James Veigli says there is nothing stopping a broker charging a fee and reducing their dependence on lender commissions, so long as they provide value-add services to their customers
It's time to face up to reality. As a broker in today's financial climate, you can no longer rely on upfront commission and trail alone to pay the bills and get ahead. With your income at the sole discretion of third party corporate institutions, you are a sitting duck.
Trail replacement strategies enable brokers to reduce the impact of the current financial downturn and boost their cash-flow, plus grow additional income streams. In fact, it's possible to replace your current broking income entirely - which means no more uncertainty at the mercy of the big lenders.
There are three trail replacement strategy concepts. (1) Value add and charge fees; (2) strategic partnerships and (3) memberships. In this column I will discuss the first of these.
Charging fees by adding value
The easiest and fastest way to boost your cash-flow and start replacing your trail is to start charging fees by adding perceived or real value to your services.
For example, many brokers offer a standard "free initial consultation". Problem is there's no real or perceived value on offer here. It is a big mistake to think that by offering something for free, that people will want it. The fact is most people are sceptical of anything that's "free".
On the other hand, if the same broker offered an "initial finance consultation" to prospects and clearly communicated the value of this offer, say the consultation is worth $300, plus offered a bonus information pack on "Tips to paying off your home loan quicker" worth $50 - people will be lined up to take advantage of this offer, even if this broker is charging $150 for the consultation. Why? Because people want value (and they love discounts!).
Don't be afraid to charge for your time or service. Accountants, lawyers and financial planners do it, and already a number of mortgage brokers have done it successfully for years. There are a number of ways you can go about charging fees, from charging an upfront fee that is reimbursed when the client settles a loan, right through to simply charging a set fee for your time.
Are you allowed?
So is it ethical to charge fees? If you are a qualified mortgage broker and you give value to your clients, help solve their problems and help them get what they want - then YES!
Here's a fact on human psychology. The more you charge for your time and the harder you are to get to, the more people will want to do business with you. This is exactly why the $1,000 per hour lawyer has a full client book, when the $100 per hour lawyer is sitting at the desk waiting for people to walk through the door.
When you start adding value to your services and charging fees, you will immediately increase your cash-flow and overall income. You will also increase your sales and conversion rates, because customers who are paying for your knowledge will value you and your service.
If that's not enough, you will even save time because you will avoid the time-wasters and rate-shoppers - leaving more time to write more loans for client's that value and appreciate you.
So start adding value and charging fees today, and watch your business (and income) grow!
Five tips to adding value to your business (and to justify charging a fee):
1. Differentiate to the point where your prospects cannot get your exact service elsewhere.
2. Satisfy your client's most burning problem, because problems are huge motivators that cause people to take action and spend money to fix them. To find out your client's biggest problem - simply ask them.
3. Become a specialist mortgage broker by focussing on one type of finance, or on helping just one group of people. It's far easier to become the preferred mortgage broker in a small group, than it is to become well-known in the wider community.
4. Offer bonus services or products, including information and education. Using bonuses is an easy way to stand out in the market - plus a bonus can motivate people to take action and say "Yes" to your offer, even if you are more expensive than another broker or bank.
5. Use 'standard' and 'premium' services. For example, your 'standard' service might be free to the client - but only includes mortgage broking. Your 'premium' service will attract a fee, but it also includes 24/7 email and phone access, a half-yearly review of your loans and an information pack on "Tips to paying off your home loan quicker". Studies show that more often than not people will choose the 'premium' service over the free 'standard' service.
James Veigli is a mortgage broker, marketing and business strategist and founder of the Australian Mortgage Broker Alliance. He can be contacted at: [email protected]
