Unveiling the Secrets of Elite Strategic Mortgage Brokers – Navigating Advice, Skills, Results, Relationships & Regulations! (Ep. 234)

Previously known as “The Property Planner, Buyer and Professor”

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Episode Highlights

1.58 – Mike kicks off the episode

4.25 – Dave has a fascinating stat about those who ask good questions

7.30 – Cate touches on the privilege of trust

11.10 – Emotional intelligence and picking up on body language

13.30 – Why is mortgage strategy so much more important than rate?

17.26 – Dave runs through the technical skills required to be a SMB (strategic mortgage broker)

20.38 – Teaser from next week’s episode… a great listener question

27.10 – Mike quizzes Dave about how SMB’s manage their client’s risks when it comes to deposits and breach of contract

37.01 – And our gold nuggets!

Show notes

1. To be a successful professional adviser, requires high emotional intelligence, what are some of the specific skills in this area that you need in order to be a great strategic mortgage broker (SMB)?

It all starts with active listening, empathy and caring.

You need to listen with intent.

As the saying goes, you have two ears and one mouth and we should strive to use them in that order!

People want to tell their story, so let them tell it. This not only helps you to understand them, they feel great for having been heard, and it allows you to really narrow in on the best solutions.

As I say to our team, it is a privilege to have someone share their goals and dreams and personal information. It shouldn’t be taken for granted, and there is so much you can learn from each and every client.

People can be meeting with you or call up after becoming a client and they are –

  • under financial duress,
  • personal stress,
  • going through a divorce,
  • you can have couples who are a different wave length and you need to act as a conduit,
  • you might have one partner who does not want to work with a broker

You can work with tradies to CEO’s.

Ultimately, you need to listen, have empathy and care.

We all know that sometimes people can hear, but they are not really listening.

One thing we focus on in training for up and coming or new brokers is to not get caught up in thinking about what you want to ask or say until the client has finished talking.

It often can be the difference between ensuring that you are not misinterpreting what the client has said or wants.

These might seem like basic life skills but if you feel under pressure, some of these skills can go out the window.

Especially when you are still in the first few years of learning all the various technical skills it takes to become a broker.

And ask lots of questions.

Research shows that the most successful service providers ask seven times more questions than the average.

We spend a lot of time reminding the team that asking questions set them up for success with clients.

And they need to remember, people only know you care through your actions, words are great, but it is your actions that show your true intent.

And asking questions and listening are a great way to show you care.

Let people communicate everything they want to share with you.

Only AFTER you have understood the client and their current and future goals, can you then map out an effective mortgage strategy.

Cate weighs in with a comment about how a good advisor can deliver an answer. She also talks about the privilege of being a trusted advisor. And Cate doesn’t worry about scripts and dialogue. It’s all about listening and asking the right questions.

2. Once you know the client’s goals and personal drivers, along with their financial situation in detail, what is the next step for a Strategic Mortgage Broker (SMB)?

This is when you need to help them set a Strategy and provide your advice.

Too many brokers and lenders only focus on products and the rate.

This is why the ability to understand what we call mortgage strategy, which we have pioneered, and apply it to a client’s situation to help them create wealth, protect their risk and execute a Property Plan is so important.

We have broken up that a customised Mortgage Strategy should include some or all of the following consideration regarding :

  1. maximise current and future investment tax deductions
  2. effective money management,
  3. the various way that you can manage ongoing risk through your largest financial commitment, your mortgages and debt
  4. how to hold property long term as they accumulate, in particular keeping a stepping stone home to become an investment
  5. Ascertaining the pros and cons of different repayment strategies
  6. How using Offsets can not only save you interest, but help with all the above strategies such preserving tax deductions, helping you hold property, reduce repayments and manage risk via bigger buffers and the list goes on….

In order to tailor a strategy to the client’s unique circumstances, this really means being advice based, not transactional or product driven.

Being able to provide Property and Mortgage education, be independent and unbiased and act in the best interest of the client is vital.

This is all best done leading into each property purchase because you can only borrow once to purchase a property, and ever day your structure and strategy is set up incorrectly after settlement costs you money, and we find almost everyone we meet with who owns multiple properties has at least one flat with there strategy.

3. Now that the SMB has listened to and understood all of the client’s needs and objectives, and has determined the strategy that would best suit, what industry related skills do they need to master to execute the mortgage strategy and get the loan approved? 

This is a big area to cover as there are quite a few areas they need to be an expert in but hopefully our listeners will appreciate taking a look under the bonnet to better understand what they do.

  • The first is credit policy.

Ultimately understanding lender credit policy is a little bit like understanding the law. There are reems of policy explanations provided by each and every lender for you to review, understand and interpret.

You must be aware of the differences between lenders and the different interpretations and areas of flexibility or loopholes to be able to take advantage of them, as required, for your client’s benefit, subject to affordability.

This is critical for clients who have more complex situations, but not all lenders will accept them as borrowers.

So, it is crucial to understand the intricacies of lender policies, to provide lender recommendations and solutions that are in the best interests of the client.

All lenders have niche areas where they differentiate themselves.

  • The next skill required in line with this area is strong number crunching expertise

You need to be a master of the dark art of making numbers work to your clients benefit, so they can be approved for the loan amount they can afford.

This gets tricky when clients have variables such as bonuses, commissions, overtime, part-time, casual, self-employed, trusts, companies, distributions, profits, depreciation or interest addbacks, rent and the list goes on and lenders may exclude all or 50% of this income source.

The reality is that 9 out of 10 people’s situation has some level of complexity.

There are lots of lenders, so matching the client’s individual circumstances to the lender policy and serviceability calculator takes skill.

Ultimately the interpretation of the clients ‘numbers’ requires a solid mix of mathematics and interpreting the written word of the policy to find the right outcome.

Being an expert in scenario calculations for purchases and refinancing is vital.

A lot of time is spent by brokers and clients in this space, working out different and optimal purchase scenarios and emails back and forth on these and different LVR’s, savings buffers, net monthly surplus, estimated purchase prices which all really boils down to need strong fundamental mathematical skills.

  • Next they must stay across lender products and the lender market in general, plus Government assistance on offer

Lenders are changing and updating products, rates, and policies all the time and when you have access to 40-50 plus lenders, you need to be across this all including different segments like full doc, low doc, non-banks, business and commercial lending with different policies, niches and quirks.

Government schemes are always evolving across First Home Owners Grant and Home Buyer Funds AND some lenders participate in these schemes and their are a multitude of eligibility requirements. These vary from state to state, and then the federal government will also provide something different to the states – you’ve gotta love our federation don’t you.

  • They also should have strong general knowledge on the property market and economy

Which is a big best but that will help set you apart.

  • And finally the industry is heavily regulated now,

For example, a mortgage broker has to meet many regulatory requirements that a lender direct doesn’t need to.

Responsible Lending requirements such as collecting all of your supporting documents (payslips, tax returns, company financials), cross checking these to verify it’s all accurate, ID checks, diving into your living expenses and reviewing your bank statements for any discrepancies.

Best Interest Duty which was newly minted in January 2021 as a result of the Royal Commission

This best interest duty ensures that brokers have the same fiduciary obligations owed to their clients as other advisors, such as lawyers, accountants and financial planners.

Its interesting to observe that this best interest duty ONLY applies to mortgage brokers. Lenders are not required to act in your best interests.

This is despite the fact that complaints against mortgage brokers make up only a relatively very small percentage of complaints compared to banks, both pre and post the Banking Royal Commission.

To give you an idea, The Australian Financial Complaints Authority recorded the following complaints for the last financial year:

  • 55% of ALL complaints received relate to the banking and finance sector
  • Of those complaints:
    • 1% are against mortgage brokers
    • 68% are against banks

They also need to provide a credit guide with various disclosures and a written Credit Proposal for the borrower which is a significant document outlining all the details of the lending and how it meet all the objectives of the borrower.

Again, lenders and banks direct don’t need to do any of this,

And despite many in the industry rightly so getting frustrated with all the extra paperwork need to be completed, it is a big reason why brokers are better than dealing with lenders direct as voted on by consumers with 72% of all loan being completed with brokers.

When I started broking it was barely a few % and people didn’t know what they were!

Boy times have changed…

4. There is a lot riding on every loan application, especially when someone is purchasing a property and could be at risk of losing a deposit, tell us about some of the risks and the skillset required to ensure nothing goes wrong? 

This is all about the need for Attention to detail.

One small oversight can mean everyone’s time is wasted if the loan was submitted to the wrong lender, or shouldn’t have been submitted at all, or cause settlement to be missed, or even worse, a client has purchased and put down a deposit when the borrower cannot even qualify for a loan.

One small mistake on your interpretation of the lender policy and the clients income and employment situation and how you apply it can be all it takes.

Or missing a small error on the loan documents from the bank.

With every purchase, there are key time lines that need to be met and managed:

  1. Timely pre-approval so you can confidently go to auction/make an offer
  2. Finance clause for unconditional approval
  3. Settlement date
  4. With Off the plans, often a 2 week turn around to get to settlement once the property is finished

Lacking attention to detail and lodging to the wrong lender could result in extreme delays and:

  1. Not being able to move into your home on the day that you planned
  2. Penalty fees for missed settlement
  3. At worst, termination of contract and losing the deposit

5. Inevitably things do go wrong, we know lenders and banks can be big behemoths, they can make errors with loan documents, and an assessor can get a bee in their bonnet about approving a loan, and sometimes the old “computer just says No”, what skills does a highly competent mortgage broker require in these instances?

In a nut shell they require –

  • Resilience and the ability to handle regular stressful situations
  • Moving through lots of different tasks in a day
  • Being able to manage a lot of things at once. The best brokers will have 20,30,40 or more files on the go at any given time.
  • Project management skills – each application is a small project with many stakeholders
  • Being highly responsive as challenges for lenders and clients arise and disrupt your day
  • Decisiveness

Be able to respond quickly to challenges that arise, and take rapid action:

  • The ability to influence stakeholders
  • Negotiation skills, especially with lenders
  • The ability to be assertive whilst maintaining professionalism and courtesy.
  • And the willingness to go above and beyond to get the best solution for a client.
  • And ultimately the maturity to take responsibility for resolving each and every situation if needed.

You need to be willing and able to be the sole person responsible when things go wrong to drive a solution, whether the mistake was by a lender, solicitor, yourself or your own support staff.

With property settlements, these are high stress situations – not only have we got large sums of money involved, but let’s not forget the clients hopes and dreams are tied up in this as well.

So having the capability to manage extreme stress and urgency on a daily basis, because you are always working to multiple deadlines on every loan application, is a project, with lots of input, steps in the process and stakeholders to manage.

And you are the woman or man in charge….

6. A lot of what you have described, when you tie it all together, really adds up to great service….yet great service is an easy thing to say, but very hard to deliver. 

Really when you bring all these things together they equal Great service

This underpins everything.

And this needs to continue beyond settlement, and for the life of the loan.

People need to know and feel you are there for them all of the time to answer all your mortgage, property and finance queries.

And if something goes wrong, you will be there to fix it, and sort it out, no matter what.

Basically, you need to be able to be relied upon.

Ultimately, this all provides peace of mind to the client because they are often going through one of the most stressful times of their lives.

Our job is to ensure they feel comfortable and at ease from go to whoa during a loan application…in an ideal world and they are getting great results.

And if something does go wrong, that you will fix it as quickly as possible.

And I often remind our team of something I read when I was a young broker,

“that the best referrers are often those who had something go wrong, but you were able to fix it for them.”

So, you need to see these situations as an opportunity to shine and create a raving fan because your bread and butter is repeat business from clients and referrals….

and that is where getting new business can become almost easy if you are able to master all the areas we have covered.

7. We know that relationship building is vital in any professional services business, what are some of the key partners and relationships that a highly effective SMB needs to cultivate to maintain a successful flow of new customers?  

Yes, relationship building is vital. This spans the gamut of

  • Clients
  • Being Pro-active in contacting clients on a regular basis, whether it’s to check in on any changes in plans, review borrowing capacity for another purchase, review existing loans / improve rates etc Being approachable, available for clients and contactable on an ongoing basis
  • Ultimately they should be your best source of business via referrals and repeat business.
  • Your own support or admin staff.

You may not be their direct manager or direct report, which is a full time job, but you do need to be able to mentor them, guide them, problem solve with them and build strong relationships with them along with your manager or business owners.

  • You also need to cultivate strong relationships inside the Lenders.

They can be your best ally when things go wrong.

  • You want to have Referral partners –

the key here is finding people who align with your values and who can be trusted to provide the client with the same level of care and quality service.

Note, in our professional relationships, we do not pay for referrals that come to us and we do not charge referral fees to refer our clients to other businesses. This is because our referral partners are genuinely businesses that we support who we know will take care of our clients.

Gold Nuggets

Mike Mortlock’s gold nugget: Mike recalls witnessing mortgage brokers and accountants arguing about add-backs and servicing calculations. This early awakening showed Mike the value of a good quality mortgage broker.

Dave Johnston’s gold nugget: Dave reminds listeners that he has hardly mentioned interest rates in this episode. Strategic mortgage broking goes so much beyond rate.

Cate Bakos’s gold nugget: “If you win them on rate, you’ll lose them on rate”. Cate relays an important message about the importance of looking beyond offering the cheapest rate.

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