CMP 10.03 by Key Media

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MARCH 2015

CONTENTS UPFRONT

COVER STORY

04 Editorial

BROKER SENTIMENT POLL

Is it time for a group marketing fund for mortgage brokers?

A dynamic mortgage landscape is reshaping broker business and sentiment in unexpected ways

06 Letters to the editor Brokers weigh in on revenue diversification

08 Statistics

Canada’s leading markets are jockeying for position

T ND

10 News analysis

And the winners and losers of the rate wars are...

12 Head to head How can brokers better compete with the banks?

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ISSUE 10.3

CONNECT WITH US Got a story, suggestion or just want to find out some more information?

CONTENTS

twitter.com/CMPmagazine www.facebook.com/ MortgageBrokerNewsCA

UPFRONT

PEOPLE

INDUSTRY ICON

Just how does Anthony Contento take customer service to such high levels that he wins awards for it?

FEATURES

COMMUNITY CONCERNS

Centum’s Paul Therien is leading by example, urging brokers to follow his own efforts to give back to the communities he serves

14 Private lending update How the private lenders been making out since the rate cut

16 Commercial update What exactly is going on with small multifamily lending?

PEOPLE 55 Career path P.E.I.’s Andrew Matheson of TMG The Mortgage Group

56 Favourite things Kent Farnsworth of Simply Mortgages Ltd.

46 STRATEGY

PEOPLE

BROKER PROFILE

Layth Matthews is bringing the lessons of quiet mediation to his brokering business, asking brokers to reflect on it

CULTURAL CHANGE IS COMING Author Stefan Kazakis reveals how to wow customers – and keep them for years to come

50 STRATEGY

MARKETING MATURITY

Mortgage brokering has evolved but have agents moved their marketing in the same direction?

www.mortgagebrokernews.ca

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UPFRONT

EDITORIAL

We’re all in this together – really! Y

ou’ve got to speculate to accumulate. It’s an expression frequently heard from one end of the broker channel to the other, reflective perhaps of the risk tolerance of mortgage professionals. Still, putting that principle to work on a collective marketing campaign to promote brokers has been a chance few players seem willing to take. Those industry professionals are receptive enough to the idea; namely, that mortgage professionals would each, whether through their networks or individually, contribute a percentage of their compensation to a group kitty. Ostensibly, those funds would then be specifically directed at a consumer awareness campaign spread from sea to sea to sea and using television, radio, print and online formats. That said, even proponents of that kind of group marketing campaign remain skeptical about the channel’s ability to work cooperatively, even when it is so very much to everyone’s benefit.

The buckshot approach hasn’t necessarily resonated with consumers They continue to look longingly at their insurance broker counterparts, who have effectively united under the IBAC banner, mounting very effective consumer marketing initiatives that have elevated the profile of insurance professionals everywhere. The organization formed around that initiative – way back in 1922 – now administers an annual marketing spend in the millions. Mortgage broker advertising has been much more splintered, with networks and, indeed, the national association, focused on promoting subgroups and not brokers in general. The buckshot approach hasn’t necessarily resonated with consumers, with surveys still pointing to a lack of appreciation for what exactly it is mortgage brokers do. It’s time for that to change. That’s one of the reasons why CMP, more specifically, its parent KMI Publishing & Events, is focused on bringing a consumer-facing website into being. The goal is to promote brokers and their increasingly unique value proposition to homeowners and homebuyers. Look for more updates on that initiative in the upcoming issue of CMP.

Vernon Clement Jones Editor

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www.mortgagebrokernews.ca ISSUE 10.3 EDITORIAL Editorial Director Vernon Clement Jones Writers Olivia D’Orazio Jordan Maxwell

SALES & MARKETING Associate Publisher Trevor Biggs General Manager, Sales John Mackenzie

Research Editor Ryan Smith

Marketing and Communications Claudine Ting

Copy Editor Clare Alexander

Project Coordinator Jessica Duce

CONTRIBUTORS John Tenpenny

ART & PRODUCTION Design Manager Daniel Williams Production Manager Alicia Salvati Designer Loiza Caguiat Traffic Manager Kay Valdez

CORPORATE President & CEO Tim Duce Office/Traffic Manager Marni Parker Events and Conference Manager Chris Davis Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL INQUIRIES vernon.jones@kmimedia.ca

SUBSCRIPTION INQUIRIES tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca

ADVERTISING INQUIRIES trevor.biggs@kmimedia.ca

KMI Media 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 tel: +1 416 644 8740 www.keymedia.com Offices in Toronto, Sydney, Denver, Auckland, Manila

Canadian Mortgage Professional is part of an international family of B2B publications and websites for the mortgage industry MORTGAGE PROFESSIONAL AUSTRALIA sam.richardson@keymedia.com.au T +61 2 8437 4787

MORTGAGE PROFESSIONAL AMERICA ryan.smith@keymedia.com T +1 720 316 0154

Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as IB magazine can accept no responsibility for loss

25/03/2015 1:14:13 PM

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UPFRONT

LETTERS TO THE EDITOR

Diversification download Brokers are busy digesting the tricks of the diversification trade laid out in CMP 10.02 by mortgage professionals broadening their revenue horizons RE: THE DIVERSIFIERS (CMP 10.02) I would love to have seen the balance sheet for each of the brokers in this diversification feature. I’m pretty sure that their income from insurance, syndicated mortgage referral, etc., does not come close to the extra money they could pick up by applying themselves better to arranging mortgages. – Don Harmon

I have spent the last ten years working on real estate and mortgage brokering, which is really the best fit in terms of mixing two disciplines. I didn’t see anything about that in the story, though.

There is no reason whatsoever to be referring clients to high-interest loan companies when a refinance is possible or appropriate. Brokers who are doing that, please stop. – Ontario Broker

– MG

Mortgage brokers need to roll up their sleeves and get on with mortgage brokering. Clients don’t go to mortgage brokers for investment advice or auto insurance or to sell them a home. Let’s not exploit the credibility we have built up. – Alberta Veteran Broker

Like Gord McCallum, I think that diversifying your brokerage into insurance is better done through a partnership with an insurance broker or agent. Trying to pick up that expertise to the level you need to in order to truly serve clients can take too much time away from the business of mortgage brokering. That doesn’t mean it cannot be done. – Marv Singer

I applaud those brokers who have shown the vision required to diversify their business models to incorporate other professional financial services into their business models. However, I think that we should be careful not to take on additional business that complicates the model and erodes trust. – Cheryl Daigle

www.mortgagebrokernews.ca

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UPFRONT

STATISTICS

One country, four stories

Yukon

-26.1

Canada’s regional housing markets are trending in all directions, and broker business is expected to go along for the ride

Northwest Territories

-50

HOME SALES YEAR-OVERYEAR PERCENTAGE CHANGE

Manitoba

-2.9

Alberta

-27.1

British Columbia

+ 19.4

Saskatchewan

OIL COUNTRY In what has been the biggest finance story of the year so far, Canada’s oil industry has seen growth stagnate in 2015 – and the housing markets in those regions are being reshaped. “A number of buyers across the Prairies stayed on the sidelines in February,” said CREA President Beth Crosbie. “That’s likely to remain an important part of the national housing story until the outlook for oil prices starts improving.” Alberta, in particular, saw a 27.1 per cent year-over-year sales drop in February. Prices saw a decrease as well, falling 4.8 per cent year-overyear. Lloydminster (-46.6 per cent) and Calgary (-34.7) saw the most drastic sales reductions. Meanwhile, Saskatchewan isn’t faring much better, reporting a 15.8 per cent year-over-year fall. The one bright spot for Saskatchewan was Prince Albert, which saw a 44.8 per cent year-over-year jump in unit sales. However, seven of the province’s nine major markets all saw sales fall.

-15.8

A GRIM OUTLOOK FOR ATLANTIC CANADA… DEPENDING, OF COURSE, ON WHO’S TALKING A recent report by TD Bank that predicted house prices in the Newfoundland and Labrador would fall by up to 10 per cent has been challenged by a local CHMC analyst. Chris Janes says that the bank has no local intelligence on the ground as the CHMC does and he predicts that prices should remain stable. TD, along withthe Finance Minister, he says, is basing forecasts on a declining oil industry but production in the province is largely unchanged. Janes told CBC that employment was the key driver for the housing market and people are still employed.

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ONTARIO AND BRITISH COLUMBIA

Newfoundland & Labrador

Quebec

-3.5

+0.2

The two bright spots for the Canadian real estate industry in February were these two housing behemoths. Both are home to the two hottest housing markets (Vancouver and Toronto). “Sales came in below the ten-year average for the month of February in two-thirds of all local markets,” said Gregory Klump, CREA’s Chief Economist. “That said, the opposite was true in a few large urban markets in British Columbia and Ontario despite a shortage of listings there, which is fuelling prices higher.” Ontario enjoyed a 10.2 per cent year-over-year increase in home sales in February. It also reported a 7.1 per cent price jump. Sales in British Columbia, meanwhile, skyrocketed 19.4 per cent year-over-year last month, with prices recording a slightly more modest 4.5 per cent increase.

Ontario

+10.2

Prince Edward Island

-1.3

THE GREAT WHITE NORTH

The region that has traditionally been the most volatile continued the trend in February, with the two western territories recording the most drastic price decreases. Northwest Territories saw a 50 per cent decrease in sales and Yukon saw its sales cut by 26.1 per cent.

New Brunswick

-13.7

Nova Scotia

THE MARITIMES

Eastern Canada saw the least drastic year-over-year changes of any region in Canada. Nova Scotia was one of only four provinces to record an increase in sales activity in February, ticking up a marginal one per cent. Prince Edward Island (-1.3) and Newfoundland (-3.5 per cent) saw modest decreases and New Brunswick had a 13.7 per cent year-over-year drop.

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UPFRONT

NEWS ANALYSIS

Rating the winners and losers Rock-bottom rates have brokers increasingly bullish on the spring market, regardless of where they work in this country – and that includes Alberta

IT’S HARD to say what exactly Bank of Canada Governor Stephen Poloz was thinking when he moved the overnight rate 25 basis points lower in January, shocking brokers and economists, alike. But, whether or not he intended it, the move has played favourites with some mortgage professionals – depending on where exactly they ply their trade. The discrepancy breaks down along provincial lines, although the winners, or the losers, aren’t confined to one end of the country. Still, Alberta has surprisingly come out on top, argue some analysts, pointing to the effects of an interest rate cut most expected would do little to counteract falling oil prices. “I don’t know if [the increased business] is a result of the rate cut,” said Alyson Thiessen, broker/co-owner of Get ‘Er Done Girls

TEN-YEAR HIGH AND LOW While the Bank of Canada’s rate cut might not be the last, neither is it the first. In the last 10 years, the benchmark rate has experienced a 400 basis-point gap between its highest high and lowest low.

4.25

This 10-year high for the Bank of Canada’s overnight rate was realized in May 2006

0.25

This 10-year low for the central bank’s interest rate was touched in April 2009

(Mortgage Intelligence) in Red Deer, in the heart of Alberta. “Our business had increased prior to that so I don’t know if you can link it. But given that I’m in Alberta, the rate cut kind of stopped people from worrying.” That last point speaks to the most tangible

later the banks lowered their rates.” Even then, the banks reduced their rate, not by the full 25 bps, but by 15. Still, it was enough to encourage buyers and sellers into the market. Condo sales, particularly in Toronto and Vancouver, have also shot up.

“I’ve found a lot more refinancing activity recently. People want to lock in at a lower rate, so they’ll pay the break fee” Alyson Thiessen win for Alberta, given real fears it would see the housing market collapse as employers in the oil patch shed as many as 23,000 jobs this year. The anticipated layoffs are a reaction to crude oil prices, which have fallen by more than half since last August. Still, other provinces have done considerably better in terms of capitalizing on an overnight rate, now sitting at 0.75 per cent. CREA numbers, in fact, tell the tale, pointing to Toronto and Vancouver’s increase in home sales for February; the rise – 11.3 per cent and 21 per cent, respectively – speak to the boom times brokers in those areas are experiencing. “Business has been very steady,” John Panagakos, principal broker for Dominion Lending Centres Home Financial told CMP. “The issue is the term rates are very low and it helps that the Bank of Canada rate has dropped. Also for existing clients, it didn’t have an immediate impact, but a few weeks

That allows brokers, even without the benefit of extended rate holds, to capitalize on the number of first-time buyers getting ready to close on new-build units, mostly in urban cores. Still, the real and unexpected boon for brokers – and that’s almost right across the country – has been a significant uptick in refinances, with most players attributing it to the rate cutting at all lenders. Those institutions have also dropped their ARMs. “Typically, renewals are hard,” said Joe Tomkins, mortgage broker with Dominion Lending Centres Canadian Mortgage Experts. “The industry average is 88 per cent, Scotiabank keeps 93 per cent of their mortgages. As a broker, you’re only going to get 12 per cent of those back, so you have to get a lot more deals every year. “[But] I’ve seen a lot more renewals this year and I think lower rates have spurred people to look at the options available to them.” He’s not alone. In Alberta, Thiessen and

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“My philosophy is that I wouldnt pre-pay my mortgage just to get a better rate... only if there’s a need to refinance” John Panagakos fellow brokers from Calgary to Edmonton have seen an uptick in demand for refinances. They wager it has a lot to do with the declining fortunes of the province, coupled with that rate reduction. “I have found a lot more [refinancing] activity recently,” said Thiessen. “People want to lock in at a lower rate and we do have unprecedented lower rates. So people will pay the break fee, then lock in a lower rate. They’ll get in at 2.69 per cent with a five-year fixed mortgage and that’s pretty low.” Still, brokers aren’t taking every deal the rate cuts send their way. Panagakos is one of them, continuing to offer what he considers the best advice in consideration of IRD penalties.

“I’m getting calls from a lot of people, almost on a daily basis [about refinancing],” said Panagakos, who operates from Toronto’s trendy Danforth strip. “My philosophy is, I would not prepay my mortgage just to get a better rate, but only if there’s a need to refinance.” But, with a revised economic forecast pegging Canada’s GDP growth at no more than 2 per cent this year, brokers have preapproved clients, namely buyers who’ve been slow to pull the trigger on a new purchase, in their sights. Still, they’re mindful that a January rate decrease at the BoC could ultimately be countered by a rate hike in June or September. Suffice it to say, brokers are preparing clients for the inevitable rise.

SINCE THE SLASH February was the first full month after January’s unceremonious rate cut. Below are year-overyear changes in home sales for February 2015.

Victoria: Vancouver: Toronto: Montreal: Winnipeg: Edmonton: Calgary:

31.6% 21.0% 11.3% 0% -1.2% -17.0% -34.2%

“Low rates are great, but it’s all about what we’re doing to prepare clients for the future,” Tomkins said. “In late 2007 rates were at 5.99 per cent for a five-year fixed. “So if we’re not thinking of that rate or higher for our clients and preparing them for it, we’re not doing our jobs.”

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UPFRONT

HEAD TO HEAD

GOT AN OPINION THAT COUNTS? Email mortgagebrokernews@kmimedia.com or join the discussion at www.mortgagebrokernews.ca

Can brokers compete against bank ‘relationship pricing’?

Relationship pricing is allowing those big players to sweeten the deal for borrowers promising to bring the rest of their banking business in tow

Janice MacIver

Andrew MacDonald

James Shinners

broker THE MORTGAGE CENTRE

agent VERICO CALUM ROSS MORTGAGE

broker MORTGAGE MANAGERS BROKERAGE

“I don’t usually run into issues with bank relationship pricing. I can still usually get a better rate than what the bank is offering. People are now more knowledgeable about mortgages and are looking for someone who can help them select a mortgage that fits their specific needs. They are looking for more personalized service and someone who is knowledgeable about mortgage products, it’s not always about a 5-year fixed rate mortgage. They’re concerned about the pre-payment options and what penalties may be associated with the possibility of breaking a mortgage.“

“Knowing the profitability of the entire customer relationship means banks will continue to match or beat rates for top clients, so competing on price alone is not a sustainable competitive advantage in the broker channel. In order to overcome relationship-priced selling, brokers must differentiate themselves; without a unique value proposition, individual mortgage professionals are a mere commodity. Start by asking “how can I use my combination of skills and knowledge to create value for the client and enable me to compete in an area where I can earn a good living?”

“Mortgage brokers can easily “outsell” our bank competition through developing an ongoing relationship with our clients, educating our clients about the mortgage process and their mortgage options and engaging them in the process. We must also challenge them to look at mortgage products outside the 5-year-fixed-rate box and to be just a little aggressive on repayment options. While this can be a bit uncomfortable for inexperienced brokers, our clients come to us looking for us to provide that level of superior advice and ongoing mortgage management.”

THE RELATIONSHIP-PRICING IMPERATIVE As home sales slow across most markets, banks are ramping up for a battle in the ongoing rate wars by wielding so-called “relationship pricing” offers. Those offers, charged brokers in a recent article on MortgageBrokerNews.ca, are tantamount to tied-selling in that borrowers are handed lower mortgage rates in exchange for bringing more of their banking business to an institution. “[Bank employees] have a target on a weekly basis for not just selling mortgages but other products that they have to cross-sell,” Deepak Bansal of Dominion Lending Centres told MortgageBrokerNews.ca.

12 www.mortgagebrokernews.ca

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UPFRONT

PRIVATE LENDING UPDATE NEWS BRIEFS Private lender weighs in on rates

Broker calls for cuts to private rates We don’t have to look too far into the past to see that private lenders’ bottom lines have grown exponentially, according to one broker who believes these lenders have room to cut their rates. “In 1989, fully qualified first mortgages were in the 10.75 per cent to 11.50 per cent range, non-qualified first mortgages were roughly 0.5 per cent to one per cent higher through companies like Municipal Savings and Loan, and private second mortgages were between 15 per cent and 16 per cent,” James Robinson of the Mortgage Centre told CMP. “So in those times, there was a 35 per cent rate premium between a fully qualified first and a private second. Today, the private second rates are about four times the fully qualified first mortgage rates.”

Private lending for micro condos One industry professional is sharing key insights on attaining financing for a type of property too many traditional lenders are now shying away from. “There are plenty of private funds available in the market. Recently the topic of micro unit financing came up during a Professional Real Estate Investors Group (PREIG) Canada meeting. Professional real estate investors have found all types of different resources to finance their deals,” Navtaj Chandhoke says. “If the major lenders do not want to do a deal, private lenders are happy to invest.”

Canadalend.com believes low interest rates are here to stay. “Core inflationary data, which strips out eight of the most volatile items, including energy and food, was actually up 2.4 per cent, an increase from January’s reading of 2.3 per cent,” says Bob Aggarwal, president of Canadalend.com. “Outside of gas, a lot of things got more expensive in January, including food, which is up 4.6 per cent, the biggest increase since late 2011.” According to Aggarwal, the economy remains unstable and any uptick in rates could upset the balance and lead to economic shock.

Are private mortgages becoming a tougher sell? In the wake of falling rates, private lenders may have a tougher time selling clients on higher rates; but not if expectations are properly managed. “I would say it’s the broker’s job to inform the borrowers about what is going on in the marketplace. Whether A-lenders’ rates are 2.5 per cent or 4 per cent and the non-bank lenders’ rates are significantly higher, say 7-8 per cent, even if we were to match the A-lenders drop in rates by 25 basis points, it’s still significantly higher,” David Vyner of New Haven Mortgage told CMP. “It’s pretty much fairly safe to assume the majority of non-bank lenders will not drop their rates in sync; it’s a different marketplace.”

Lender of first resort? Brokers are facing increasing competition from institutional players on the prime and alternative sides of the business, so many are turning to the private lending sector to win a competitive edge PRIVATE LENDING isn’t for everyone, warn mortgage professionals expert in brokering those deals, but industry players embracing the sector have growing access to innovative solutions. “Since getting into the mortgage brokering business I’ve been heavily involved on the private lending side,” Anson Martin of Verico Fair Mortgage Solutions told CMP. “I’ve seen the worst of the worst and it’s a very different scene from your typical “AAA” client.” While rule changes in the mortgage world over the past few years − from the B-20 guidelines to the latest news from CMHC − have certainly made it more of a struggle for some to obtain an approval, many of these types of clients would not have been approved by an “A” lender even before the revisions to lending policies, he said, and “they are in need of a viable option.” Martin has been embracing the private lending side in the wake of tightened lending rules, on both the prime and sub-prime sides. “Oftentimes, a broker can turn to a “B” lender when there are certain issues such as someone in a credit rebuilding phase or a selfemployed client who is unable to verify income through traditional means,” Martin says. “While in some cases a solution can be found, it’s certainly not a catchall for bank declines.

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Even some of these types of lenders have tightened up and aren’t quite as flexible as they once were.” And when it comes to convincing a client that a private mortgage is the right fit, one leading broker believes it’s all about managing client expectations. “It’s not a hard sell because those who apply for private mortgages do so based on need,” Shawn Allen of Matrix Mortgage Global tells CMP. “Clients are educated and they’re smart; it’s not like an “A” client shopping for rate, it’s a client looking for a solution.” However, private lending is never Martin’s first option. If he can find an “A” product that suits the client – even if it requires a co-signer – he believes this is the best option. If that fails, Martin will turn to the Alt-A market. “A few lenders have alternative lending divisions, which are still more competitive than a full-on “B” lender,” he says. “Although not quite as flexible, sometimes it can work this way, resulting in the client still getting a decent rate all things considered. Failing this, it may end up being a B-type deal.”

A NEWCOMER’S GUIDE TO PRIVATE LENDING

Interest rates: 10-18%

Q&A: Rate frustration BRENT FRANCIS Centum Mortgage Advisors

Prime rate cuts forced by the BoC and sagging bond yields have brokers asking when will private lending rates be chopped. One broker is hazarding an educated guess CMP: How have the private lenders been making out since the BoC rate cut? Brent Francis: The Bank of Canada rate drop had little impact on the rates and lenders I deal with. On the A side, long-term rates are determined by the yields in the bond market so they gradually slid down as the bond market factored in the decline in prime. Based on the various rate offerings by the A lenders and their varied discount programs, such as quick close and limited features, the overall effect on the 5-year rates averaged 15 basis points. Not very much effect in this already historically low rate environment. The A-minus lenders dropped about 25 basis points to 4.5 per cent for borrowers not proving income. On the B side, the prime rate drop had very little effect as the private lenders are placing their own capital and price it according to the risk assessment of the borrower. The rate specials we have seen on the B side were more a result of the competitive nature of the B lenders chasing borrowers for market share than the decline in prime. My experience on the B side has been that the lower special rates – 5.99 per cent for a first mortgage to an equity borrower (not proving income) – are usually advancing only 65 per cent for that rate. The rates then escalate dramatically as the loan-to-value increases. A typical second mortgage to 80 per cent loan to value would be priced to the borrower starting at 12 per cent with lender and broker fees ranging from 2-5 per cent.

CMP: Why haven’t they lowered their own rates?

Fees: 1-3%.

These fees includes broker fees, mortgage fees, and set-up costs

Terms: 1-35 years Source: RateHub.ca

BF: The few brave souls offering 85 per cent loan to value exact an even greater penance on the borrowers charging higher rates and even higher points. Again, the pricing is based on the risk assessment of the borrower. For brokers on the B side, the challenge is twofold. Firstly, they have to find a borrower and sell them on the payment not the rate. This is actually not that hard to do as the borrower has typically been turned down by an A lender and already feels discouraged. The B loan, while painful, is usually for a oneyear term, the borrower then hopefully has a good payment history and after one year the borrower is rolled into an A loan and the pain goes away. The broker sells the dream of home ownership today rather than waiting a year and risking higher prices and not being able to afford to get into the housing market at all.

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UPFRONT

COMMERCIAL LENDING UPDATE

Lenders raise the bar on LTVs

you’re talking multi-million dollar loan amounts, that sort of difference is always worth exploring because the monthly amount means huge savings. Even if there is a penalty to pay out it may only take a couple years to justify [incurring the penalty]; it depends on the situation.” Mortgage rates have been a hot topic since the Bank of Canada slashed its overnight rate by one-quarter of one percentage point to 0.75 per cent on January 21.

“Lenders have become less conservative”

INTEREST RATES are at historic lows, even on the commercial side, with lenders providing loan-to-values of 75 per cent where previously they’d have gone no higher than 65 per cent, say seasoned brokers. “Lenders have become less conservative,” Mike Lee of Mortgage Alliance told CMP. “Interest rates are really pretty spectacular.” The market is also attractive to fence-sitting investors and business owners who currently rent office space, with more opportunity than ever for first-time buyers to enter the commercial space. “One of the asset classes that has become really spectacular is multi-family apartment buildings because, as an example, I just got

NEWS BRIEFS

quoted from a lender for an apartment building loan, CMHC insured, over $1 million, they’re quoting 1.75 per cent for a five-year [rate at press time]. It fluctuates daily, though,” Lee says. “A five year term at 1.75 per cent is ridiculously low; it’s like free money. Some are even offering ten-year terms at 2.43 per cent. That’s insane.” And it’s not just buyers who are benefitting. According to Lee, several clients have inquired about refinances, which, in many cases, provide ample opportunity for brokers. “Lately a lot of what I’ve been doing is refinancing anybody who has an apartment building because who knows when these rates will come around again,” Lee says. “When

Commercial sales rise in Vancouver’s Lower Mainland The Lower Mainland saw increased activity last year in commercial real estate, with sales and values hitting 5-year highs. Data from the Real Estate Board of Greater Vancouver show a 7.3 per cent rise in sales to 1,963 in 2014 compared to the 1,829 in 2013. The value of sales rose to $6.086 billion compared to $5.585 billion in the year earlier. Land sales led the increases with a surge of 21.8 per cent in commercial land sales and 7 per cent in multi-family land; office sales rose 2.8 per cent; industrial was down 1.7 per cent.

Several of the big banks followed by slashing their own prime rates and also offering specially priced fixed mortgage rates on various residential products, but it could be commercial brokers who most enjoy the current environment. Finance Minister Joe Oliver has held an optimistic view of the housing market and its future since he took office in March of last year, and last summer, when a number of lenders dropped their five-year fixed rates, Oliver voiced his opinion that it is not up to the government to oversee interest rates – meaning it won’t interfere with record-low rates, which appear, at least for now, to be here to stay. “I don’t think it’s the role of government to set interest rates or rates for mortgages,” he told Business News Network in mid-June. “The rates are quite low and they’ve been coming down but a very small amount.”

New commercial VP for Home Trust Home Trust, one of the country’s leading lenders, has appointed Aris Athanasoulakis to the position of vice president of commercial lending. Athanasoulakis brings to the company a master’s degree in economics and 15 years of experience in sales, originations and business development. He will focus on the originations and development of small commercial business. Previously, Athanasoulakis worked for various financial institutions.

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Q&A: Gateway to commercial closed CHAD ROBINSON, Broker, Mortgage Architects 360 Best Interest Mortgages

With a dearth of small multi-family property deals, brokers hoping to use them as a stepping stone to industrial and retail commercial have their work cut out for them. One specialist in the area explains CMP: Some brokers have reported a dearth of deals when it comes to four-plexes, triplexes and small apartment buildings. What is that owing to? Chad Robinson: There aren’t a lot of deals out there because no one is funding them. The banks have tightened up so much that it’s making it very, very difficult to finance them. We’re using a lot of the B lenders, so there’s a lot of consumer misunderstanding – they’re expecting 2.5% and they’re getting 4.5%.

CMP: How do you explain to clients that it’s still a good investment, even if they’re paying a higher rate? CR: It’s deal by deal. You have to look at what they’re buying, if it still cash flows. You need to analyse it: Are they making positive cash flow by the end of the year? Are their mortgages being paid down? If it is, then it should be a good deal. To give you an example, I had a client with a net worth of $4 million or close to it. She had perfect credit, but because she owned too many properties, she ended up with a B lender. She ended up going with the deal. She could have paid cash for it, but it was economically better for her to pay the higher rate than to just pay cash.

CMP: Do you see lenders loosening up a bit? CR: Not so. One of the CEOs I was talking to a little while ago said

Commercial brokers to cash in, in 2015 Morguard, a North American real estate and property management company, is forecasting a fourth consecutive year of “positive performance” in the commercial sector – despite the oil industry’s sluggish performance and its effect on the economy. “Investment returns will be largely income-driven, with some investors looking increasingly to new construction as a core strategy,” said Keith Reading, director of research at Morguard. “Boosting income performance will be a focus.”

rentals are such a small percentage of the market and it is such a high percentage of their defaults that it just minimizes their appetite for it.

CMP: Are there any opportunities to refinance these properties? CR: Not usually, unless they’re doing it to buy another property. But a lot of people who were in the A space are now squarely in the B world.

CMP: Is this discouraging investors from adding to their portfolio? Are clients choosing instead to renovate? CR: They are either renovating or not. I don’t think the current environment is affecting it either way. People who are renovating are doing that to stay competitive in areas that have higher vacancies.

CMP: So for brokers who’ve done a fair bit in terms of financing deals for smaller apartment units, is there opportunity to shift to industrial or retail commercial? CR: Yes, there is. But those are even harder. You really have to understand what you’re doing to get into industrial and some of the unique commercial properties.

Calgary commercial deals surpass $3 billion A sluggish economy hasn’t held commercial investors back, with oil country seeing a surge in commercial sales. “The last half of 2014 wraps a strong year for the Greater Calgary commercial real estate market and caps a healthy five-year run from the market adjustments experienced in 2009,” Paul Richter, director of research at RealNet Canada told the Calgary Herald. Several sectors enjoyed exponential sales growth, including apartments (up more than 35% to $253.5),

Price of Target store purchase revealed Landlords paid $138 million (pre-tax) to buy-back 11 properties that currently house Target stores in a deal that closed in early March. The deal was between Target Canada Co. and a number of landlords, including Oxford Properties and Ivanhoe Cambridge – two of Canada’s largest commercial real estate companies. In total, there are 133 Target stores expected to hit the market in the near future, representing plenty of opportunity for commercial mortgage brokers to help investor clients add to their portfolios.

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PEOPLE

INDUSTRY ICON

A STORY AND A HANDSHAKE Those are two things multiple CMA winner Anthony Contento has to offer, writes John Tenpenny. The story is one he shares with so many brokers, but the handshake – the foundation of his business – is all his

LOOKING BACK, Anthony Contento still remembers when his father got a car loan on the strength of “a signature and a handshake.” In business, nothing’s really changed. “All we have is our handshake and if you can’t stand behind that, then you’re probably not going to last long, not matter what business you’re in,” says the president and CEO of Toronto’s Mortgage Architects Sherwood Mortgage Group. Contento got his start in the banking industry right out of high school more than 25 years ago with a co-op position as bank teller. After working for Central Guaranty Trust and Banca Commerciale ‎Italiana, Contento jumped to the lending side with BMO before becoming a mortgage specialist with RBC in 1996. Over the next 13 years he chalked up win after win, propelling him to a management position overseeing a mortgage sales force of more than 40. In 2008, with partner Athena Constantinou and 10 RBC mortgage specialists, Contento made the jump and opened the doors of Sherwood Mortgage Group. With more than 30 agents, Sherwood topped $400 million in funded volume last year. The reasons behind the switch were some of the same reasons many bank mortgage specialists have cited for becoming mortgage

brokers: compensation and choice. “Working at a bank, they continued to request more and more sales, yet they continued to cut our commission,” explains Contento. “It just got to the point where it wasn’t making sense anymore and I figured moving to the broker side would not only

they have about nine agents who sit in real estate offices. “I’ve been in one real estate office for the past 19 years,” says Contento. Treating lenders and real estate agent referral partners as customers is key to building the relationships, and the best of those, says Contento, are quid pro quo at their core.

“All we hear is that the mortgage broker market is shrinking and we could be doing a better job on many fronts. There’s still that stigma out there that we are the lenders of last resort. And we really are not” improve my compensation, but also give me the ability to offer customers more options. The relationships with those lenders is at the core of what Sherwood does, according to Contento. “Relationships are very important in our business and, at the end of the day, creating relationships with four or five key lenders and being able to establish partnerships is what is going to help set us apart.” Another driver of Sherwood’s business are its relationships with Realtors. Currently,

“I think we’re probably the best at giving back to our referral partners and our lenders by way of always thanking them throughout the year. We recently held an agent and lender appreciation event attended by 320 Realtors and more 60 lenders.” Fostering those relationships has built up considerable trust and according to Contento that translates into a mutual respect, with executives right on down to underwriters. “We depend on them for quick turnarounds. And when we call them at 10

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“All we have is our handshake and if you can’t stand behind that, then you’re probably not going to last long”

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PEOPLE

INDUSTRY ICON o’clock at night and they answer, it’s a testament to the relationships that we’ve built over the years,” says Contento. “It’s how we differentiate ourselves in the industry, by being able to turn around deals for our customers in a timely manner.” The concept of trust and mutual respect extends to the business itself, where as a boutique brokerage, Sherwood maintains a

Mortgage Group may strike a chord with many others in the industry, there is another story Contento thinks Canadians should hear: the one about mortgage brokers and what they offer consumers. “What we need to do is tell our story,” he says. “We have a great story to tell, but we’re not telling it. “All we hear is that the mortgage broker

“Trust is very important in this business. Hiring people we trust has made it very easy to manage our sales force” family atmosphere with integrity and respect for each other. “We don’t take on just anyone,” he says. “Ninety-five per cent of the people here I know personally from my days at BMO and RBC. “Trust is very important in this business. Hiring people we trust has made it very easy to manage our sales force.” That group of agents is the reason why Sherwood Mortgage Group has been honoured with the CMP Mortgage Brokerage of the Year Award twice in the past three years. In addition, Contento himself has been singled out, winning CMP Broker of the Year in 2012. The idea of great customer service, while not new, has been given a fresh take at Sherwood, where Contento says agents deal with customers not just on a financial level, but on a personal level. “We like to find out a little bit more about them when we do the initial interview,” he says. “We do things like sending birthday cards to their children and they appreciate that a whole lot more because they feel like we were listening during the interview. He adds that Sherwood doesn’t rely on a single kind of client, whether it be A or B to drive its business. “To say we specialize in one type of client would be selling ourselves short,” says Contento. “I think what it is, is because we’ve all been in the business so long we can handle any scenario.” While the story of Contento and Sherwood

market is shrinking and we could be doing a better job on many fronts. There’s still that stigma out there that we are the lenders of last resort. And we really are not.” But individuals and networks can only do so much by themselves. “All of us – industry associations and individual brokers – need to do a better job of telling the public who we are and what we do,” says Contento. Part of that story is the difference between mortgage specialists working for the banks and mortgage brokers. “We can’t play in the same sandbox with the big banks, but what we can do is differentiate ourselves as professionals who are educated and understand the business,” says Contento. “On this side, it’s a little bit different, with courses and licensing requirements.” The reason for the recent mass exodus of bank mortgage specialists to the broker side is because brokers can offer more options and have the ability to sit in front of the customer and not only offer a mortgage, but also their expertise on other financial matters, says Contento. As for the future for Contento and Sherwood Mortgage Group, that’s a relatively simple tale. “We are going to continue doing what we’re doing, which is work our database, and marketing ourselves in a manner which tells the public our story as a boutique brokerage,” says Contento. “We just need to stay the course.”

TIMELINE

2014

Top Funded TEAM at Mortgage Architects – Sherwood Mortgage Group

2014

CMP Broker of the Year (25 employees or more)

2014

CMP Brokerage of the Year (25 employees or more)

2013

Top Funded TEAM at Mortgage Architect – Sherwood Mortgage Group

2012

CMP Brokerage of the Year (25 employees or more)

2012

Top 10 Funded Scotia Authority

2010-11

Top Funding Broker Street Capital

2008

Sherwood Mortgage Group founded

2000

Top Mortgage Specialist BMO

1998-2000

Top Mortgage Specialist RBC

1999

Recipient of Leo Award at RBC

1999

Top Insurance Sales National RBC

1999

Top Funded Mortgage Specialist CMHC

1998

2nd Funded National CMHC

1997

Rookie of the year Nationally at RBC

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25/03/2015 1:28:35 PM

SPECIAL REPORT

BROKER SENTIMENT POLL 2015

CONCERNS

PREDICTIONS

TRENDS

BROKER SENTIMENT 2015 22

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WHILE CANADA’S brokers continue to thrive even under tightened regulatory guidelines, that doesn’t mean there aren’t areas of concern. CMP wanted to know what was on brokers’ minds, so we’ve once again asked you to tell us about your biggest worries for 2015, your thoughts on the everchanging regulatory environment, and your predictions for the future of the industry. In many ways, the results of our broker sentiment poll told a familiar story. Just as they were last year, most brokers are still concerned that stricter underwriting guidelines and poor service from lenders will hurt their bottom lines in the coming year. At the same time, many are concerned that fewer lenders will continue to operate through the broker channel. Still, there’s reason for optimism. More than 88% of those surveyed rated their current brokerage as good or excellent, and not a single broker said that he or she would consider leaving the industry in the next 12 months. And most independent brokers seem to be satisfied; fewer than half said they’d consider joining a national network in the next 12 months. Read on for a more in-depth look at how your peers view the current state of the industry – and its future.

TOP CONCERNS WHAT ARE YOUR BIGGEST CONCERNS OVER THE NEXT 12 MONTHS?

Stricter underwriting guidelines and poorer service from lenders 54.76% Economy/new home sales 50% House prices falling 33.33% Consumer/household debt 33.33% Fewer lenders operating through the broker channel 33.33% Shrinking market share 28.57% Industry reputation damaged by rogue brokers 26.19% Reduced revenue due to lower commissions 26.19% Interest rate volatility 11.9% Meeting the requirements of new regulations/licensing 9.52% As it was last year and the year before, brokers’ biggest concern is that stricter underwriting guidelines and poorer service from lenders will hamper their business this year. They’re marginally less worried about that than last year, however; this year 54.76% of survey respondents cited strict underwriting guidelines and poor service as their biggest concerns, compared with 58.73% last year. Falling house prices, consumer/household debt, and the fear fewer lenders would operate through the broker channel were tied, each with 33.33% of brokers citing them as major concerns. About 29% said they were worried about shrinking market share. About 26% said rogue brokers were damaging the industry’s reputation. One survey respondent even suggested that making the profession tougher to get into would help weed out the bad apples. “Increasing the barrier of entry would have a positive outlook from the consumer perspective, as well as making the industry a more professional environment,” he said.

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25/03/2015 11:43:23 PM

SPECIAL REPORT

BROKER SENTIMENT POLL 2015

ROLLING WITH THE CHANGES Last year, brokers saw mobile sales teams from big banks competing with them as the biggest change to look for in 2014. Brokers felt the same this year, although not quite as many – 38% compared to last year’s 41% – cited that as their biggest predicted change. More than a third of survey respondents predicted that more and

more brokers would become multi-product sellers, while about 31% predicted that the remaining big banks would leave the broker channel. About 28% worried that 2015 would see a decline in home sales. However, less than 10% were worried that the industry would see a steep decline in the number of brokers.

WHICH DO YOU THINK WILL BE THE BIGGEST CHANGES IN THE INDUSTRY OVER THE NEXT 12 MONTHS?

40% 35% 30% 25% 20% 15% 10% 4% 0%

Big bank mobile sales teams competing with brokers

Brokers as multi-product sellers

Remaining big banks leaving the broker channel

A decline in home sales

Lenders moving towards efficiency bonuses as opposed to volume bonuses

New commission structures

Brokers charging upfront fees

A steep decline in overall broker numbers

REGULATORY HEADACHES HOW DO YOU FEEL THE GOVERNMENT IS HANDLING THE ISSUE OF MORTGAGE REGULATIONS?

1= POOR 1 2 3 9.52%

4.76% 2.38%

Average score: 5.45

4 16.67%

14.29%

11.9%

28.57%

HOW HAVE MORTGAGE RULE CHANGES OVER THE LAST YEAR AFFECTED YOUR BUSINESS?

19.05%

80.95%

Positively

Negatively

10= EXCELLENT 8 9 10 4.76% 4.76% 2.38%

Brokers were relatively split on the issue of how the government is handling mortgage regulations. About 40% rated the government’s handling of the issue as good or excellent, while a third rated the government’s regulator performance as poor or very poor. There wasn’t much controversy, though, on how mortgage rule changes were affecting the industry. More than 80% of survey respondents said the rule changes were having a negative impact on their businesses.

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BANKS VS. NON-BANKS

STAFFING WOES

Non-banks were the clear winner when it came to brokers’ business. More than 78% of survey respondents said they would put the majority of their loans through a non-bank this year, while only 17% said they’d put most of their loans through a bank. More than 80% said they’d be putting 25% of their loans or fewer through banks in 2015.

WHAT PERCENTAGE OF YOUR LOANS WILL YOU PUT THROUGH NON-BANKS/BANKS?

42% of respondents said they’ll put 50-75% of loans through a non-bank 36% of respondents said they’ll put over 75% of loans through a non-bank

The new regulatory environment may mean some belt-tightening for many brokers; almost 60% of those who took the survey said they wouldn’t be hiring any new staff over the next 12 months. However, more than 77% said they wouldn’t be reducing staff in 2015, and those who said otherwise also said that they’d only consider it if market conditions worsened. None of the survey respondents planned to reduce staff unless forced to by lagging business.

WILL YOU BE HIRING NEW STAFF OVER THE NEXT 12 MONTHS?

40.48%

Yes

59.52%

IF NO, WILL YOU BE REDUCING STAFF?

14% of respondents said they’ll put 26-50% of loans through a non-bank’ 7% of respondents said they’ll put 25% or less of loans through a non-bank

Yes

77.78%

22.22%

Only if market conditions worsen

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SPECIAL REPORT

BROKER SENTIMENT POLL 2015

BROKERS STAYING PUT While the industry faces many challenges, brokers seem to be in it for the long haul. Not a single one of our survey respondents said they would consider leaving the broker industry in the next 12 months. That’s better than last year, when 3.16% of respondents said they’d at least consider it. Meanwhile, most independent brokers seem to like it where they are. More than 54% of independent brokers who took the survey said they had no desire to join a national network in 2015. Meanwhile, brokers who were already part of national networks said they were staying put, too; more than 88% said they had no plans to become independent in the next 12 months. Meanwhile, most brokers seemed to like their current brokerage. More than 88% of survey respondents rated their brokerages as good or excellent, while only 4.76% rated theirs anywhere below fair.

DO YOU THINK YOU MIGHT LEAVE THE BROKER INDUSTRY IN THE NEXT 12 MONTHS?

YES 100%

IF AN INDEPENDENT, WOULD YOU CONSIDER JOINING A NATIONAL NETWORK OR BROKERAGE IN THE NEXT 12 MONTHS?

YES

ON A SCALE OF 1 (TERRIBLE) TO 10 (EXCELLENT), HOW WOULD YOU RATE YOUR CURRENT BROKERAGE?

50%

42.24% 54.76%

40%

IF PART OF A NATIONAL NETWORK OR BROKERAGE, WOULD YOU CONSIDER BECOMING INDEPENDENT IN THE NEXT 12 MONTHS?

11.9%

NO 26

88.1%

YES

30%

20%

10%

1-2 3-4 5-6 7-8 9-10

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SAN DIEGO, CA

JOIN US

take part in our next conference JOINMA.ca

ÂŠ Copyr ight 2015, Mor tgage Architects Inc ., All r ights reser ved.

22-35_Broker Sentiment Poll2.indd 27

25/03/2015 1:04:48 PM

SPECIAL REPORT

BROKER SENTIMENT POLL 2015

PROMOTING THE BROKER CHANNEL RATE THE INDUSTRY IN TERMS OF PROMOTING THE BROKER CHANNEL TO CONSUMERS

Ineffective

Somewhat effective

Effective

7.14% 7.14% 4.76%

Lenders

23.81%

14.29%

4.76% 4.76% 21.43%

Networks 45.24%

N/A

While brokers were happy with their own brokerage, they weren’t too happy with how the industry promoted the broker channel. Worst at promotion, according to brokers, were lenders; more than 57% of our survey respondents rated lenders as ineffective at promoting the broker channel, while only 7.14% thought they were very effective. Associations faired a little better, with 54.76% of respondents rating them as somewhat effective at promoting the broker channel. However, only 23.81% rated associations as effective or very effective. Networks got much higher marks. More than 57% of respondents rated networks as effective or very effective at promoting the broker channel. But that doesn’t mean networks don’t have some work to do yet; 28.57% rated them as either ineffective or only somewhat effective.

7.14%

11.9%

57.14%

Very effective

16.67%

19.05%

Associations 54.76%

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25/03/2015 1:04:54 PM

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SMART

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22-35_Broker Sentiment Poll2.indd 29

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25/03/2015 1:05:07 PM

SPECIAL REPORT

BROKER SENTIMENT POLL 2015

MARKETING STRATEGIES PLEASE RANK THE IMPORTANCE OF EACH MARKETING STRATEGY YOU PLAN TO USE IN 2015

Email newsletters Unimportant 41.46%

21.95%

19.52%

12.2% 4.88%

Unimportant

Somewhat important

Somewhat unimportant

Important

Very important

Blogging

Social networking Unimportant 38.1%

30.96%

14.28% 11.9%

22.5%

Somewhat unimportant 32.5% 10% 12.5%

22.5%

4.76%

Ads in print publications 12.12% 12.12%

Broadcast ads (TV/radio) Very important 39.39%

27.27% 9.09%

23.07%

Yellow pages 16.22%

18.92% 8.11% 8.11%

11.11%

30.56%

Very important 36.11%

8.33%

Direct mail Somewhat 17.95% unimportant 28.21% 20.51% 10.26%

13.89%

Very important 48.65%

When it comes to marketing, brokers seem to find value in the old standbys. Asked to rate the importance of 10 marketing strategies to their business, brokers remained relatively unimpressed by new media such as blogs and social networks. Far and away, they preferred the humble old Yellow Pages as the most important method to get their names out there.

â&#x20AC;&#x153;Many brokers still believe in old-school marketing, such as the Yellow Pagesâ&#x20AC;? More than 67% of survey respondents rated the Yellow Pages as important or very important to their marketing, while only 26% felt social networking was a vital component of their marketing strategies. Nearly as many brokers found TV and radio ads as important as the Yellow Pages, and about a third swore by direct mail.

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25/03/2015 1:05:16 PM

Seminars 23.08%

Rate sites Somewhat unimportant 30.77%

28.2%

10.26%

13.15% 15.78% 13.15%

21.05%

Very important 36.84%

7.69%

Community events/trade shows 15.79%

15.79%

Somewhat important 50%

Other 13.16%

Unimportant 36.37% 13.64%

18.19% 9.1%

22.73%

5.26%

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25/03/2015 1:07:08 PM

News

InternatIonaL

SPECIAL REPORT

u.s.

BROKER SENTIMENT POLL 90.6% 2015 U.S. housing market worse than thought

inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing. More than two years after the recession The number of Americans who bought previously officially ended, many people can’t qualify for occupied homes rose in October. But the National loans or meet higher down payment Association of Realtors says it overstated more than requirements. Even those with excellent credit three million sales during and after the Great Recession, and stable jobs are holding off because they fear showing the housing market was weaker than Percentage of that home prices will keep falling. Sales are also previously thought. homeownership SOURCES OFgroup BUSINESS being hurt by a decline in first-time buyers, who The private trade says sales rose four per costs, including are critical to reviving the housing market. cent in October to a seasonally adjusted annual rate of mortgage payments, Sales have in four of the five yearsBE 4.42 million. That’s below the roughly six million homes So where are mortgage brokers finding their business? About 45% WHAT PERCENTAGE OFfallen YOUR DEALS WILL utilities and property since the housing boom went bust in 2006. asay year that economists say are consistent with a healthy that half or more of their business comes from repeat or referral taxes thatBOUGHT take up a DOWN? Declining prices and record-low mortgage rates housing market. But it’s ahead of 2008’s revised sales, clients. Another 43% see half or more of their business coming from household’s typical haven’t been enough to boost sales. now considered the worst in 13 years. new clients. monthly pre-tax At the same time, home construction has The trade group revised its sales from 2007 to 2010 83.33% begun income Most brokers about 98% -- are still getting the vast majority of in Vancouver a gradual comeback and should add to the down 14 per cent,–from more than 20.6 million to nearly and Toronto, their business from mortgages. about 21% economy’s growth in 2011 for the first year since 17.7 million. Among theresidential reasons for the lower fiMeanwhile, gures, (RBC say Realtors they’re getting a good amount of commercial business asrespectively well, the Great Recession began in 2007. Last month, the group says: changes in the way the Census Economics Housing builders broke ground on an annual rate of Bureau collects data, population shifts and some sales and almost a quarter are doing a decent business in home equity Trends and 685,000 homes, the government said recently. being counted twice. lines of credit. Affordability Report) That was a 9.3 per cent jump from October and The Realtors consulted with government and 4.76% 0% 11.9% the fastest pace since April 2010. private housing experts, including the Federal Reserve, Most economists say home prices76-100% will keep the Department of Housing and Urban Development, 0-25% 26-50% 51-75% WHAT PERCENTAGE OF YOUR BUSINESS COMES falling, by at least five per cent, through 2012. the Mortgage Bankers Association, the National FROM REPEAT OR REFERRAL CLIENTS? Many forecasts don’t foresee a rebound in prices Association of Home Builders, mortgage giants Fannie until at least 2013. Mae and Freddie Mac and CoreLogic, a California-based WHAT PERCENTAGE BUSINESS WILL The highOF rateYOUR of foreclosures has made data firm that first raised40.48% doubts about the annual cheaper than new ones. The numbers earlier this year. COME FROMresold NEWhomes CLIENTS? median price of a new home is roughly 30 per CoreLogic has estimated that the Realtors 33.33%group cent above the price of one that’s been occupied overstated sales in 2010 by at least 15 per cent. 33.33% 30.95% before – twice the normal markup. Investors are The changing numbers could affect how economists taking advantage of the discounts. view the trade group’s data. It could also affect companies 23.81% The housing market is struggling even that use the figures for hiring and expansion plans. 14.29% as the broader economy has improved in Sales are measured when buyers close on homes. 11.9% recent months. But many deals are collapsing before that point. 11.9% The economy grew at an annual pace of two One-third of Realtors said they had at least one contract per cent in the July-September quarter. Many scuttled in October, up from 18 per cent in September. 0-25% 26-50% 51-75% 76-100% economists expect slightly better growth in the Contracts are being cancelled for several reasons: quarter. Banks have declined mortgage applications; home 0-25% October-December 26-50% 51-75%CMP 76-100%

52.1%

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OTHER SERVICES WILL ANY OF YOUR BUSINESS COME FROM THE FOLLOWING?

WHICH SERVICES WILL YOU BE TAKING ON OR LOOKING TO BUILD OVER THE NEXT 12 MONTHS?

Financial planning Real estate

Residential

97.56%

Commercial

21.95%

HELOCs Mortgage insurance Commercial

HELOCs

24.39%

Insurance

9.76%

Equipment leasing Private lending Home, auto or life insurance

Reverse mortgages

4.88%

Equipment leasing

2.44%

Private mortgages Construction Development

Referral (database)

68.29%

Referral (referral partners)

78.05%

Many brokers are diversifying their businesses in order to open additional revenue lines, and the respondents to our survey were no different. Many said they’d be taking on or expanding additional services over the next 12 months.

www.mortgagebrokernews.ca

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SPECIAL REPORT

BROKER SENTIMENT POLL 2015

SOCIAL MEDIA DO YOU USE ANY OF THE FOLLOWING SOCIAL MEDIA PLATFORMS?

Facebook

Google+

Foursquare

Twitter

Pinterest Brokers have already said they prefer broadcast advertising and listings in the Yellow Pages to social media – but that doesn’t mean it isn’t part of their business strategy. More than 80% of survey respondents said they used Facebook in their business, and nearly 79% made use of LinkedIn. Half of them had a Twitter account, while a measly 4.76% used Foursquare or Pinterest for business.

Blogging

MARKET SHARE WORRIES ARE YOU WORRIED ABOUT SHRINKING MARKET SHARE?

YES 52.38% 47.62%

Mortgage professionals are not ostriches, and the increased competition they face from banks — even those operating in the broker channel — is something most acknowledge Brokers were almost evenly divided on concerns about shrinking market share. While a slight majority – 52.38% – admitted they worried their market share would shrink over the next 12 months, nearly 48% said it wasn’t a concern for them.

www.mortgagebrokernews.ca

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BROKERS TALK BACK We asked the brokers who responded to our survey what the industry could do to help win back market share. Here’s what they had to say: “I believe communication is very important in order to … educate (consumers) about the broker community, so they understand what a mortgage is and the benefits they can bring to the public. This is the personal, hands-on service they will receive from the broker community.” “Give clients questions that their banker won’t know how to answer, but any broker would: ‘What are the top three rates right now?’ ‘I’m self-employed – how do you support me?’” “I believe non-bank lenders need to improve their funding/ closing habits to make them equal to, if not better than, the banks’ requirements.”

“More advertising (on TV/social media), and more notifications letting consumers know who the bad guys are who are not licensed under FSCO.” “Collaborative associations.”

marketing

campaigns

among

national

“Lobby the government to level the playing field. When banks can claim an existing relationship means different rules, it’s unfair to brokers and, in the long run, injurious to (customers).” Promote the mortgage broker more as the only viable entity which puts the homeowner first!”

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PEOPLE

OPINION

GOT AN OPINION THAT COUNTS? Email mortgagebrokernews@kmimedia.ca

TIME TO PROTECT YOUR BROKERAGE’S REPUTATION AND BOTTOM LINE How would a fire, local chemical spill, system or building failure impact your business? Glenn Halliday of Bridgewater Bank argues that not enough mortgage brokerages have asked themselves that question or come up with the right answer THE NUMBER of overlapping priorities competing for the attention of any small or medium-sized business owner is huge. From sales growth to ensuring adequate coverage during the upcoming spring break and more, I’d bet dollars to donuts, most brokerages have not given sufficient thought to the ways their business may be impacted by a sudden and unforeseen interruption in operations. For Bridgewater’s part, a few weeks before the annual CAAMP conference, disaster hit: An underground fire in downtown Calgary destroyed important data transmission and power lines, plunging parts of the city into darkness. Enacting our disaster recovery plan over the Thanksgiving weekend, we managed to resume our operations by the start of the next business day. Don’t stew – take some time pre-crisis to protect your business with these six steps. Anticipate Crises Consider all of the possible scenarios that could bring a halt to your operations, whether briefly or for an extended period of time. Write them down. Most will fall under two categories; environmental and operational failures, but within these consider the possi-

ble situations. Is your office situated near a river that routinely floods or located in an area known for strong weather? Has a disgruntled ex-employee made

gathering this information and updating it on a regular basis. Create a group email distribution list to inform all employees of an immediate issue. Following up this initial message with a telephone call allows the people making the calls to check on the welfare of each employee and their family. Identify all stakeholders Remember others also need to know it isn’t business as usual. Customers come to mind. How will you reach out to them? Is anyone likely to try to visit your office today? Are they even aware an issue has affected your area and your office is closed? And remember each stakeholder has specific needs. What a customer needs to know will be very different from a key supplier. Communicate Return to your work in step one to identify the implications of a business interruption, determine who on your stakeholder list is affected then communicate with them. Tell them about the situation, what you’re doing to resolve it, what

“I’d bet dollars to donuts, most brokerages have not given sufficient thought to the ways their business may be impacted by a sudden and unforeseen interruption in operations” extreme statements in the past? Are they active on social media? Pondering these scenarios isn’t fun, but like downing medicine, the bad taste is temporary and is exactly what you need to start feeling better soon. Create a business continuity plan team Who are the key people on your team? This is often a touchy subject as every colleague performs a necessary role, especially in leaner organizations. But your more senior people are paid to understand all aspects of your operations, not just daily tasks. Establish notification systems Technology makes communication easy. Ensure you have all contact information for each employee. Put one person in charge of

they need to know. Ensure you keep in constant communication with them throughout the event. Train, test, refine. Repeat. Nothing eases the conscience more than seeing a new plan rest on a bookshelf in a shiny new binder. But don’t be lulled into a false sense of security. Convene regular meetings with your Business Continuity Plan team, test your plan, hold drills, review the results and refine your responses. Be soft on your people during these reviews, but be hard on the issues – gaps and challenges need to be resolved. Your company’s reputation, and its bottom line, depend on it.

Glenn Halliday is the Director of Enterprise Operations with Bridgewater Bank in Calgary. He leads the bank’s disaster recovery operations.

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FEATURES

CLIENT RELATIONSHIPS

Brokers in the community Mortgage professionals have a unique bond with the communities we serve, Paul Therien, VP of Operations for Centum, writes. That’s perhaps more so than most other professions because the job revolves around one of the most personal and expensive investments people will ever make: the purchase of a home and the laying down of roots

HOMEOWNERSHIP is for many people the ultimate accomplishment. It provides security and is a sign of their success. We assist people in achieving their dreams and this binds us to the community that we work in. We have a choice to simply be the conduit for a mortgage, or we can play an active role in our community; we can choose to give back. Supporting others is important because it changes us and the relationship that we have within the neighbourhood we serve. It clearly demonstrates our willingness to make a tangible investment in the overall success of that community and its future. It also changes our hearts, as the issues we observe become personal and their solution our responsibility. Giving back takes very little effort, but the effects of that contribution can be huge and long lasting. As mortgage professionals, we are helping people make their dreams a reality, but dreams can fail and shatter. You never know, the people you serve today could be the people in need tomorrow. If we are seen to be supporting our community, it also means that people are more likely to trust us with their dreams. People want a mortgage professional who is knowledgeable and can find the right product at the

right price, but they also want to do business with someone they can trust and know is giving back. From a purely business point of view, this can grow your business. Outside of the “feel good factor” it is one of the reasons why companies invest so heavily in charity. The greatest influence you can have is how you touch the lives of those around you. For most people they never seem to grasp how one small act of kindness can snowball into a movement for change. By giving to others we not only feel good about ourselves, but we are building a connection with people on a deeper level. We are no longer just the mort-

“On a more personal level, it feels good for us to give, making us both happier and healthier” Paul Therien gage professional, we are an important influence in their lives. Giving promotes social connection and co-operation throughout a community, builds relationships and demonstrates shared values on a level that social media and advertising cannot.

These shared values are key to driving your business forward. Take the millennial generation, for example. A recent study found that businesses that support social and environmental issues increased millennial consumers’ trust and loyalty with that

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“odiam quia senitibus imincia verae nullab illit, utem illorat iorehent volorro bea dest etur, sam fugiandi quunt, omnissit” Paul Therien

“We have a choice between being simply a conduit for a mortgage and playing an active role in our community” Paul Therien

company. Never mind the fact they were 89% more likely to purchase from them. This in turn positively grows the brand. Little will create affinity for your brand the way charitable support does. When a company supports a social or environmental cause in their community, people have a more positive image of that business. With information so readily available, consumers want to know what differentiates you from the competition beyond just price. On a more personal level it feels good for us to give, making us both happier and healthier. Studies have shown that giving

stimulates the region of the brain that feels pleasure, trust, and social connection. This has been characterized as the “warm glow” effect, as giving has the power to transform your attitude in all areas of your life. In 2008 I founded the Q Hall of Fame to recognize people in Canada who have been a driving force in the advancement of human rights. Today it is the single-largest recognition program of its kind in the world. This is my legacy, not just of giving back, but one of honouring people who have made sacrifices in the service of others. I am not alone, others have done great

things in our industry in support of their communities. People such as Gary Mauris from Dominion Lending Centres, who created an organization to combat bullying (The I Am Someone campaign), the Invis Angels in the Night program, Centum’s own support of Children’s Wish, and so many others. We have, as an industry, an opportunity to create a legacy that far surpasses just functioning as mortgage professionals. We have the ability to dramatically impact the world around us and impart real change for those in challenging life situations. We just need to do it.

www.mortgagebrokernews.ca

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2015-03-23

2:02 PM

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PEOPLE

BROKER PROFILE

“We meditate with our eyes open, which helps with bringing mindfulness and awareness into daily life”

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THE MORTGAGE INDUSTRY’S RENAISSANCE MAN Layth Matthews, a B.C.-based mortgage broker and owner of Rate Miser Mortgage Advisors, is many things: a father, a financial professional, an entrepreneur and a writer. He’s also a Buddhist who dispels the myth that wealth and mindfulness are incompatible

TO BE a successful mortgage broker requires courage, creativity, a certain business savvy, and bravado. But Layth Matthews proves that a little mindfulness is just as key an element. When he’s not working from his home office or preparing lunch for his three children, Matthews can be found meditating at his local Shambhala Centre, with its hardwood floors, ikebana flowers and Buddhist banners. “In the Shambhala tradition we meditate with our eyes open, which helps with bringing mindfulness and awareness into daily life,” Matthews tells CMP. “One common misconception is that meditation is seeking a perfect state of mind. That is not what it is about. Indeed. The Buddhist point of view is that the ground is originally “pure,” he says, “and so what we are doing in meditation is training to be more at home with just being where we are.” Buddhism and mindfulness have had an important role in shaping Matthews not only as a person but a businessman as well. “I graduated from the University of Washington with an economics (degree) in 1982, having already begun to practice and study meditation. I participated in many retreats over the years, including a three-

month residential intensive called Vajradhatu Seminary,” Matthews says. “In 1984 I moved to the Karme-Choling retreat centre in Barnet, Vermont, to practice and study intensively for a year before heading to Halifax with other senior students of Chogyam Trungpa Rinpoche in 1985.”

‘staring into the abyss,’ which is something we do a lot of in business because our financial prospects fluctuate a lot,” Matthews says. “The more we learn to relax with uncertainty or be brave, as Sakyong Mipham, puts it, the more we can discover innovative solutions and enjoy the whole business cycle,

“The more we learn to relax with uncertainty or be brave, the more we can discover innovative solutions” He would then attend Dalhousie Business School, working and practicing meditation and starting a family in Halifax, which he would call home for more than 22 years. Matthews ultimately moved to Nanaimo, BC, in 2007 and later Victoria in 2010. Born to two accomplished academics, Matthews enjoyed a very open-minded upbringing that eventually led him to discover meditation in 1979 at the age of 17. He has been practicing it ever since and he credits it with contributing to not only his personal success but his professional accomplishments. “Meditation helps with what I call,

instead of just the upswings.” That bravery is very much akin to “transcending egocentricity,” he says. “I’m not the best example of that, but my experience confirms it is the right direction to navigate.” Like all mortgage brokers, Matthews faces daily challenges when trying to fund deals for clients. Sometimes the solution to a problem is not easily arrived at, and industry players have to rely on their experience and creativity to navigate tricky deals. Matthews finds creativity and innovation in mindfulness, through meditation.

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PEOPLE

BROKER PROFILE LAYTH MATTHEWS’ CAREER TIMELINE

1979

Began practicing meditation

1982

Graduated from University of Washington with a degree in economics

1983

Worked as a discount stock broker at Freeman Welwood & Co. in Seattle, Wa.

1984

Moved to the Karme-Choling retreat centre in Barnet, Vermont

1985

Moved to Halifax; attended Dalhousie business school

1988 –

Worked as account executive for Dean Witter Canada

1991 –

Worked as a financial advisor for Midland Walwyn

1992

Worked as an investment planning consultant for Fortunate Financial in Halifax

1996

Became an investment marketing consultant

1998

Became a producer for InvestorCanada.com

2001

Worked as eBusiness development manager for CNW

2003

Launched RateMiser Mortgage Advisors

2008

Affiliated with RMAI Network

“That happens all the time,” he tells CMP. “I have a client right now who I initially thought I was going to have to present as a statedincome candidate and then it occurred to me that I could actually verify his income in a certain way with certain lenders.” He credits meditation with allowing him to let go of habitual thought patterns – the sort of thinking that can get any entrepreneur stuck in a rut – and arrive at conclusions that otherwise may not have occurred to him. “I’ve been able to save a lot of deals, I’ve been able to find opportunities,” he says. author. “But I would say probably one of the most interesting things about all mortgage brokers in my experience is that you get an instinctual sense of a deal but sometimes you can’t see clearly how to get to it so sometimes you need a good night’s sleep and meditation – that meditation kind of opens things up that are otherwise seen pretty well blocked and you can find ways around issues.” He also credits his experiences with meditation and Buddhism for allowing him to be more empathetic to specific client situations. “I can relate it back to my own experience of disappointment or challenges that seem insurmountable and for me finance is just the way into relating with people rather than relating with people as the way into relating with finance,” Matthews says. “Finance just happens to be my natural inclination and I just enjoy solving financial problems and trying to discuss how to work with your mind and just arriving at a new way of looking at mortgages and I’ve been advising people in a different way, so now I’m 12 years into being a mortgage broker and I’m just arriving at a new kind of looking at it which I don’t think is the end point. “For instance: One of the things where I think mindfulness and meditation has really come into play with my financial view is that over the course of such a path you begin to realize that you just have to take responsibility for yourself, for your own frame of mind,” he adds. “But how that plays out with money is you have to take responsibility for just the management of your money and you can have all the financial strategy in the world – which I’ve spent my career trying to come up with innovative financial strategies – but increasingly

I’ve come to realize it’s 95 per cent discipline and five per cent strategy that you need.” Matthews’s experience with meditation and mindfulness has influenced him to develop a series of talks about personal finance, which have taken their inspiration from the ancient teachings of Buddha. The Four Noble Truths provide the basic framework for Buddhism and were first taught by Buddha; explained by His Holiness the Dalai Lama, they are the truth of suffering, the truth of the cause of suffering, the truth of the cessation of suffering, and the truth of the path to the cessation of suffering. They served as inspiration for Layth Matthews seminars as well as his first book, The Four Noble Truths of Wealth: A Buddhist View of Economic Life. “The Four Noble Truths of Wealth is the same thing – the first two noble truths are really about what is the misery of economic life; economic life is, like life in general on some level, difficult, inherently, because it is impermanent,” says Matthews, effectively translating a lifelong creed. “No matter what we put together, it’s always coming apart. Our whole lives, we have a limited lifespan and everything we do and everything we own has a limited lifespan and so the first thing is to really acknowledge that. That’s the environment we’re in. Without becoming depressed we can get some relief in recognizing that’s how it is.” The book, which was condensed from four separate talks Matthews had given on marrying mindfulness and personal finance, contains lessons on living a more meaningful life and better understanding wealth. “This book is about view and I deliberately stayed true to talking about outlook, and what I want people to get from this book is that atmospherically they will come to the end of this book and they will have a better understanding of wealth and that they will actually have everything they will need to have what I call ‘an unconditional outlook [on life],’” says Matthews.

www.mortgagebrokernews.ca

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For more information, visit www.homequitybank.ca.

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BUSINESS STRATEGY

CUSTOMER SERVICE

Creating a customer delight culture In an incredibly competitive business landscape, it is vital that you keep customers not just satisfied but delighted! In an extract from his book From Deadwood to Diamonds, Stefan Kazakis reveals how to wow customers – and keep them for years to come

AS YOU know by now, a key part of the colour of your business is how you treat your customers. Without customers your business is nothing, even if you have the greatest products or services in the world. If people aren’t buying, you have an expensive hobby not a business. So let’s have a look at how you delight your customers. Not satisfy, delight. If you want your customers to come back to you time and time and time again, just meeting their needs is not good enough. There are dozens, and maybe even hundreds, of other businesses out there that will meet your customers’ needs just as well as you can. It’s the minimum standard to be in business at all. To build a prosperous and sustainable machine that puts money in your pocket for years to come, you need to be proactive and think outside the square. You need to keep getting better and be an innovator. You can’t simply wait until there’s a problem and then step in and help. You need to offer the solution to the problem,

and more. You need to see the problem before they do. You should always be communicating with your customers and seeing what else you can do to help – there will always be something. If you run a gym, can you open up a small daycare to look after the kids while the parents do a workout? If you’re a mechanic, start washing your customers’ cars at no extra cost. If you sell computers, throw in a free game with every

If you want your customers to come back to you time and time and time again, just meeting their needs is not good enough. It’s the minimum standard to be in business at all computer sold so the kids can’t wait to get home and use it. Go above and beyond. That’s how you delight your customers. That’s how you keep them coming back. If you own a restaurant, feed them! Have

an abundance mindset; don’t have an attitude of scarcity. Give them an extra glass of wine. Keep bringing them bread throughout the meal. Bring a free bowl of chips for the kids. The small cost will

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You can’t simply wait until there’s a problem and then step in and help. You need to offer the solution to the problem, and more. You need to see the problem before they do

disappear into insignificance when you start turning your customers into raving fans who come back to your restaurant time and time again and they also tell their friends. Make a Customer Delight Culture a nonnegotiable part of the colour of your business. Don’t just serve your customers, wow them! Make sure all your staff have the same approach. Show them that you care, not with a fake smile and a voucher for $10 off next time but by genuinely caring and being interested. Play dumb and dig deep. Make them feel as if they are the most

important customer you have ever served – because they are. Each and every client is vital to the ongoing success of your business. A great question to ask yourself is, “How can I give my customers something more than they expect?” It’s simple but powerful. And here’s the key to creating a true Customer Delight Culture: you need to think outside the box when you answer this question. A daycare in a gym, washing cars for a mechanic and free games with a computer are great steps in the right direction, but they are just the beginning.

What about giving your clients movie tickets, or a voucher for a restaurant, or sending flowers on their birthday? Business owners often look a bit surprised when I make these suggestions. It usually goes something like this: “But I run a gym; why would I give them movie tickets?” I want you to have a think about this right now. Why would you give them movie tickets? Do you have the answer yet? Think about it … It’s actually really simple. You’d give them movie tickets because they’ll love it! That’s it! It doesn’t necessarily need to be related to your

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BUSINESS STRATEGY

CUSTOMER SERVICE

EXERCISE: CRITICAL NON-ESSENTIALS

THE CNE MATRIX $$ 5 Birthday gift

4 Lunch/dinner

2 Movie tickets

3 Free upgrade

Make them feel as if they are the most important customer you have ever served – because they are. Each and every client is vital to the ongoing success of your business

COST

1 Thank-you cards

$ EASY

DEGREE OF DIFFICULTY

Prepare a list like this for your business. You can use these five, or you can come up with five other bonuses that you think will be more appropriate for your customers. It’s also a good idea to work out a timeframe over which these events will occur, so as part of your plan you need to work out what actions you are going to take over a period of, for example, six months. Then draw yourself a diagram like the one above, and insert each of these items in the appropriate place. This matrix allows you to decide how you will use these five activities in your business. Thank-you cards are of course cheap and easy. Movie tickets

HARD

and a gift will probably cost a bit more but are also easy. A meal with a client takes a bit more effort, as does an upgrade. Your low-cost and easy ideas must be done often. There’s no excuse not to do them. The more expensive and difficult things can be done when appropriate, but they must still be done. Don’t think of these as a cost; think of them as an investment in the long-term success of your business. And once you have this system and culture in place, don’t think you need to stop at five – keep going! Keep coming up with new and inventive ways to delight your current and future customers.

business. It doesn’t always have to be something they’ll expect from you or related to your products or services. Imagine if you signed up for a gym membership and you received a welcome letter that contained two movie tickets. Or you picked your car up from the mechanic and the tickets were sitting on the front seat. Wouldn’t you be blown away? Wouldn’t you tell your friends? I sure would.

The critical non-essentials matrix What are five things you can do for your customers that are critical for them to be delighted but that are not essential? Let’s have a look at what I call the Critical Nonessentials Matrix. In the diagram on the left are five random and surprising examples of what you can do to delight your clients. The key is the surprise element. If it’s not surprising it will become an essential and lose its impact. If your client expects something it

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won’t wow them nearly as much. So, give them a hand-written thank-you card thanking them for their custom and achievement; buy them movie tickets. And don’t be cheap – give them a free product or service upgrade or a voucher for a related business; take them out for a coffee, or lunch or dinner; send them a gift on their birthday (not a voucher for your business – this is not an opportunity to get another sale, it’s an opportunity to wow your customer). Now let’s have a look at how each of these fits into the Critical Non-essentials Matrix. If you have a look at the diagram you’ll see that we have ‘cost’ going from low to high on the vertical axis and ‘level of difficulty’

going from easy to hard on the horizontal axis. What you have to do now is fit each of these five bonuses for your customers into the matrix according to cost and degree of difficulty. You can see I’ve done it for the five examples.

Stefan Kazakis is a business strategist, sought-after presenter and speaker, and author of the new book, From Deadwood to Diamonds (Major Street Publishing, $29.95). He is a futurist and an inspiring communicator, with the voice of experience. For more information, please visit www.stefankazakis.com or email info@stefankazakis.com.

A LT E R N AT I V E M O RT G A G E C E N T R E

One application One Email Submission Two Mortgage Options BlueShore Financial or Pacifica Mortgage Investment Corporation *BlueShore Financial is the operating name of North Shore Credit Union

Tiffany Pedersen

Shannon Hillman

Steve Canning

tiffany@capitalwest.ca

shillman@capitalwest.ca

scanning@capitalwest.ca

778-238-7746

604-899-3780

604-671-4783

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BUSINESS STRATEGY

EMPLOYEE ENGAGEMENT

Secrets to building an engaged staff As winner of Aon Hewitt’s Best Employer award four years in a row, it’s obvious that Hilti Australia is doing something right in the staff retention stakes. Managing director Jan Pacas explains how the company continues to please its staff WITH SUCH a diverse range of businesses fishing from the same talent pool, finding the best fit for your organisation has become a competitive pitch that is just as much about the applicant selling themselves as about selling the business. Therefore, once you’ve integrated staff into your business, it’s never been more important to retain them for the

“Never forget the fact that you serve as a role model for staff, so even the most subtle, sarcastic remark or negative comment on an initiative will have a flow-on effect throughout the business” long term. The benefits of minimising staff turnover go far beyond simply financial; they impact on employee morale, productivity and loyalty. The key to instilling a focus on staff retainment all comes down to employee engagement and providing each team member with a sense of purpose, identity and direction. As managing director of leading power-

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tool manufacturer and distributor Hilti Australia, named Best Employer by Aon Hewitt for a fourth consecutive year, I have reflected on the successful strategies that have made a measurable impact on our business and how we maximise our staff retainment.

Change led from the top The first thing to bear in mind is that the effectiveness of any sort of change in the business comes down to the top-level management team. There must be an agreed commitment of time, resources and finances to your employees, their development and their level of job satisfaction, and if you want your staff to get passionate about a strategy, you must lead by example and begin personally embracing it. Never forget the fact that you serve as a role model for staff, so even the most subtle, sarcastic remark or negative comment on an initiative will have a flow-on effect throughout the business.

Hire the right people In order to get staff excited about leading the business from success to success, you first have to hire the right group of people. Have a clear idea of the culture you are wanting to nurture, and hire accordingly, valuing personality over expertise. The number one reason that staff leave a company within the first 18 months is down to ‘attitudinal differences’, so ensuring from the outset that you’ve chosen a team member who will be well suited culturally is essential. Remember you can always train staff on technical knowledge or skills they may be lacking, but it is much more difficult to change an attitude or personality.

Actions speak louder than words The next step is to remember that actions speak louder than words, and although a simple email congratulating a staff member should be an essential part of the day-to-day management of a team, nothing is more motivating than receiving a physical reward that is of personal value to the employee, whether it be a voucher to their favourite store or some time in lieu to use as they wish. This strategy is more about time and thought than money, and is often far more motivating than just handing out stock-

standard rewards to all staff, such as branded collateral or local restaurant vouchers. As well as offering these smaller incentives, it’s also imperative to invest in a larger, company-wide recognition program. This allows everyone from the sales staff to the directors to be honoured for their outstanding achievements in front of their colleagues, both

Set clear expectations The final element in creating an engaged, motivated staff is to set clear expectations from the outset, and providing employees with both short- and long-term KPIs or objectives is a great way to implement this. The short-term objectives allow staff to focus on something achievable, whereas the long-term goals allow

“As the level of employee engagement increased, we saw a significant improvement in customer loyalty and an outstanding 210% increase in company earnings” motivating for those being honoured, as well as for those watching. At Hilti, we have instated a business-wide awards program called the Champions League. This program recognizes high-performing staff at all levels of the business, and the best of their field are given a luxury overseas holiday. This ceremony has become a highlight on the work calendar, and staff look forward to it year-round.

Invest in career progression Another key aspect of keeping staff engaged is ensuring that you invest in the career progression of each individual team member. Every employee should have their own development plan that outlines tactics for how they can progress in their current position, as well as their future potential roles. Annual development discussions between each staff member and their direct manager should be the norm, with the aim of getting a clear understanding of the employee’s motivations, behaviour, strengths, weaknesses, goals, and the tools they need to be able to progress. This allows all parties to be clear on the direction, and by putting together a formal document for this plan it adds a level of accountability and motivation to seeing these developmental objectives come to fruition. Not only will this initiative have a positive effect on employees, who see the business investing in their future, but it also allows the business to have clarity on employee goals, and the ability to refer to these goals when opportunities arise for internal promotions or role expansion.

them to understand their place in the business, and see that they are working towards something bigger. At Hilti, we manage this by having just a few monthly objectives per staff member, as well as one annual or five-year ‘bigger picture’ goal. The most important part of this exercise is to allow the time for line managers to conduct monthly updates with each employee, so that both the staff member and their manager keep their performance goals as a priority and top of mind. Following industry research pointing to the fact that employee engagement has a direct impact on overall business performance, Hilti has invested significantly in tactics to motivate staff in the workplace. From this we have developed a measuring tool that we term the Triple Bottom Line, and the results we received throughout the trial floored us. As our tactics were implemented and the level of employee engagement increased, we saw a significant improvement in customer loyalty and an outstanding 210% increase in company earnings. These are the types of figures that any business would be happy to have, and serve to show just how essential it is to invest in the heroes of the company – its staff.

Jan Pacas is the managing director of Hilti Australia. Operating in 120 countries, Hilti Australia employs 300 staff and has a company culture based on the following four values: integrity, teamwork, commitment, and courage to embrace change.

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BUSINESS STRATEGY

LEADERSHIP

DRIVING CHANGE:

when to involve the troops Leadership is always a delicate balance, and knowing when to involve your staff in an important initiative is just one of these balancing acts – and the timing needs to be just right. In this extract from his book, Leadership: It’s a Marathon, Not a Sprint, Gordon Tredgold shares the perfect time to bring in support WHEN YOU’RE fighting a battle, how long do you have to fight it alone? What’s a duel, and what’s a war? When should you call for reinforcements? When can you expect to find an army at your back? Someone asked me the question: At what point do we need to involve more people – like experts – when we’re shooting for those big goals? This is an interesting and difficult question to answer. I see it as a very tough balancing act that we have to get right. If you involve too many people too

early, then your goals run the risk of becoming tempered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded and this can then lead to resistance, tension and lack of commitment. That can be a huge source of conflict. In my opinion, the team defining the objectives and the goals needs to be small. And by small, I mean perhaps one to two people. I’ll explain why I’m so conservative with that number. The more people you have involved in

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“If you involve too many people too early, then your goals run the risk of becoming tempered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded, and this can then lead to resistance, tension and lack of commitment”

compared to our old average performance of 35%). If I had consulted with a larger group, I am sure we would have tempered the goal and probably set it at 60%; 80% wouldn’t have even been considered, much less reached. In my opinion, keep the team to a minimum when you’re at the first step of defining success and setting the goals for a change. So then, the second step. You have to define the why behind the what: why this goal is important, what the benefits are, the reasons behind it and so forth. The more inspirational the goal, the more convincing your why – and the bigger the buy-in. This is when more people begin to show up. As soon as what and why have been defined, you can begin gathering an army to tackle how. Remember this: The goal is non-negotiable now. There will be those who will try to deter you from it. There will be those who won’t be able to fathom the big picture. But the team’s focus should be on brainstorming and mapping out the road to success. The vision of success has already been taken care of. All the energy must now be channelled to discovering how to achieve the bold goals – not how to temper or reset them.

defining the goal, the more reasons they’ll provide you as to why you cannot hit your target. (It’s more ‘natural’ to think initially of what could go wrong. Remember when someone turned up late for a date or a meeting? A dozen bad scenarios probably ran through your head – from he doesn’t like me anymore to maybe he got into a car crash. Turned out, he’d just stopped to fill up with petrol.) If there are too many people involved, your goal will be watered down from big, bold and beautiful to small and not-so-impressive. It’s nobody’s fault, per se; it’s just the way of people, for there are as many opinions as there are voices. In the end, it’s your decision, and your voice has to make the choice. We need to be dedicated and fearless when setting big and ambitious goals, and this is more easily done if we only have to deal with (or convince) a small group. Large groups tend to be more cautious, argumentative and often lean toward the safe side – not what you need when setting big, bold goals. You need healthy doses of risk, ambition and creativity, and those characteristics can get trampled by the masses. I’ve experienced this in the workplace time and time again, like that time when I set one company’s goal for an on-time delivery increase to 80% (as

The three key principles to driving change are:

Define the problem (the goal) with as few people as possible

Create an important and inspiring reason that people can buy into

Define the solution (the strategy for success while involving and welcoming more people – the troops) There will always be some resistance, of course. You need to see beyond that now. The Chinese have a popular proverb: It is better to light the candle than to curse the darkness. Problems exist to be solved. Your vision must be powerful enough, and your focus must be just as keen. Don’t ask your team: Why shouldn’t we do this? Instead, ask your team: Tell me what you need to make this happen. If you can attain the balance, your larger group will not feel excluded. Instead, those people will feel involved. They will take up the challenge and work with you to define the solution. After all, the resulting solution will be their brainchild, too, and involvement breeds commitment. Thus do we set big, bold, challenging goals, while inspiring people and ensuring their commitment.

Gordon Tredgold is a specialist in transformational leadership, operational performance improvement, organizational development, creating business value, and program and change management.

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BOO

ALL K NO SO 8 YEARW! LD S

”

Official Ballot Accountants

”

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PEOPLE

CAREER PATH

PATH TO BEING A BROKER Andrew Matheson, TMG The Mortgage Group

2015 2014

“I’ve been in the top 20 per cent for the last two years and business is good. I was also named the area sales director and I am working with young brokers to mentor them and bring them along.”

IN THE TOP 20 PER CENT IN CANADA

EYEING MORE OPPORTUNITIES ON THE HORIZON FOR BROKERS

“I think things will be more diversified and we’ll start to see more in private and commercial lending. I expect that the interest rate cut and subsequent freeze should keep people buying homes and having the confidence to do so.”

2011

STARTS WITH TMG THE MORTGAGE GROUP “It’s been great working with TMG. I have the flexibility to work on my own time and help my clients find the best products for them. Just to know that everyone I work with leaves happy is a good feeling for me so I certainly enjoy it and am glad I left electronics!

2009

ENCOURAGED TO BECOME A BROKER BY A FRIEND

1996

BEGINS WORKING AT IRVING TISSUE IN P.E.I. “I was a manager of production at Irving for 11 years and I enjoyed it for it a time but there was a certain point when I decided that I wanted to do something a little more relaxed.

“It was something that I wanted to do from the time I was a kid. I was interested in dentistry or optometry so I went to school to pursue it. I got my bachelor of science degree and decided to go back to school”

Looking for a change of pace where he’d be in control of his own destiny, Matheson decided to become a mortgage broker after his best friend turned him on to it. “I started with HomeLoan Canada and worked with CIBC University to get my licence. I worked for the bank but there wasn’t much freedom there so I decided to look elsewhere.”

1994

DECIDES TO PURSUE EDUCATION IN ELECTRONICS AT HOLLAND COLLEGE

1989

ATTENDS THE UNIVERSITY OF P.E.I. TO PURSUE AN EDUCATION IN SCIENCES

“I’d always been interested in electronics and technology so this was the step to doing that. There was a lot going on in the tech sector at the time so it was a good opportunity for me that led to a long career.”

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PEOPLE

FAVOURITE THINGS

KENT FARNSWORTH

Owner, Simply Mortgages

Smashing Pumpkins, Pizza and, of course, hockey: just a few of this East Coast broker’s favourite things Favourite drink: This brings me back to the favorite movie question. How can you choose just one? If I’m forced to choose, it’s probably going to be a bloody Caesar with lots of ice and a little extra Tabasco. It also should be rimmed properly with celery salt and garnished with a dill green bean.

Favourite vacation spot: Any place with a rich history to learn about. I’m not at all the boiling-hot-temperatureresort-type person. I don’t like the heat, and lying on a hot beach doing nothing at all would be torture for me.

Favourite sport: Hockey, of course: It’s Canada’s game. It’s very fast-paced with just the right amount of aggression. I thought about choosing MMA, but I think there are still too many people that don’t consider it a real sport. Favourite music: ‘90s alternative or grunge; bands like Pearl Jam, Nirvana, and Smashing Pumpkins come to mind. Musicians and bands today just seem too “created” I guess. Favourite thing about working in the mortgage industry: I think the best thing by far is the flexibility of how I can plan my day. Being a mortgage broker has to be one of the best careers for being able to control how you wish to spend your day/week. Favourite celebrity: I’m going to have to go with John Travolta. Somehow this guy (almost overnight) went from being completely typecast for what seemed to be an eternity, to becoming one of the most sought-after movie actors.

Favourite movie: To me, personally, this is sort of like asking which is your favorite child so I can’t pick just one here. It’s a toss-up between Forrest Gump, Saving Private Ryan, and Goodfellas. I don’t know how anyone could have just one favorite movie.

Favourite book: Stephen King’s “Drawing of the Three” series. My first real job was scallop fishing. It was long before smart phones existed so in slow times there wasn’t much to do. I also didn’t particularly like the job, so that was one series of books that helped me escape where I was (the middle of the Bay of Fundy or well out into the Atlantic Ocean).

Favourite place to be: Home with the family, watching a good movie…eating Kraft pizza. Seriously!

Favourite mortgage product: Alt-A, business-for-self, stated income. It’s nice to still be able to offer some things that the banks aren’t keen on doing. At one time it seemed like we had so much more to offer than big banks as far as mortgage products were concerned, but these days it seems like the playing field is becoming increasingly unbalanced.

Favourite food: Kraft pizza with ground beef, bacon, pepperoni, green pepper, mushrooms, onions and, last but not least, sliced-up hotdogs. When I smell it cooking, all of a sudden I’m eight years old and nagging my mother about when it’s going to be ready to eat! It’s the ultimate comfort food. And don’t knock wieners on pizza until you’ve tried it!

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