home shows and auctions etc.
The second dose of reality that will be painful is discovering that only around 30% of all their efforts will proved fruitful in terms of earning them a commission, and that around 70% of their new clients will be unsuccessful or change their mind or walk away from any deal. Except for certain niches there is no reliable prediction whether a client is going to uplift the mortgage once it has been pre-approved, or whether the application is going to fail once the broker starts digging deeper into their client’s financial affairs. NZ Mortgage Brokers need to have a high level of self belief as they carry out their work in as professional a manner as possible.
The biggest problem for a new mortgage broker is discovering how difficult it is to tap into the vast amount of new business that arrives via Google search on the Internet. They will almost certainly spend a few thousand dollars on a high quality website that presents them and their new business in the best possible light, but if their website gets virtually no search traffic then it is virtually no better than a very expensive business card. The reality is that new business generated by Internet search is overwhelmingly dominated by the small number of large companies that are ranking #1, #2 or #3 for the most common search terms.