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Speaking on Broker Daily’s latest Business Accelerator podcast episode, Broker Daily director Alex Whitlock and Broker Essentials director and broker coach Jason Back outlined how brokers can sometimes be their own worst enemy when it comes to taking on additional work for no remuneration.
The warning comes as record proportions of borrowers turn to the broker channel for help with their home loan, with many turning to the third-party channel for its convenience and specialist knowledge.
But the duo said that a lack of awareness of the time and effort put into writing a loan has resulted in brokers working long hours for no pay and increasing the risk of burnout.
The industry is currently facing a crisis of “invisible” labour, Whitlock said and highlighted a growing trend where brokers are not being compensated for the extreme workload involved.
Whitlock pointed to a specific case involving a referral from an accountant that resulted in 70 hours of work for the brokers in order to undertake a minor refinance.
“They [the client] had our broker going through multiple different documents. They were looking at a refi of some tens of thousands of dollars – so nothing in terms of a return with 50/60/70 hours of work from the broker,” Whitlock said.
Whitlock noted that most borrowers would not realise that brokers are not being remunerated for the hours worked on a deal and said that brokers often undertake this type of work for their referral partners, resulting in “absolutely zero ROI on the hours that they’re putting in”.
He compared the situation to the property management sector, where a lack of education leads to hostile client relationships. “Most owners and investors treat their property manager like a doormat because... the property manager doesn’t educate them sufficiently about the value that they bring,” Whitlock noted.
“Property managers don’t educate their owner at the point of contact as to the value of what they bring. The same is absolutely the same as, and just as relevant to, brokers.
“If your customer or prospective customer doesn’t treat you with respect... you are doing yourself a disservice.”
Back of Broker Essentials said that this was a common issue and that the industry is largely flying blind when it comes to actual profitability per deal.
“The revenue outcome is such a mystery to a lot of brokers because the ability to work out cost per file and revenue per file is actually a little bit tricky,” Back said and stated he recently used a calculator to understand what the actual return looked like and cited it was a “fascinating process”.
He emphasised that the “physical revenue return” is only one side of the coin.
“We’re not just getting paid to draw down a loan. We’re actually a central figurehead within the advisory role within our clients’ life. And that comes with great responsibility, but it also comes with a great workload as well. And at the moment that workload is generally not recognised,” Back said.
He added that the emotional toll of working on these deals was also not factored into broker work.
Back continued: “The idea of working through tens of hours of work for no reward or for no recognition happens in our industry every day. So how are we, as an industry, evolving?”
The power of the ‘fast no’
To combat this, Back suggested that brokers must pivot from being “interviewed” by the client during the discovery call to “interviewing” the prospect to see if they are the kind of business the broker actually wants.
He gave the example that brokers who take on commercial or agri clients without having a speciality in that area can find that it is “really detrimental not just to your client, but also to you and your business”.
This involves a shift in mindset regarding lead conversion and client retention.
The broker coach said: “It’s an opportunity right there and then to have a very short discovery call (not an hour and a half but 15–20 minutes) where you’re basically saying to them whether you’re going to take you on board or not based on what’s important to the customer, their expectations, the scenario, the complexities and your specialities.”
He said if brokers find that the client isn’t a good fit in that call, they could politely decline the business and refer them to someone who can help.
“By saying no, it doesn’t disempower you, it actually empowers you,” Back explained. “I would rather a fast no than a slow yes. Taking a client down a rabbit hole for six months and dragging through the mud backwards... doesn’t do anybody, the industry, you, or the client any favours.”
Back urged brokers to look at the clients they wish they hadn’t taken on and ask: “What state of mind was I in at that time? What was the decision-making process?”
As the industry evolves, the consensus remains that a broker’s time is their most valuable commodity.
As Whitlock concluded: “Don’t assume that people understand... you have to educate your customer as to the value that you bring.”
You can hear the full conversation in the Business Accelerator podcast, here:
[Related: Why broking is a fantastic career choice for women]