MORTGAGEBROKERNEWS.CA ISSUE 11.03 | $12.95
2016
BROKER SENTIMENT What are brokers’ biggest concerns for the year ahead? We asked, and you answered
INTEREST RATES Economists forecast the Bank of Canada’s next rate decision
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GOING INDEPENDENT Canada’s top independent brokerages on why it’s better to go it alone
TIME TO REBRAND? The 13 telltale signs that your image might need a makeover
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ISSUE 11.03
CONTENTS
22 2016
BROKER SENTIMENT COVER STORY
How has brokers’ outlook on the industry changed over the past year? You might be surprised
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CONTENTS
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04 Editorial
Google abandons its mortgage comparison site
06 Statistics
Trends to keep an eye on in 2016
46
T
08 Head to head
Examining the shadow flipping trend
10 News analysis
FEATURES
THE REINVENTION OF TEAMWORK How to harness the power of technology to create a 21stcentury team
Economists try to predict the Bank of Canada’s next interest-rate decision
12 Commercial update
Lenders are tightening up in the commercial space
14 Investment update
Student housing in the Waterloo area – investment boom or bust?
16 Opinion
What the federal budget means for the housing market
FEATURES
TOP INDEPENDENT BROKERS The heads of some of Canada’s best-performing independent brokerages weigh in on the pros and cons of going your own way PEOPLE
INDUSTRY ICON
RMAI’s Ron De Silva shares his thoughts on where the mortgage industry is headed
18
PEOPLE
48
55 Career path
Ireland native Robert Clancy’s varied career in financial services
FEATURES
WHEN AND WHY TO REBRAND How to tell if it’s time to give your brand a makeover
PEOPLE
BROKER INSIGHT
In Canada, Chris Karram might be a mortgage broker, but in Africa, he’s a homebuilder
52
Verico Paragon Mortgage Group’s Steve Rogerson on the opportunities that exist for today’s broker
2
56 Other life
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UPFRONT
EDITORIAL
The sky’s not falling after all
W
hether you use them or shun them, embrace them or decry them, rate comparison sites appear to be a permanent fixture in the mortgage broker channel. When Google jumped on the trend south of the border with its Google Compare for mortgages, brokers speculated about a potential jump into the Canadian market, which likely would have brought even more pressure to use rate sites and, indeed, buy down rates. All that worry was for naught, it seems. Google announced in late February that it would be pulling out of the rate comparison game entirely, effective March 23 – a mere four months after its official launch. “Despite people turning to Google for financial services information, the Google Compare service itself hasn’t driven the success we hoped for,” the company said in an email to its partners. “After a lot of careful consideration, we’ve decided that focusing more intently on AdWords and future innovations
“Despite people turning to Google for financial services information, the Google Compare service itself hasn’t driven the success we hoped for” will enable us to provide fresh, comprehensive answers to Google users, and to provide our financial services partners with the best return on investment.” Of course, Google’s decision to abandon Google Compare in the US doesn’t mean the tech giant won’t someday take a crack at the Canadian market. However, the fact that Canada has a much smaller broker channel – and that the rate comparison market is well served already – suggests that Google will likely focus on other innovative products. Perhaps a bit of good news as spring approaches – and with it, blue skies and booming housing markets. Until then, however, take shelter from the cold and curl up with this issue. The team at Canadian Mortgage Professional
www.mortgagebrokernews.ca ISSUE 11.03 EDITORIAL Editor Justin da Rosa Writer Donald Horne Executive Editor – Special Features Ryan Smith Copy Editor Clare Alexander
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UPFRONT
STATISTICS
Trending right now
AFFORDABILITY CONTINUES TO SUFFER Finding affordable housing in coveted urban areas is getting harder and harder, according to PwC’s report, which cites greenbelt legislation in BC and Ontario, along with “lengthy approval processes” and “significant development charges” as key drivers in the rising cost of city-centre housing. The report posits that affordability concerns could impact the recent trend of urbanization, forcing more people into the suburbs.
A recent in-depth report reveals that it’s not all doom and gloom for the Canadian housing market in 2016 IT WOULD be easy to be pessimistic about the Canadian real estate market’s prospects for 2016. The oil downturn that has plagued resource-driven markets like Calgary and Edmonton for the past year shows no signs of abating, and the Canadian dollar is also continuing its downward slide. Yet there is a silver lining to these hardships, according to PwC’s 2016 Emerging Trends in Real Estate report: Low energy
prices and a weak dollar have driven interest in manufacturing, warehouses and other key sectors, especially in the eastern provinces. PwC also predicts that the number of renters across the country will increase as housing prices become increasingly out of reach in key markets like Toronto and Vancouver. Overall, caution seems to be the watchword for Canadian real estate in 2016, but there are opportunities to be found.
Vancouver Average house price
$921,900 Price-to-income ratio
11.6:1 59.2
3rd
Number of kilometres of transit infrastructure currently underway in Toronto
Canada’s rank in average home size by square footage, behind Australia and the US
1.96 million Total number of multifamily housing units in the country as of 2015
36%
Projected percentage of Canadians who will be in the over-55 age bracket by 2038 Source: PwC Emerging Trends in Real Estate 2016
MARKET BAROMETER
HOW THE LOCALS FEEL
How long can the market continue to grow? Some respondents to PwC’s survey suspect a downturn is coming – sooner rather than later.
PwC surveyed real estate investors in key markets around the country to find out their outlook on key indicators such as the strength of the local economy, investor demand, capital availability and development opportunities. Unsurprisingly, investors in the Eastern provinces were, by and large, more optimistic than their Western counterparts.
GOOD
Hold
5
EXCELLENT 4
FAIR
GOOD 3
Buy
Sell
FAIR
2
1
POOR Montreal
2008
2009
2010
2011
2012
2013
2014
2015
Toronto
Winnipeg
Ottawa
Vancouver
Saskatoon
Edmonton
Calgary
2016
Source: PwC Emerging Trends in Real Estate 2016
6
Halifax
Source: PwC Emerging Trends in Real Estate 2016
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Montreal Average house price Edmonton
$344,000
Average house price
Price-to-income ratio
$357,100 Price-to-income ratio
4.3:1
5:1
Saskatoon Average house price
$297,800
Toronto
Price-to-income ratio
$639,300
Halifax Average house price
$285,200
Average house price
4.5:1
Price-to-income ratio
3.8:1
Price-to-income ratio
7:1 Calgary Average house price
$441,700
Winnipeg
Ottawa
Average house price
Average house price
$375,400
$279,200
Price-to-income ratio
Price-to-income ratio
Price-to-income ratio
3.9:1
3.9:1
3.5:1
Source: PwC Emerging Trends in Real Estate 2016
WHERE ARE THE OPPORTUNITIES IN COMMERCIAL REAL ESTATE?
FOREIGN INVESTORS STILL DRAWN TO CANADA
In the commercial space, lower energy prices and a weak loonie are increasing activities in sectors like industrial space and office buildings. PwC identified the following as the top 10 commercial real estate subsectors for 2016, based on the percentage of investors who intend to buy in that sector. Warehouse/industrial
59.6%
Medical office
54.3%
Fulfilment centre
52.4%
Neighbourhood/community shopping centres
42.2%
Limited-service hotels
37.8%
Apartments – affordable
35%
Apartments – moderate income
Central city office
33.3%
By and large, investors still see Canadian real estate as a safe haven, though numbers have fallen off over the last decade. PwC speculated that the lack of premium opportunities, combined with the slowdown of the energy market, could lead to further decline.
Full-service hotels
5.0% 4.0% 1.7%
Latin America
0.7% 02%
Others 2014 2004
Source: PwC Emerging Trends in Real Estate 2016
29.0% 11.7%
Asia and Oceania
27%
35%
64.1% 34.3%
Europe
Student housing
32.4%
49.4%
United States
0%
10%
20%
30%
40%
50%
60%
70%
Source; PwC Emerging Trends in Real Estate 2016
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UPFRONT
HEAD TO HEAD
Are shadow flippers hurting the market? Some contend that using assignment clauses to flip properties is placing prices out of reach for the average homebuyer
Jared Stanley
Gordon Barthels
Business developer and underwriter Alt Mortgages
Sales associate Re/Max Lifestyles Realty
“The practice of shadow flipping is often unethical in that the seller may be misled and is not achieving true market value. It is similarly unethical if the buyer is misled to pay more than they need to. The perception that this is taking place erodes the credibility of Realtors and undermines trust in the market in general. Currently, there is not enough empirical evidence to conclude that it is inflating prices, yet there is reason to be concerned. The definition of market value is the price a property should bring in when the buyer and seller are each acting prudently and knowledgeably. Both buyers and sellers rely on the advice of their Realtor to determine what is a fair price, and they are susceptible to being misled.”
“In the Vancouver area alone, we have approximately 16,000 Realtors, and our industry is doing a hell of a good job dealing with what has been brought upon us. Most Realtors have become so cautious and transparent for fear of anything that could be construed as unfair. Imagine this: You do a CMA for a seller based on recent sales. Then you add another 5% to your price, just because the market is so nuts, then you list the property, and it sells in multiples for another 5% over that. We don’t tell the seller what the true value of their property is – the market does. We could list every property for $1.99 right now, and in three days, the highest bidder will have established what it’s really worth.”
Ian Hocking
Broker Keller Williams Experience Realty “It appears to me that the real issue is not the semantics of the contract. The issue would appear to be the flow of dollars from place A to place B. The reason is not totally clear, although certainly overseas money is a likely driver. So why not introduce a law that instructs all lenders to require a 35% down payment for all non-residents of Canada? At least that way, if there is a nasty pullback, those who are speculating will have some significant skin in the game and stand to lose a fair bit before the Canadian banking system has to take the strain. I agree that agents have a responsibility to help their client with pricing, but what is happening at the moment has little to do with any conventional pricing method.”
THE ASSIGNMENT CLAUSE LOOPHOLE Assignment clauses were intended to give buyers the opportunity to back out of a transaction without losing their deposit. But some Realtors are taking advantage of this loophole to reassign a contract to different owners at progressively higher prices before the sale is concluded, which often nets them two to three times their base commissions for each transaction. Although Vancouver and Toronto are hotbeds of ‘shadow flipping,’ industry insiders noted that the practice is not exclusive to these redhot markets, but also can be observed in other areas like Calgary and Edmonton.
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29/03/2016 8:45:24 AM
UPFRONT
NEWS ANALYSIS
Where are interest rates headed? The Bank of Canada made its latest rate decision, and economists weren’t surprised. But what does the future hold?
THE BANK of Canada stood firm on its 0.5% benchmark rate in March, but it may be the calm before the storm – many economists believe the central bank is awaiting the government’s financial policy statement before making any rate-related decisions. “The Bank of Canada keeps putting out a timeframe, saying they will raise the rate next year,” says Michael Campbell, Verico’s economist. “Each time they target ‘next year,’ it doesn’t happen; they underestimate the impact of commodities on the economy.” The BoC’s habit of setting its sights on ‘next year’ to raise interest rates may, once again, fail to come to fruition.
there is no upward pressure.” Commenting on its decision in a press release, the BoC said, “The global economy is progressing largely as the Bank anticipated in its January Monetary Policy Report. Financial market volatility, reflecting heightened concerns about economic momentum, appears to be abating. Although downside risks remain, the Bank still expects global growth to strengthen this year and next. Recent data indicate that the US expansion remains broadly on track. At the same time, the low level of oil prices will continue to dampen growth in Canada and other energy-producing countries.”
“The Bank of Canada is waiting until the budget and will factor that into its next decision” Dr. Sherry Cooper, Dominion Lending Centres “We’re not yet done with the oil downturn,” Campbell says. “There is a real problem in Calgary with commercial real estate – they brought in a lot of office space that didn’t get rented, and those companies that are currently renting have made a lot of layoffs. The likelihood of the Bank of Canada raising rates in the next year is very low because
10
The BoC also noted recent rebounds in oil and other commodities. Coupled with a slight appreciation of the loonie, the central bank said it remains cautiously optimistic about economic conditions. “Canada’s GDP growth in the fourth quarter was not as weak as expected, but the near-term outlook for the economy remains
broadly the same as in January,” the bank said. “National employment has held up despite job losses in resource-intensive regions, and household spending continues to underpin domestic demand. Non-energy exports are gathering momentum, particularly in sectors that are sensitive to exchange rate movements. However, overall business investment remains very weak due to retrenchment in the resource sector.” Overall, the bank cited balanced risks as the basis for not moving the overnight rate. “The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the
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RECENT HISTORY OF THE BANK OF CANADA’S OVERNIGHT RATE TARGETS The Bank of Canada held its overnight interest rate target at 1% for years before shocking the financial community with two rate cuts last year. 2012
2013
2014
2015
2016 1.000
0.900 0.800 0.700
0.600 0.500
03/16 0.500 Source: Bloomberg News
overnight rate remains at 0.5%,” the BoC said. For her part, Dominion Lending Centres’ chief economist, Dr. Sherry Cooper, believes
Cooper says, adding that it won’t be until 2017 that the full effects of the government’s fiscal stimulus will be felt.
“We’re not yet done with the oil downturn. There is a real problem in Calgary with commercial real estate” Michael Campbell, Verico the Bank of Canada will have a better idea about the future of rates once the government releases its budget. “[The Bank] is waiting until the budget and will factor that into its next decision,”
Campbell agrees. “[The Bank of Canada] is looking to the March budget to see what kind of fiscal stimulus the economy is given; there isn’t a single push to increase rates right now,” he says. “There will be no upward pressure on
rates in the foreseeable future – every time people thought the rate would go up, it didn’t.” Indeed, the Bank shocked the mortgage industry last year with two cuts to its longheld overnight rate – from 1% to 0.75% in January 2015 and to 0.5% in July. The bank’s forecast at the time of its second rate cut was that economic growth would resume by the third quarter of 2015. “The lower outlook for Canadian growth has increased the downside risks to inflation,” the Bank said at the time. “While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada’s economy is undergoing a significant and complex adjustment. Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.”
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UPFRONT
COMMERCIAL UPDATE NEWS BRIEFS First National reports strong commercial growth
Canada’s largest non-bank lender has reported that its originations rose 7% year-over-year from $16.2 billion in 2014 to $17.3 billion in 2015. “First National’s record results for 2015 reflected the ongoing benefits of nonbank mortgage lending across both residential and commercial markets, generally strong conditions in those markets, and our team’s dedication to customer service supported by bestin-class technology,” said Stephen Smith, First National’s chairman and CEO. “Compared to the prior year, growth was registered in all key financial metrics.”
Colliers posts fourth-quarter results Colliers International Group has reported fourth-quarter earnings of $35.7 million. On a per-share basis, the Toronto-based company said it had net income of 92 cents. Earnings, adjusted for one-time gains and costs, were $1.06 per share. The commercial real estate services provider posted revenue of $556.1 million during the period. For the year, the company reported profit of $23.3 million, or 62 cents per share. Revenue was reported as $1.72 billion. Colliers International shares have fallen 23% since the beginning of the year and 35% in the last 12 months.
Big bank’s commercial portfolio growing National Bank’s mortgage business is credited with helping boost its overall personal lending portfolio. “Rising 6% from a year ago, personal lending experienced sustained growth, with the most significant increases coming from mortgage loans, and commercial
lending grew 8% from a year ago,” the bank said in its Q1 report. Residential mortgages accounted for $4.4 billion as of January 31, 2016 – a 2% increase from October’s $4.3 billion, and up 11% from $4 billion in January 31, 2015.
CMLS reviews the year in commercial mortgages
At the end of 2015, CMLS Financial released its in-depth commercial mortgage commentary report, which highlighted global economic volatility and the widening economic gap between Canada and the US. “With the strong October US jobs report, the US Federal Reserve is positioned for its first rate hike in almost 10 years,” the report said. “The Bank of Canada, on the other hand, is on hold as it awaits a pick-up in manufacturing activity as a result of a stronger US dollar to offset the decline in oil prices and other commodities.” The report also noted the increase in spreads on CMHCinsured multi-family mortgages and on high-quality commercial assets.
Is now the time to invest in the US? In a recent poll of real estate executives, the Altus Group found that most believe the US housing industry will see good performance in 2016, although commercial real estate investors must take into account the presence of overseas capital and the modest pace of the country’s economic growth. According to a report in the World Property Journal, “Demand for core investments in primary markets remains strong, supply is still catching up to demand in a few key sectors, and interest is trending upward in secondary markets as some buyers who are priced out of the core markets seek alternatives.”
Commercial funding harder to find Certain lenders are tightening up on commercial loans Sun Life Financial is becoming more cautious about lending for commercial deals due to trouble with commodities markets. “We’re concerned about the stage in the real estate cycle Canada’s in right now – there’s more risk in the market,” Michael Andrews, managing director of Sun Life’s Canadian commercial mortgage team, told Bloomberg. “We wanted to ensure our portfolio could withstand, for example, a 25% drop in prices. Do we think that will happen this year? No. But what about in five years? It’s just prudent to test.” That prudence is warranted, it seems: Toronto reported 392,132 square feet of combined industrial, commercial/retail and office space leased in February. That was down from 796,437 in 2015. “While the regional economy for the GTA and surrounding Greater Golden Horseshoe has held up quite well relative to other regions in Canada, it is clear that there remains a degree of uncertainty in many sectors regarding the outlook for the next year,” said Mark McLean, president of the Toronto Real Estate Board, in a release. “This uncertainty seems to have translated into caution when it comes to firms committing to more industrial, commercial/retail or office space.” Those struggles are being felt by lenders, who are clamping down on lending in Toronto. However, things seem
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more positive on the other side of the country for commercial brokers. “Financial market jitters offset solid gains from a strong BC economy,” said BCREA economist Brendon Ogmundson in a recent release. “We expect that the economic environment will remain supportive of steady growth in the commercial real estate market.” It’s an optimistic tone that contradicts some of the gloomier reports for Toronto and, indeed, the rest of Canada.
“We’re concerned about the stage in the real estate cycle Canada’s in right now – there’s more risk in the market” Office vacancies are on the rise throughout Canada, and the commercial sector is expected to see a tough year as a result of low oil prices and an excess retail supply. “Demand, or lack thereof, will be the biggest story in the office sector,” said Paul Morassutti, executive vice president at real estate firm CBRE, during the RealCapital real estate conference in Toronto in late February.
Q&A
Dale Bilton
Where the deals are
President DOMINION LENDING CENTRES COMMERCIAL
Years in the industry 35 Fast fact Bilton won the CMA Commercial Mortgage Broker of the Year Award two years in a row
There has been much made about the struggling commercial market, especially in Alberta. Should brokers be worried? The present time offers the experienced commercial broker fantastic opportunities. As much as the oil industry is having major issues, and that is really affecting most of the Western provinces, the majority of Canadian manufacturing has a great opportunity to take advantage of the lower Canadian dollar. We have aggressive lenders for the well-positioned companies. To assist the challenging Western oil-related industry, all lenders are going to be very cautious, as they have been in the past during times like this. The role of the knowledgeable commercial brokerage specialist becomes more important to Canadian business and investor customers. Mortgage brokers who deal in the commercial side need to have a good base of private lenders to assist with the tougher deals. What is the best strategy for commercial deals in Toronto, versus other markets such as Alberta and BC? First of all, the broker needs to know their lenders well and have good relationships with them. Senior management of national lenders are closely monitoring the economic conditions in each part of Canada. Which provinces will lead the way in commercial deals? I think Ontario will lead the way this year, with Toronto having the best growth and Ottawa being consistent. Expect British Columbia to also see reasonable growth, particularly in the Vancouver area. Quebec will most likely be consistent with previous years, as well as the Eastern provinces. The provinces that are heavily affected by the oil industries will not be seeing their normal growth. Which property types should brokers be targeting? Our main lenders are firstly looking for income properties in larger centres, including apartment buildings, retail and industrial plazas. As mentioned earlier, with the weakness in the Canadian dollar, manufacturing is making a good comeback, particularly in Ontario. Manufacturers will need to expand facilities, in many cases. This may be our best growth area for the commercial broker this year. Which property types and markets should brokers avoid? There really are no particular areas an experienced commercial broker will not work; however, location is still one of the key indicators. Development land is more challenging in the remote areas; that is where you need to partner up with an experienced broker that specializes there. Even with our experienced team, I have localized brokers that I count on for deals in the smaller communities. Funding new operations without a track record will always have its challenges, and quite often is just spinning your wheels. A new manufacturer needs strong reserves to cover the unexpected surprises, and most don’t have that.
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UPFRONT
INVESTMENT UPDATE
Investing in Waterloo student housing Is Waterloo’s student rental market a boon for investors – or one to be avoided at all costs?
longer, getting jobs and choosing to live in the city,” Elkind says. “The units are close to the universities, but Technology Park is close by as well. The buzzword is ‘student housing,’ but that’s not what it’s all about.” Billed as the Silicon Valley of the North, Waterloo has recently seen companies such as Microsoft, Google and other tech start-ups and incubators set up shop. That’s due in part to attractive real estate prices. “Commercial property goes for about $15 per square foot, as opposed to $45 per square foot in Toronto neighbourhoods such as Liberty Village,” Elkind says. “[Waterloo] has a very powerful long-term growth story, and
“We’re finding people are staying longer, getting jobs and choosing to live in the city” Depending on who you ask, student housing in Waterloo is either an incredible investment opportunity or a risky prospect. “Student rental has been overbuilt,” says Karl Innanen, managing director at Colliers International. “A study was recently put out, which found that there is an oversupply of [rental units] – 27% more than the market needs. It’s something [investors] should avoid.” According to the Waterloo Region Record, the city has an oversupply of approximately 1,200 beds, and that number is expected to jump above 8,000 as planned buildings
NEWS BRIEFS
come to fruition. According to Colliers, there are 41,440 post-secondary students in the Waterloo region, but nearly 10,000 of those are commuters who don’t require student housing. However, the key to the Waterloo market is to evaluate its ‘student’ housing as much more than just homes for students, according to veteran investor Matt Elkind. “We’re thinking less in terms of student housing and more about the market overall; the typical student stays in a house for three years, but we’re finding people are staying
Thunder Bay real estate value shoots way up
The Northern Ontario city of Thunder Bay is home to the fastestappreciating homes in the country. In a survey of Canadian cities conducted by MoneySense, Thunder Bay residents had some of the most stable incomes in Canada; average household income clocked in at $81,000. And at $216,000, the benchmark price for homes in the city is only around 2.5 times this amount. By contrast, average prices in the hottest Canadian markets are six (Toronto) to nine (Vancouver) times the average household income.
it’s only one hour from Toronto.” And the city is certainly booming – 500 active start-ups made their home in Waterloo in 2014, according to Canada’s Technology Triangle. It’s also home to 1,000 tech firms. In regard to the Colliers report that argues student housing is overbuilt, Elkind says it’s a certain type of home that has been overbuilt. “The problem is there is an oversupply of a certain type of unit we wouldn’t touch – five-bedroom units,” he says. “One- or two-bedroom units [are a good investment]; wealthier students and graduate students who want to live alone are attracted to these.”
AB
Alberta investors aren’t worried just yet
Despite a glut of available properties in Alberta, professionals aren’t yet worried about price depreciation. February ended with a total of 6,681 properties for sale in Edmonton – a 16.17% increase over the previous month and a 33.41% year-over-year-increase. Sales were up 36.54% month-over-month in February, but were down 10.1% year-over-year. Despite this, investors may not need to worry just yet. Prices in February were on par with February of last year, and up 6.93% month-over-month.
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Q&A
Daniel Nagy
Cultivating a pool of investor clients
Founder DN3 PROPERTY INVESTMENTS
Years in real estate investing 5 Fast fact Nagy won the Investor of the Year Award at the 2016 Toronto Investor Forum
What are some of the best ways for brokers to attract investor clients? Attracting investors is quite simple once you understand their thought processes. Networking is critical. We connected with a main broker at a networking event. After some communications back and forth, we quickly realized his great connections with both investors and lenders, and the benefits that a relationship would bring. Experts get noticed. Present at events and forums. Speak locally. Even make informational videos online. These all lend you credibility.
Why would brokers want to add investors to their pool of clients? Investors are looking for long-term relationships with people they trust. Prove to them that you can get their deals done, and they will keep coming back for more. This results in more deals per person versus working with the general public. Additionally, strategic investors tend to be professionals. When an investor needs financing, their paper work should be sorted, categorized and prepared in advance. This helps you skip most of the headaches. Investors understand that financing is part of the game, and know that if the numbers don’t work, they’ll go find a deal that does.
What are some of the advantages of working with investors in terms of referrals? Networking is essential in the investing world. A common investor saying is that “your network is your net worth.”
Has foreign investment been overblown?
Recent official statements and regulatory changes have placed the spotlight on the role of overseas investors in driving up Canadian real estate prices, but Bank of Montreal senior economist Robert Kavcic thinks factors closer to home are at play. He noted that while it’s easy to blame overseas capital for the exorbitant housing prices in high-demand, high-volume markets, it is a misguided assumption. “Sure, all anecdotes suggest they are playing a role in some neighbourhoods – we just don’t know exactly how big that role is,” Kavcic told HuffPost.
While knowing a lot of people helps, knowing the right people is crucial. If a broker consistently closes deals, and an investor is able to refer them to others, it lends a tremendous amount of credibility, reliability and trust to that investor.
What are investors looking for in a mutually beneficial working relationship with brokers? The most important thing to an investor is whether the broker can close deals. If the broker can’t get deals financed, both businesses die. Once the investor is comfortable with the broker’s close rate, we look for communication. If the investor is not kept in the loop, the transaction might become soured. Finally, what distinguishes a great broker is their ability to provide context and guidance. Investors know the rules, but not for each and every situation. Investors need a knowledgeable broker to understand the portfolio as a whole, to form a more complete picture and provide guidance.
What is the best way to market to investors? Increasingly, the most successful way to market to investors is to be branded an expert. Branding through social media has never been more manageable, and is paramount to creating a successful marketing campaign. The broker must be the one investors think of when they need financing. Attract them by creating informational content that can be shared in their network as well as yours. Create videos, blogs, posts and any other content that will associate the broker’s name with getting their deal financed.
CMHC says Toronto market overvalued
CMHC has issued a warning that Toronto’s housing market is showing signs of overvaluation. “Declining inventories of both new and resale singledetached homes contributed to rapid price growth,” CMHC said. “The continued rise in house prices has not been matched by growth in personal disposable income and population, giving rise to strong evidence of overvaluation.” That, coupled with the fact that the number of completed and unsold units remains above the historical average, has led to troubling conditions in Toronto.
Vancouver market less troubling to CMHC
Often held up next to Toronto as another problematic market, CMHC’s latest report found that Vancouver had low evidence of problematic conditions. However, CMHC warned that “moderate evidence of overvaluation was observed in the third quarter, meaning house prices were higher than levels consistent with personal disposable income, population growth and other factors. Single-detached homes have recorded particularly strong price growth due to demand from high-networth and repeat buyers.”
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29/03/2016 10:33:47 AM
UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email mortgagebrokernews@kmimedia.ca
No surprises in the budget The recently announced federal budget should spell good news for Canada’s housing market, according to Dr. Sherry Cooper
THE FEDERAL budget included everything I expected and nothing that I feared. The fears first: There is no change in the tax treatment of capital gains or stock options, despite continued rumours and speculation. Indeed, in a press conference in the lock-up, Minister Morneau said that stock options tax changes are off the table because they are so important to young, innovative companies. There is also nothing in the budget designed to tighten credit conditions in the housing markets. With respect to housing, Ottawa will support the collection of data regarding foreign purchases of Canadian residential real estate, providing additional funding to Stats Canada, working with CMHC and British Columbia. Evidence-based assessment of the situation is important. Hopefully, governments at all levels will refrain from discouraging foreign investment in housing in a misplaced effort to create more affordable housing. The budget does express concern about affordable housing by investing $2.3 billion over two years for social infrastructure in communities where it is most needed, including $739 million for First Nations, Inuit and northern housing. The budget states that “stable and secure housing markets protect the greatest investment of many middle-class Canadian families. On December 11, 2015, the government announced coordinated actions to strengthen the resiliency of Canada’s housing finance system, increase market discipline in residential lending, and promote long-term stability and balanced economic growth. The government will continue to closely monitor vulner-
16
abilities related to housing and consumer debt, and is prepared to implement further measures, should they be needed.” This is all good – no messing around with the housing market in this year’s budget, but reasserting a watchful eye on excesses and potential bubbles. There is a growing concern among US hedge fund managers regarding the Canadian housing market and Canadian
gency reserve. But to the surprise of some, there is no estimate as to when the federal budget will be balanced. Despite these large deficits, the federal debt-to-GDP ratio – while rising from 31.2% to 32.5% in the fiscal year that begins April 1 – will fall over each of the next five years to end fiscal year 2020-21 at 30.9%. Canada has the lowest debt-to-GDP ratio by far in the G7, so no worries here. With interest rates so low, debt-servicing costs have dropped sharply. The middle-class tax cut was announced last December, effective January 1. While it is estimated to provide a net boost to the economy of $1.3 billion this year, the hike in tax rates for incomes over $200,000 – which is called “the tax fairness measure” in the budget documents – is estimated to have a net negative economic impact of $0.7 billion over the same period. The negative impact of this tax increase could be substantially greater, especially over the longer term, as it dampens entrepreneurial spirit and makes it more difficult to attract and retain talent and new high-growth businesses in Canada.
“While there will no doubt be quibbles about the specifics of the budget, the good news is that it will provide economic stimulus without threatening Canada’s solid financial position” household debt, as many expect a meltdown in Canada, similar to what happened in the US in 2007–2009. This is nothing new, as Canadian pundits and media have been suggesting something similar for several years now. However, vigilance against fraud and insufficient qualifying conditions for credit is important to maintaining the financial stability of our economy and our financial institutions. As expected, the current fiscal year budget deficit is forecast to come in just shy of $30 billion ($29.4 billion, to be exact) and to fall only a bit next year (to $29.0 billion), nearly three times the size of the deficit promised during the election campaign. As well, deficits will remain over the five-year forecast horizon. There is some cushion here in that these numbers include a $6 billion contin-
Bottom line: While there will no doubt be quibbles about the specifics of the budget, the good news is that it will provide economic stimulus without threatening Canada’s solid financial position. There is no doubt we will maintain our triple-A rating. The government was urged by some to spend more and by others to spend less, so they have reached a reasonable balance without raising the tax burden further on high-income Canadians. The actions taken will help, at least at the margin, to assure a minimum standard of living for all.
Dr. Sherry Cooper is the chief economist for Dominion Lending Centres.
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PEOPLE
INDUSTRY ICON
THE FUTURE OF THE INDUSTRY As the head of a small but thriving broker network, Ron De Silva has some ideas about where the mortgage industry is headed – and what it will take for brokers to stay on board RON DE SILVA is the head of the broker network that punches above its weight – and that’s just how he likes it. “At the end of the day … RMA tends to be on the outside of mainstream brokerages, and we’re OK with that,” says De Silva, the CEO of RMAI Financial Group. “We’re simply driving towards what we do best, and we’re happy with our position. We have a big family of individual brokers that are very successful.” RMA does just over $1.5 billion in annual sales, making it a relatively small mortgage network player in contrast to the multi-billion-dollar originating juggernauts it competes with. However, De Silva is no stranger to helping small companies grow. He got his start in the mortgage industry in 1995 as a mortgage specialist for CIBC, where he worked until he was approached to help establish a small broker network. That company was Invis, which is now a major broker channel player. “Invis got a hold of me and several other CIBC managers, and we rolled it out and put some structure in place and grew it in Ontario,” De Silva says. “I was there until mid-2005. I was VP of marketing, e-commerce and information technology at the time.” He helped Invis establish itself in new markets before moving to the lending side and essentially doing the same thing.
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“I became VP of sales and marketing for Cervus Financial later in 2005,” De Silva says. “We took that organization with a handful of products – one-, three- and five-year high-ratio fixed and a five-year variable – and we penetrated the market so well, we were number 10 in the lending
the industry when you work with RMA. That’s how we continue to distinguish ourselves,” De Silva says. “Some brokers aren’t interested in that: They want the family environment, and they’re willing to give away a portion of their commission. Our brokers don’t need a company telling
“For the longest time, we’ve been saying there has to be a correction, but we haven’t seen it. At the end of the day, you might see some changes in certain buyers’ ability to purchase real estate, which may reduce price growth” spectrum on Filogix in June or July of 2005. That’s a huge deal for a start-up.” Now, of course, De Silva is the head of RMA, and he is focused on growing that company. So how does the small network compete with the larger broker networks when it comes to attracting top talent? For De Silva, it’s all about embracing the entrepreneurial spirit. “RMA keeps our operation simple – we don’t try to be everything to everybody – and you truly get the best compensation in
them what they need to do; they know how to go out there and grow their businesses.”
Winds of change Having been in the mortgage industry for a while, De Silva certainly isn’t afraid to disrupt the industry. “I fancy myself an advocate of the ‘feet on the street,’” he says. “I am largely credited for advocating the change in the RedX database that was erroneously recording a broker’s AMP designation as mandatory requirement for licensing. After several
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PROFILE Name: Ron De Silva Company: RMAI Financial Group Title: CEO Years in the industry: 21 Career highlight: “I truly have to say it has to be the launch of RMA. It was a culmination of everything I had done in my past.”
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PEOPLE
INDUSTRY ICON
discussions and the boycotting of Teranet’s services, the RedX service changed their database to not recording incorrect or irrelevant broker information.” Throughout the years, he’s seen several changes as the industry has evolved, and he has some ideas about how it will progress in the future, and the challenges it will face. “I think one of the bigger stories you’re probably going to run into is something slightly different from what you’ve been
And that’s a significant number of new mortgages,” De Silva says. “The broker channel will continue to grow. To me, that’s a given.” Especially when you consider first-time buyers are increasingly using the services of a broker, he adds. Those first-timers will likely become repeat customers, which really points to the importance of brokers striving to provide the best possible customer service.
RON DE SILVA’S CAREER TIMELINE
June 2006
RMAI and Real Mortgage Associates • Founder and CEO
“I think the biggest challenge brokers will face will be to really create the type of loyalty that you want from your customers who come back to you. I’m not sure millennials have that as a conditioned characteristic”
July 2005
dealing with,” he says. “The market has been growing, but I think we’ll see some settling in terms of prices. “The largest cities are driving the price escalations,” he continues. “For the longest time, we’ve been saying there has to be a correction, but we haven’t seen it. At the end of the day, you might see some changes in certain buyers’ ability to purchase real estate, which may reduce price growth. The growth may be restricted to 5% in 2016.”
September 2000
The future of brokers Not is all bleak for brokers, however. Despite expected price settling, De Silva believes the industry will continue to chip away at big banks’ market share. “You’re going to see more penetration from consumers adopting brokers, more than they have in the past. I think the last number I saw of new mortgage originated last year, 40% were originated by brokers.
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“I think the biggest challenge brokers will face will be to really create the type of loyalty that you want from your customers who come back to you,” De Silva says. “I’m not sure millennials have that as a conditioned characteristic: I think they do tend to be very price-conscious and value-driven. They will shop everywhere and chase down the best prices. I think brokers will start cutting into their own commissions for more and more, which could cut them out of the marketplace. They need to find other ways to provide value.” A lot of brokers have a kill-and-eat mentality that will eventually be overcome by the availability of technology to the consumer, De Silva argues. “Brokers have to farm to eat. If brokers are only as good as their rate … they will find themselves on the outside,” he says. “You need to look at the value proposition that you are offering.”
Cervus Financial Group (subsequently purchased by Macquarie Bank) • Vice president of sales and marketing
Invis Financial Group • Vice president of marketing, e-commerce and information technology
August 1995
CIBC • Mobile mortgage specialist • Regional manager, GTA West
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T T B R E 10 p a q p t t
MAKE THIS A YEAR TO REMEMBER. WIN PRIZES ALL YEAR LONG.
To celebrate HomEquity Bank’s 30th anniversary we’re giving all of our Certified Reverse Mortgage Brokers the opportunity to win prizes throughout the year. At the end of each quarter you could win 1 of 2 $300 Pre-Paid VISA® Cards. Plus, every deal you fund all year gets you closer to winning our end-of-year prize of a $1,000 Pre-Paid VISA® Card. For over 30 years, many Canadian homeowners over 55 have already benefitted from our smart financial solutions. To learn more about how your customers can unlock the value in their home and live the retirement they deserve, please visit homequitybank.ca.
The Contest is sponsored by HomEquity Bank (the “Sponsor”). Contest Period: The Quarterly contest begins on the first day of the quarter and ends on the last day of quarter. The Annual contest begins on January 1, 2016 and ends on December 31, 2016. Eligibility: To be eligible, you must be a Certified Reverse Mortgage Specialist with HomEquity Bank at the time of the draw. Odds of winning will depend on total number of eligible entries received. How to Enter: No purchase necessary. Every deal funded by a Certified Reverse Mortgage Specialist will be considered a ballot for the Quarterly and the Annual Contest. A deal is considered funded once it is finalized in the Sponsor’s system of record. Each entrant shall be eligible to win only one prize for the quarterly draws. Prize administration: For the quarterly draws, the winners will be selected randomly and notified within 10 business days of the following quarter. The winner of the annual contest will be randomly selected and notified within the first 10 business days in January 2017. All monetary prizes awarded are in Canadian dollars. To claim the prize, the winner should follow the instructions once notified of winning. The prizes must be accepted as awarded. Prizes are not redeemable for cash and no substitute for any portion of a prize is offered. General Rules: Only mortgages funded from the first day of the quarter to the last day of the quarter, according to HomEquity Bank’s system of record, will be considered eligible to count towards the incentive. Limit of 1 incentive per Certified Reverse Mortgage Specialist per quarter. The Sponsor reserves the rights to terminate or suspend this Contest or to amend the Contest Rules at any time and in any way, without prior notice. Without limiting the foregoing, if, for any reason, the Contest is not capable of running as originally planned, due to any reasons such as tampering, then the Sponsor reserves the right to terminate the Contest and conduct the selection process from all previously received eligible entries. This Contest is subject to all applicable federal, provincial and municipal laws.
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FEATURES
COVER STORY: BROKER SENTIMENT
BROKER SENTIMENT We asked brokers to comment on current market trends, voice their concerns and give us their predictions for what the rest of the year holds. Here’s what they had to say
CANADIAN MORTGAGE brokers face a lot of challenges, from tightening regulations to concerns over lender service levels – and yet they continue to thrive. CMP wanted to know what was on brokers’ minds, so we’ve once again asked you to tell us about your concerns, your thoughts on current market trends, and your predictions for what’s on the horizon. In many ways, this year’s broker sentiment poll mirrors brokers’ concerns last year. Just as in 2015, most brokers are concerned about stricter underwriting guidelines and poor service from lenders. And a large number are worried that more lenders will move away from the broker channel. There’s also some evidence that current conditions may be souring some brokers on the business as a whole; unlike
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last year, a small percentage of this year’s survey respondents said they were considering leaving the industry. But there’s also reason to be hopeful: Almost 92% of brokers surveyed rated their brokerage as good or excellent, and only 2.32% rated their brokerage below fair. And
independent brokers seem satisfied overall; less than 40% of those surveyed said they’d consider joining a national network in the next year. For a more in-depth view of how your peers view the current state of the industry – and what’s to come – read on.
TOP CONCERNS For the last few years, brokers’ top concern has been that stricter underwriting guidelines and poorer service from lenders will hurt their business, and this year is no different. If anything, in fact, brokers are becoming more worried about it. Last year, 54.76% of brokers cited these as their chief concerns; this year, that number is up to 61.63%. Consumer and household debt was also a significant concern – 45.35% of brokers named it as a reason to worry. That’s a significant increase from last year’s 33.33%. There was also a significant increase in fears of rogue brokers damaging the industry’s reputation; last year, only 26.19% of respondents cited it as a concern. This year, that number shot up to 37.21%. It’s not all doom and gloom, however. Last year, 28.57% of respondents said they were concerned about shrinking market share. This year, that number has tumbled to 17.44%. And the continued housing boom seems to have allayed fears of falling home prices; only 29.07% of survey respondents named it as a concern, down from 33.33% last year.
WHAT ARE YOUR BIGGEST CONCERNS OVER THE NEXT 12 MONTHS? Stricter underwriting guidelines and poorer service from lenders
61.63% 45.35%
Consumer/household debt Industry reputation damaged by rogue brokers
37.21% 34.88%
Economy/new home sales Fewer lenders operating through the broker channel
32.56% 29.07%
House prices falling Reduced revenue due to lower commissions
26.74%
Shrinking market share
17.44%
Meeting the requirements of new regulations/licensing
16.28% 12.79%
Interest rate volatility My brokerage failing
1.16%
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29/03/2016 7:54:39 AM
FEATURES
COVER STORY: BROKER SENTIMENT A CHANGING INDUSTRY
EVOLVING REGULATIONS
Once again, brokers saw mobile sales teams from big banks competing with them as the biggest change to look for in the year ahead. However, not quite as many feel that way. Last year, 38% of brokers cited that as their biggest predicted change; this year, that number saw a slight drop to 36.05%. Far fewer respondents are predicting that more brokers would become multiproduct sellers this year – just 22.09%, compared to more than a third in 2015. Knocking it out of second place was the prediction that brokers would see new commission structures this year. And there was a slight increase in predictions that the industry would see a steep decline in overall broker numbers – from fewer than 10% in 2015 to just over 10% this year.
HOW DO YOU FEEL THE GOVERNMENT IS HANDLING THE ISSUE OF MORTGAGE REGULATIONS?
10 = EXCELLENT
WHAT DO YOU THINK WILL BE THE BIGGEST CHANGES IN THE INDUSTRY OVER THE NEXT 12 MONTHS?
It’s good news and bad news when it comes to brokers’ opinions on the government’s handling of regulations. The good news is that fewer brokers than last year feel that the situation is absolutely abysmal – just 4.65% compared to 2015’s 9.52%.
Big-bank mobile sales teams competing with brokers New commission structure A decline in home sales
10 9
2.33%
8
15.12%
7
9.3%
6
15.12%
5
18.6%
4
8.14%
3
18.6%
2
6.98%
1
4.65%
1.16%
Remaining big banks leaving the broker channel
36.05% 33.72%
32.56%
30.23%
29.07% 22.09%
10.47% 5.81%
Lenders moving toward efficiency bonuses as opposed to volume bonuses
A steep decline in overall broker numbers Brokers charging upfront fees
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1 = POOR
Brokers as multi-product sellers
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The bad news is that there are also fewer brokers who feel the government is actually doing well. Last year, more than 40% of brokers surveyed said the government’s handling of regulations was either good or excellent. This year, that number dropped to less than 28%. To put that in perspective, the percentage of brokers who rated the government at a 7 – merely ‘good’ – was greater last year than the percentage of brokers this year who rated the government at a 7, 8, 9 and 10 combined. On the other hand, brokers seem to feel that government rule changes are having less of a negative impact this year. In 2015, more than 80% of respondents said mortgage rule changes had impacted their business negatively. This year, that number tumbled by nearly 20%.
HOW HAVE MORTGAGE RULE CHANGES OVER THE LAST YEAR AFFECTED YOUR BUSINESS?
38.55%
61.45%
Positively
Negatively
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29/03/2016 7:54:53 AM
FEATURES
COVER STORY: BROKER SENTIMENT BANKS VERSUS NON-BANKS
STAFFING WOES
Once again this year, non-banks had a clear advantage when it came to getting brokers’ business. Nearly 80% of survey respondents said they would put the majority of their 2016 business through non-banks, while just 12.79% said they’d put the majority of their business through a bank. Nearly 60% of respondents said they’d put a quarter of their loans or fewer through banks this year.
WHAT PERCENTAGE OF YOUR LOANS WILL YOU PUT THROUGH A BANK?
0-25%
Tightening regulations might mean a dearth of new broker jobs in 2016, if survey respondents are to be believed. In a marginal increase from last year, more than 60% of respondents said they don’t plan to hire any new staff over the next 12 months. The jobs that already exist, however, may be more secure. This year, more than 86% of respondents said they would not reduce staff in the next 12 months – an increase of nearly nine percentage points from last year. Just 13.79% said they’d consider reducing staff if market conditions worsened, and not a single respondent planned to reduce staff regardless of conditions.
59.3%
1.16% 11.63% 27.91%
76-100%
WILL YOU BE HIRING NEW STAFF OVER THE NEXT 12 MONTHS?
51-75%
39.53%
26-50%
60.47%
Yes
No
WHAT PERCENTAGE OF YOUR LOANS WILL YOU PUT THROUGH A NON-BANK?
0-25% 26-50%
IF NO, WILL YOU BE REDUCING STAFF?
8.14%
0.0%
12.79% 40.70%
Yes
76-100%
86.21%
No
38.37%
51-75%
26
13.79%
Only if market conditions worsen
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BROKERS STAYING PUT Most brokers seem to be in the industry for the long haul, but this year marks a departure from last year when it comes to those considering leaving the industry. In 2015, not a single survey respondent was considering leaving the business in the next 12 months. This year, nearly 7% said they’d at least consider it. On the other hand, most brokers seem to like where they are. More than 60% of independent brokers surveyed said they wouldn’t consider joining a network in the next 12 months, up from 54.76% last year. And 88.37% of brokers who were already part of a network said they were staying put as well – pretty much the same percentage as 2015. That might be because the vast majority of brokers seem to like their current brokerage. A staggering 91.87% rated their current brokerage as good or excellent, and only 2.32% rated their brokerages as anything less than fair. Not a single respondent rated his brokerage as poor.
DO YOU PLAN TO LEAVE THE BROKER INDUSTRY IN THE NEXT 12 MONTHS?
ON A SCALE OF 1 (TERRIBLE) TO 10 (EXCELLENT), HOW WOULD YOU RATE YOUR BROKERAGE? 50% 41.87%
0.0%
2.32%
1-2
3-4
WOULD YOU CONSIDER JOINING A NATIONAL NETWORK OR BROKERAGE IN THE NEXT 12 MONTHS?
YES
5.82%
5-6
7-8
9-10
WOULD YOU CONSIDER BECOMING INDEPENDENT IN THE NEXT 12 MONTHS?
YES
6.98%
YES
39.53%
NO
NO
93.02%
11.63%
NO
60.47%
88.37%
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29/03/2016 8:00:00 AM
FEATURES
COVER STORY: BROKER SENTIMENT PROMOTING THE BROKER CHANNEL Brokers were, on the whole, very satisfied with their own brokerages. But like last year, they weren’t very impressed with how the industry promoted the broker channel. Lenders, networks and associations all saw slight improvements in broker opinion in 2016, but there’s still a long way to go. More than 45% of brokers felt that lenders were ineffective at promoting the channel. That’s down from last year’s 57.14% – but it’s also not the whole story. While fewer brokers said lenders were completely ineffective at supporting the channel, there were also fewer brokers who rated lenders as ‘very effective.’ Last year, 7.14% of respondents felt lenders were very effective at promoting the channel. This year, that number was down to 6.98%.
Like last year, mortgage brokers weren’t very impressed with how the industry promoted the broker channel Associations fared somewhat better. However, nearly 20% of respondents felt associations’ promotion of the broker channel was ineffective, and just 5.81% rated it as very effective. Networks, meanwhile, had the best showing of the three. While nearly 20% of respondents rated them as ineffective or only somewhat effective, 20.93% said they were very effective. That’s a massive increase from 2015, when just 11.9% of respondents rated networks’ promotion of the broker channel as very effective.
LENDERS
N/A 8.14% 6.98% 45.35% 9.3%
Effective
Ineffective 30.23%
ASSOCIATIONS
Ineffective
19.77% 23.26%
Somewhat effective
Somewhat effective
Effective
50%
NETWORKS
Ineffective
Somewhat effective
N/A Very effective
1.16% 5.81%
N/A 15.12% 8.14% 20.93%
11.63%
44.19%
28
Very effective
Very effective
Effective
www.mortgagebrokernews.ca
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29/03/2016 8:00:11 AM
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29/03/2016 8:00:17 AM
FEATURES
COVER STORY: BROKER SENTIMENT MARKETING STRATEGIES WHICH MARKETING STRATEGIES WILL BE MOST IMPORTANT TO YOUR BUSINESS PLAN IN 2016?
Email newsletters Unimportant 50.6%
13.25%
14.46%
15.66% 6.02%
Just like last year, brokers seem to still be relying heavily on traditional marketing methods. While relatively few rated new media like email newsletters or social networking as very important, a truly huge percentage said they still found the Yellow Pages to be their most important marketing tool. A whopping 59.74% said the Yellow Pages were important or very important to their marketing. Meanwhile, fewer than 22% considered email newsletters a vital part of their marketing strategy – and just 6.02% rated them as ‘very important.’ Radio, television and print ads also made strong showings when compared to online marketing techniques.
Social networking Unimportant Unimportant
Somewhat unimportant
41.18%
16.47%
12.95%
18.83%
10.59% Somewhat important
Ads in print publications
Important Very important
18.75%
18.75%
18.75%
15%
28.75%
Blogging
Direct mail Somewhat important 23.75%
Very important
17.5%
27.5%
Unimportant 10%
Yellow Pages
21.25%
29.87%
23.37%
9.09%
30
19.48%
Ads on TV/radio Very important
23.75% 9.09%
18.18%
11.68%
9.09%
50.65%
Very important 22.22%
12.35%
14.81%
11.11%
39.51%
www.mortgagebrokernews.ca
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29/03/2016 8:00:40 AM
Seminars
Rate sites Somewhat important
16.86%
25.3%
27.71%
Very important 14.46%
15.66%
Community events/trade shows
20%
20%
17.5%
10%
Other
Somewhat unimportant 18.3%
28.04%
32.5%
Very important 14.64%
13.42%
25.61%
26.31%
7.89%
18.42%
10.52%
36.84%
www.mortgagebrokernews.ca
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29/03/2016 8:00:48 AM
FEATURES
COVER STORY: BROKER SENTIMENT SOURCES OF BUSINESS So where are mortgage brokers finding their business? Nearly 60% say that half or more of their business comes from repeat or referral clients. Meanwhile, 32.56% say that between half and all of their business comes from new clients.
WHAT PERCENTAGE OF YOUR BUSINESS COMES FROM REPEAT OR REFERRAL CLIENTS?
Brokers are still getting the majority of their business from residential mortgages Nearly 98% of brokers are still getting the majority of their business from residential mortgages, while nearly 33% report getting a good amount of commercial business as well. Another 33% report that they’re doing significant business in home equity lines of credit. That’s a significant increase from 2015, when only about 24% reported doing significant HELOC business.
WHAT PERCENTAGE OF YOUR DEALS WILL BE BOUGHT DOWN?
0-25%
26-50%
51-75%
76-100%
0-25%
26-50%
51-75%
76-100%
WHAT PERCENTAGE OF YOUR BUSINESS WILL COME FROM NEW CLIENTS?
0-25%
26-50%
51-75%
76-100%
WHERE WILL YOUR BUSINESS COME FROM?
Residential
97.56% HELOCs
32.94%
32
Referral (database)
70.59% Commercial
32.94%
Referral (referral partners)
65.88%
Reverse mortgages
18.82%
Insurance
9.41% Equipment leasing
1.18%
www.mortgagebrokernews.ca
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29/03/2016 8:00:57 AM
OTHER SERVICES Many brokers last year were opening up additional revenue lines through diversification, and this year’s survey respondents were no different. Many said they’d be adding or expanding services over the next 12 months.
53.49%
Private mortgages 46.51%
Private lending 37.21%
Mortgage insurance 27.91%
Real estate
WHICH SERVICES WILL YOU BE TAKING ON OR LOOKING TO BUILD OVER THE NEXT 12 MONTHS?
Commercial
25.58%
Construction
25.58% 22.09%
HELOCs
19.77%
Financial planning Home, auto or life insurance
17.44%
Development
17.44%
Equipment leasing
17.44%
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www.mortgagebrokernews.ca
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29/03/2016 8:01:04 AM
FEATURES
COVER STORY: BROKER SENTIMENT SOCIAL MEDIA
MARKET SHARE WORRIES
While most brokers appeared to prefer old-school marketing techniques, that doesn’t mean social media isn’t a part of their business strategy. More than 86% of survey respondents said they used Facebook in their business, and an identical percentage said they used LinkedIn. More than half used Twitter, while Foursquare was the odd man out – just 1.16% of brokers used it for business.
YES
46.51% 53.49% Facebook
86.05%
Blogging
30.23%
97.56%
Google+
30.23%
51.16%
8.14%
NO
Foursquare
1.16%
As they were last year, brokers were relatively evenly divided on concerns about shrinking market share. However, this year a slight majority – 53.49% – said they weren’t worried. In 2015, that breakdown was reversed; the slight majority said shrinking market share did concern them.
BROKERS TALK BACK We asked brokers who responded to our survey what the industry could do to help them win back market share. Here’s what they had to say:
“Work collaboratively to complete projects rather than compete. The regulator should not allow individuals to obtain licences within a few weeks to deal/ trade in mortgages. One should work within a brokerage for a minimum of two years and understand the industry to be competent to source business, close deals and be ethical.”
“Work with the government to level the playing field between non-bank lenders and the banks themselves. Regulations and requirements should be consistent in both channels, inclusive of disclosures on commissions. [There is] also a need to create a more unified approach to consumer-focused marketing for the channel as a whole.”
“Increase education requirements so that new agents don’t go out and put clients into mortgages that they shouldn’t be in.”
“Promote more the use of brokers as a credible alternative. We need to educate the public on the benefit of using a broker. We have to increase market share so that the big banks will need to use us to source business. We also need to access additional products to sell so we become a one-stop shop with insurance and financial products.”
“Focus on all stakeholders working together to develop and deliver a truly differentiating client experience.”
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“Ensure we do not need to disclose every penny earned to the consumer. This won’t lead to them making better decisions, but will lead to all brokers earning less money.” “More consumer awareness. I would love to see mobile mortgage specialists have to be licensed like us.” “More active role in the community/charities. … Maybe it will help the public understand what brokers do.”
www.mortgagebrokernews.ca
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29/03/2016 8:01:13 AM
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29/03/2016 8:33:53 AM
FEATURES
TOP INDEPENDENT BROKERAGES
TOP INDEPENDENT BROKERAGES They are certainly in the minority, but that hasn’t stopped these independent mortgage brokerages from reaching the pinnacle of success – their own way IT’S EASIER than ever to go independent. The number of industry associations, including the recently launched CIMBC, and the pooled resources available to brokers who just want to go it (not so) alone are a testament to that. And yet, the decision to break away from an established brand is not one that should be taken lightly.
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To inspire those who might be considering taking the leap into independence, we searched across the industry to assemble a list of some of the top independent brokerages in Canada. Many have been approached by large networks, but all have, for the time being, remained independent. Get to know them a little better on the following pages.
www.mortgagebrokernews.ca
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29/03/2016 10:26:01 AM
CANADA’S INDEPENDENT BROKERS AT A GLANCE
Ameera Ameerullah, Founder and CEO Favourite mortgage product: Refinance
9.7 years
When asked about consolidation in the mortgage industry:
Average time as an independent
10% said it was a good thing
60%
Years as an independent: 1 Always independent: No
Have always been independent
40% said it was bad
75% Would not consider joining a broker network
50% were neutral
TOP INDEPENDENT BROKERAGES INDEX BROKERAGE
CANADA MORTGAGE & FINANCIAL GROUP
PAGE
NAME
Admore Financial Services
40
Geoff Carnevale
Anderson and Associates
38
Blair Anderson
Bespoke Mortgage Group
38
Simon Lyn
Branch Financial
42
Damian Wickie
Canada Mortgage & Financial Group
37
Ameera Ameerullah
Connex Realty
40
Dan Brewer
First Foundation
41
Gord McCallum
MonsterMortgage.ca
40
Nick Ametrano
MorCan Direct
41
Marcus Tzaferis
Mortgage Edge
44
John Bargis
Mortgage Managers
41
Margaret and James Shinners
Mortgage Outlet
42
Shawn Stillman
Mortgage Wise Financial
38
Michael Maguire
Number of employees: 7 Volume in 2015: $185 million
What do you think are the biggest issues facing the broker industry? • Not enough collaboration among brokers and agents • Regular changes by FSCO (legislative and non-legislative) • Changes of internal banking lending policies • Licensing is too easy to acquire, especially by individuals who are not properly trained in the mortgage industry In your view, what is the biggest advantage of being independent? • More open line of communication with banking senior executives, including BDMs • Revenue control • Implementing change to policy and procedure according to regulation changes • Overseeing and managing conduct of agents, ensuring they are compliant What does your company do differently to stand out from the competition? We offer industry knowledge and training to mortgage agents or brokers who are working with other brokerages, as we believe in collaboration and not competition.
www.mortgagebrokernews.ca
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29/03/2016 10:26:32 AM
FEATURES
TOP INDEPENDENT BROKERAGES BESPOKE MORTGAGE GROUP Years as an independent: Less than 1 Always independent: No Number of employees: 8 Volume in 2015: $190 million
Simon Lyn Mortgage agent Favourite mortgage product: MCAP Value-Flex Blair Anderson Founder Favourite mortgage product: Anything refinance
ANDERSON AND ASSOCIATES Years as an independent: 17.5 Always independent: Yes Number of employees: 1 Volume in 2015: “Enough to keep the lights on, and then some”
In your view, what is the biggest advantage of being independent? Being able to manage your personal branding, and controlling how revenues are used and reinvested to help build your business. What do you do to cultivate your brand to make it memorable for clients? Being a boutique start-up, our plan is to portray a brand that reflects our tailored approach to each individual transaction. Forging a long-term relationship and mapping out a plan that fits our clients’ individual needs, we are Bespoke. What does your company do differently to stand out from the competition? Our company delivers a unique set of steps that allow the client to understand the process at every stage, in addition to the type of product they are entering into and the basis of the selection of that product. Our customized CRM program, which has been developed for post-closing communication, will keep the borrower engaged throughout the life of the mortgage. Our focus is on building lifelong relationships.
What do you think are the biggest issues facing the broker industry? • Self-identity • Minimum volume requirements and the subsequent marginalization of small brokerages • National representation for the channel, exclusively, vis-à-vis public and government domains • Consumer awareness • Mortgage fraud In your view, what is the biggest advantage of being independent? One hundred per cent control of operations and brand. What does your company do differently to stand out from the competition? Service levels, plain and simple. It’s what sustains us.
38
What do you think are the biggest issues facing the broker industry? Constant changes due to government regulations, and unrealistic perception by consumers of products that are being advertised on the Internet.
MORTGAGE WISE FINANCIAL Years as an independent: 7 Always independent: No Number of employees: 12 Volume in 2015: $100 million
Michael Maguire Broker/co-owner
What do you think are the biggest issues facing the broker industry? Part-time agents, inexperience and lack of training are tarnishing the industry.
In your view, what is the biggest advantage of being independent? No politics – you form a team that works well together.
Favourite mortgage product: Variable-rate mortgages
What does your company do differently to stand out from the competition? We try to hire seasoned veterans that all get along, work well together and assist each other. We are very concerned with service and building long-term client and lender relationships.
www.mortgagebrokernews.ca
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29/03/2016 10:27:20 AM
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2016-02-23 10:51 29/03/2016 10:27:40 AMAM
FEATURES
TOP INDEPENDENT BROKERAGES MONSTERMORTGAGE. CA Years as an independent: 2 Always independent: Yes Number of employees: 4
Nick Ametrano Vice president
What do you think are the biggest issues facing the broker industry? The inability to see your business for more than just the mortgage transaction in front of you, and not treating and managing your lender relationships as real partnerships.
In your view, what is the biggest advantage of being independent? We are actually building a company that is of value, as opposed to just closing mortgage transactions.
Favourite mortgage product: The one that best helps the client reach their goals
What does your company do differently to stand out from the competition? Our success is rooted in our core values and our core purpose: • Encourage and reward: Opportunities are endless for anyone who believes success is built upon providing great customer service. • Innovation: We will always look for new and exciting ways to provide great customer service – no one will do this better than us. • Discipline: Having the right systems and processes in place to deliver a positive customer experience requires discipline in everything we do. • Mutual respect and support: If we don’t respect and support each other, we can’t be expected do the same for customers who need our help. • Have fun: Time is precious, so if we are going to spend our day trying to serve customers better, let’s have fun doing it. Quite simply, our core purpose is to serve customers better every day. This is our competitive advantage, which will ultimately make everyone at MonsterMortgage.ca successful.
Dan Brewer Broker of record Favourite mortgage product: Conventional lending
CONNEX REALTY Years as an independent: 30+ Always independent: Yes Number of employees: 1 Volume in 2015: $3 million
What do you think are the biggest issues facing the broker industry? The lack of knowledge linking lending criteria and the appraisal process. In your view, what is the biggest advantage of being independent? It’s easy to make decisions to help your clients. What does your company do differently to stand out from the competition? Service is number one.
ADMORE FINANCIAL SERVICES Years as an independent: 9 Always independent: Yes Number of employees: 1 Volume in 2015: $50 million
What do you think are the biggest issues facing the broker industry? Regulation changes.
Geoff Carnevale Vice president Favourite mortgage product: Home equity line of credit
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In your view, what is the biggest advantage of being independent? Flexibility and freedom to truly manage my own business. What does your company do differently to stand out from the competition? We truly offer financing for any situation: A and B business, private lending, commercial and construction financing.
www.mortgagebrokernews.ca
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29/03/2016 10:27:48 AM
MORCAN DIRECT Years as an independent: 14 Always independent: Yes Number of employees: 8 Volume in 2015: $150 million
Marcus Tzaferis Broker
What do you think are the biggest issues facing the broker industry? Opportunities related to automation and the increased use of technology. Commoditization of mortgages will only result in increased efficiency.
In your view, what is the biggest advantage of being independent? The ability to make our own mistakes. We can spend money on ideas that don’t need to be vetted and develop our own processes and identify ways to exceed the expectations of our clients.
Favourite mortgage product: Variable-rate mortgages
What does your company do differently to stand out from the competition? Sound, unbiased mortgage advice. Our salaried employees provide excellent service to Canadian consumers who have been under-serviced by their banks for too long.
Gord McCallum Founder, president and CEO Favourite mortgage product: Whichever one the client needs
MORTGAGE MANAGERS FIRST FOUNDATION Years as an independent: 7
Years as an independent: 13
Always independent: No
Always independent: No
Number of employees: 5
Number of employees: 3
Volume in 2015: $12 million
What do you think are the biggest issues facing the broker industry? Lack of representation on a national level with the lenders. This could mean improved service with existing broker lenders, and it could mean working with other banks to bring them back to the broker channel.
Margaret and James Shinners Founders Favourite mortgage product: Merix’s trailer fee model
In your view, what is the biggest advantage of being independent? Being able to build your own brand – but the biggest challenge is trying to find a way to expand that brand into other provinces while meeting provincial licensing requirements.
What does your company do differently to stand out from the competition? Mortgage Managers’ single-tier residual income profit-sharing commission structure is unique to the Canadian mortgage brokerage industry. By diversifying income into multiple income streams, brokers can earn a greater income and improve monthly cash flow while securing income for retirement and developing an income stream for beneficiaries. And the more qualified brokers they sponsor into Mortgage Managers, the more they can increase their residual income.
What do you think are the biggest issues facing the broker industry? Lacklustre M&A market, poor growth financing options, and difficulty valuing books of business. Exit and retirement options are poor. In your view, what is the biggest advantage of being independent? It satisfies the entrepreneurial itch that I have to put my own stamp on something. From a branding standpoint, you have the ability to define yourself rather than being defined by the other agents that the brokerage chooses to hire. What does your company do differently to stand out from the competition? We are three companies in one – very diversified – which gives us a ton of solutions for our clients. Mortgages, home/auto/ commercial insurance, life insurance, disability, group benefits, plus full-service banking, which will roll out this summer.
www.mortgagebrokernews.ca
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29/03/2016 2:21:49 PM
FEATURES
TOP INDEPENDENT BROKERAGES BRANCH FINANCIAL Years as an independent: 4 Always independent: Yes Number of employees: 1 Volume in 2015: $20 million
What do you think are the biggest issues facing the broker industry? The ease of entry into our industry creates a large percentage of unskilled brokers and agents who act as base order-takers with little professional knowledge or experience. They bog down lenders and provide a poor representation of our industry to the public. This affects costs, pricing, etc., but is largely ignored, as those same individuals feed the national chains with agents upon which to earn fees, brokerage costs, marketing fees, etc. Our industry permits and in fact encourages a monopoly situation to exist
Shawn Stillman, Principal broker Favourite mortgage product: Merix RMP and MCAP Flex
MORTGAGE OUTLET Years as an independent: 1 Always independent: Yes Number of employees: 11 Volume in 2015: $140 million
What do you think are the biggest issues facing the broker industry? Fraud, poor education of agents and brokers, and the fact that it’s too easy to become a broker. In your view, what is the biggest advantage of being independent? I’m my own boss, and I’m not beholden to anyone. My reputation with lenders is me 100%; they respect what I do and my clientele. What does your company do differently to stand out from the competition? We’re 100% rate-driven and online.
42
Damian Wickie, Owner and principal broker Favourite mortgage product: The one that best suits my client’s needs at that time
with our origination system. The national chains are largely responsible for this, in that they are paid to use a certain system, and agents under that umbrella are given no choice but to comply. It’s bad business and dangerous to leave the entire industry exposed in such a way. Being independent allows us to fight to keep choice alive.
“The sooner brokers realize that it’s not the sign over the door that brings people in, but the person inside, the better off they’d be” In your view, what is the biggest advantage of being independent? Not being limited by someone else’s poor decisions or handcuffed by company policies that have nothing to do with brokering, but rather were developed to make the parent company itself money. What do you do to cultivate your brand to make it memorable for clients? The sooner brokers realize that it’s not the sign over the door that brings people in, but the person inside, the better off they’d be. Branding in our industry should be about the person, not the company, and that’s how I approach it. We’re a local company with national reach. What does your company do differently to stand out from the competition? Put the client first, and don’t push string. By that I mean that I never chase a paycheque or worry about who is paying what finder’s fee, but rather operate based on who is providing the best deal for my client at that time and act accordingly. My business is mortgage brokering and professional advice, and it is a livelihood, not a job or part-time gig to earn extra money. That is what makes the difference.
www.mortgagebrokernews.ca
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29/03/2016 10:28:28 AM
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29/03/2016 10:28:35 AM
FEATURES
TOP INDEPENDENT BROKERAGES MORTGAGE EDGE Years as an independent: 17 Always independent: No Number of employees: 95
Why do you choose to remain independent? Independence equates to entrepreneurship, individuality, uniqueness and more revenue for both the brokerage and its agents, as has been the case for Mortgage Edge. My belief in independence runs so deep, it has served as the driving force behind formation of the Coalition of Independent Mortgage Brokers of Canada [CIMBC], which has proven to be highly successful in its endeavours within one year of its inception. What are some of the advantages and disadvantages of running your own shop? After already experiencing the large national network concept, I believe independence has created nothing but advantages for many of the reasons already covered above, especially as a member of CIMBC, which allows Mortgage Edge to maintain true independence with more advantages. Are there ever any temptations to join a network? None at all. There is less than zero benefit for Mortgage Edge to join a network when it comes down to the math, which simply doesn’t add up. Not only would the firm itself significantly lose revenue by joining a broker network, but we would lose top-performing agents as well, who would be forced to take a loss on their commission in order to pay 5% to the network for next to no ROI. We’ve already been approached by the largest network players with offers of significant money in exchange for hanging their sign on our door – although I was flattered, we declined. Why is it important to have a coalition of independent brokers? Again, it comes down to value. The concept behind the coalition is to create a solid
44
John Bargis Vice president Favourite mortgage product: It varies, depending on what best suits the client union of mortgage brokerages under their own independent and unique brands, all of which could count on the strong support of CIMBC equally. The model is actually very simple, and CIMBC has actually delivered on its mandate to increase the revenue of each and every one of its member broker firms and their agents, while maintaining complete independence without the cost of being part of a network. The coalition is up to 23 member broker firms within 12 months and growing, which is a real testament to its success. Is it more difficult to develop a brand as an independent broker? I have been in the business for 25 years, and very successfully I might add. I have always been of the belief that the brand lies within the agent, and have always promoted this with my agents for years by helping them understand that they are best served creating
a brand within a brand by creating a strong value proposition for their referral sources and clients. Realistically speaking, clients and referral sources deal with those who best communicate what they have to offer and how they perform, regardless of what brand they belong to at the corporate level. A good example of this would be the billions of dollars in volume that the monolines close each year through the broker channel. Having gone down the road of investing large sums of money as a network conglomerate on advertising on primetime TV, I assure you this volume is not as a result of the branding of any one corporate entity. It is, however, the result of the great job the feet on the street have done to develop their business relationships, which creates confidence enough in the consumer to accept mortgage financing from the virtual monoline lenders. Agents don’t give themselves enough credit on how strong their personal brand really is.
www.mortgagebrokernews.ca
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29/03/2016 10:30:04 AM
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36-45_Independent Brokers-SUBBED.indd 45
29/03/2016 10:30:08 AM
FEATURES
TEAMWORK
The reinvention of teamwork Technology gives us the power to communicate, collaborate and learn across great divides – but ultimately, it remains a tool. The real key to 21st-century business success is teamwork, writes Graham Winter DISRUPTION IS the buzzword of business. And why wouldn’t it be, when tech-centric companies like Amazon, Uber, Netflix and Twitter are transforming the way we shop, travel, play and communicate? Perhaps your business is trying to disrupt itself. If not, then you can be sure that someone else’s is, and chances are they’re doing it with quite different teamwork practices than what you treat as the norm. Is it technology that’s making the difference inside these disruptive companies? Yes, to the extent that product technology supports their exponential growth. However, inside the company, everyone has the same access to pretty much the same technology at the same time, everywhere. It’s cheap, easy to use and mobile. And let’s remember that instant messaging, email, smartphones, video, collaboration software and the like are tools – and tools only. Where’s the difference?
Share and share alike There’s a clue in the common purpose of many of these new technologies: to facilitate the sharing of information. Indeed, this is exactly why the Internet was invented in the first place. Social media platforms like Facebook, LinkedIn and Twitter are popular because people like to share. We have social brains, and our evolution has programmed us to connect (because it saved our early ancestors from the disruption of sabre-toothed tigers). Even Daniel Goleman,
the acclaimed thought leader in emotional intelligence, now speaks of social intelligence. We are genetically wired to engage and share with others and, in doing so, to adapt and respond and learn, which is precisely what the disruptive teams in places like Uber and Dropbox are doing so brilliantly. And they’re doing it with the help (and at times hindrance) of new technologies. Here are six things you can do to lead your team to be disruptors, or at least nimble adaptors.
they use to share information (the tools are very similar), but whom they share it with and what they (collectively) do with it. Fast disruptors know that technology can be duplicated, but there is one thing that can’t be. In a disruptive world, the secret to success remains what it was thousands of years ago: the ability of people to work together toward a shared purpose. In a word, teamwork – but a more fluid and flexible style that suits a world that has seen its boundaries shatter in the face of globalization.
Technology is the vehicle. It is who you take along for the ride and how you use the technology to share the challenges and opportunities that make the real difference 1
Find the secret
We live in an age of information overload, bombarded with data 24/7. We are most certainly sharing, and it’s on a global scale that’s faster, more frequent and, some would argue, less meaningful than ever before. The importance of focus can’t be underestimated, as we must navigate through the distraction of always being ‘on.’ The better performers in this digital world derive their focus from the core belief that it’s not so much which collaborative technology
2
Make the secret scalable
While technology and globalization continue to disrupt the business landscape, they are not reinventing teamwork in their wake, but rather scaling it as a capability and culture. The typical company circa 2016 has people dispersed across multiple locations and issues arising at the speed of light, which is why teamwork makes the business more than the sum of its parts. Great teamwork scaled across the business makes anything possible.
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as one team. Think of a flock of migrating geese, which always fly in a V formation. Geese innately know the secret to great teamwork. They have a common destination and work in perfect unison. When a goose drops out of the V formation, it quickly discovers that it requires a great deal more effort and energy. Geese help each other, too. When a goose gets sick or wounded, two geese drop out of the formation and follow their fellow member down to help provide protection. They stay with this member of the flock until he or she is either able to fly again or dies. Then they launch out on their own, creating another formation, or they catch up with their own flock.
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This is why a national 2014 employment survey in the US, as reported by Forbes, found that the skill employers looked for in their new recruits was the ability to work in a team structure. The second most important skill was the ability to communicate verbally with people inside and outside an organization.
3
Accelerate and share the learning
Business has always been a team sport, and there are many good reasons for this; however, one now stands alone as pivotal to organization survival and success. Business is consumer-driven (or more specifically, customer-experience-driven), which means our teams must be agile, innovative and constantly learning how to optimize that experience for a customer who has abundant choice. Shared learning is the key, because working alone or in silos of expertise reduces learning, growth and creativity. When there is no one to challenge us, we simply don’t leverage our experience and ideas.
4
Escape the gravity of hierarchy and structure
Daniel Pink, acclaimed business thought leader, argues that we are now in the Conceptual Age, in which right-brain thinking reigns supreme. There is much evidence for this. Pink talks of the necessity for organizational symphony: through empathy, intuition, play and meaning. The disruptive companies are enterprises more than organizations, unencumbered by the gravity of organizational hierarchy, process and division. They play like they’re in the Age of the Entre preneur: risk-ready, nimble, wellconnected folk who thrive on change.
5
Harness the power of the whole team
The leaders of the most successful disruptive companies share their vision and move others to see it, too. They’re marvellous storytellers, connecting with others, who in turn connect with them. They inspire people to think as one team, to move as one team and to learn
Share the truth
The disruptors share the reality. They are not afraid of the truth. In fact, what they fear most are hidden agendas, silos and the status quo. As in professional sports, they make sure the whole team knows whether they have won or lost and why. The focus is always on what is best for the business, even if getting to the marrow of this takes some tough conversations. The leaders insist that they be challenged. They embrace feedback and tap into the power of their people, because a good idea can come from anywhere.
Make the secret yours Technology gives us the power to communicate, collaborate and learn across great divides. Very few of us do this well. To prosper in today’s markets takes real teamwork, and we are just beginning to harness technology to this end. Beware those who see technology as an end itself. Technology is the vehicle. It is who you take along for the ride and how you use the technology to share the challenges and opportunities that make the real difference. This is what it’s really all about. Graham Winter is the bestselling author of Think One Team. Learn more at www. thinkoneteam.com.
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FEATURES
MARKETING
When and why you should consider rebranding Whether to rebrand or keep your company’s image unchanged is an important – and potentially costly – decision. Paul Nelson explains how to know when it’s time to revamp your image THERE ARE various reasons why an organization may find itself in a position where it is considering a rebrand. If you are considering rebranding your organization, start with an understanding of the business need behind the rebrand. Do you need to accelerate growth? Have you been subject to a merger or made a significant acquisition? Are you hovering between being a mid-sized and large organization and need to position yourself to compete with businesses more sizeable than your current competitive set? Before launching into a comprehensive rebrand, you need to understand the business problem you are trying to solve and realistically assess whether a rebrand can effectively address your challenges. Broadly, the business reasons that may trigger a rebrand can be divided into two classifications: proactive and reactive.
PROACTIVE REBRANDING Preparing for growth: If you are a business teetering on the edge of
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rapid expansion, a rebrand can help position your organization for growth. It can act as a signal to your customers, competitors and stakeholders that you are here, you are ready, and you have the momentum to drive your company forward. New strategic direction: If you are preparing a strategic plan that will change the future direction of your organization, a rebrand can help communicate this new intent to your market. New product or service offering: If you have added a new product or service to your business offering that has changed the focus of your organization, a rebrand may act as a circuit breaker to signal to your audiences that your offering has changed. New audience: You may find yourself in a situation where you are marketing your products and services to audiences that were not previously relevant to your organization.
Finding talent: Despite the recent economic downturn, Canada continues to enjoy low unemployment, and financial services companies continue to struggle to attract and retain top talent. Rebranding your organization can position you to attract candidates who, in the past, may not have considered your organization as a prospective employer. Relevance: As your organization grows, your markets expand, and new challengers enter your competitive set, you may find your sales are declining or your current brand is looking dated and your brand story lacks relevance to your target audience. A rebrand can be an
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13 SIGNS THAT YOUR ORGANIZATION NEEDS TO REBRAND Are you looking for a way to accelerate growth and lead your organization forward?
Do you need to introduce your services to an important new audience?
Have you been exposed to trademarking or legal issues?
Have you merged with another organization or been acquired by another organization?
Have you been involved in a damaging or controversial situation that will impact your brand?
Is a new competitor threatening your market position?
Have you acquired a significant new asset?
Has it been more than five years since you reviewed your brand to check that it was still relevant?
Does your brand tell the wrong story (or an outdated one)?
Have you introduced a game-changing new product or service? Are you developing a new strategy that will change the direction of your organization?
Has it been more than 10 years since you refreshed your brand or rebranded your organization?
Do you struggle to recruit the industry’s top talent?
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FEATURES
MARKETING
opportunity to revitalize and modernize your brand positioning in line with the expectations of a rapidly evolving market.
REACTIVE REBRANDING Merger or acquisition: If you have recently made a significant acquisition or been part of a merger that changed the strategic intent of your business, you will need to rebrand to reflect the different intentions of your newly expanded organization. In this situation, a rebrand can act as a unifier for your new team, and can launch your new company or new structure to your external audiences. Reaction to recent growth: Sometimes businesses experience periods of rapid growth and find that, over time, their business strategy and brand strategy are no longer aligned – in a sense, that the brand has been left behind. Their brands start to collide in different channels and against different customers, and their customer segmentation is no longer clear. In situations like this, it is often also the case that the internal culture has drifted away from the organization’s aspiration. Changing business environment: The introduction of new industry regulations or a new competitor in your market can rapidly alter your ability to compete and can very quickly make your brand appear dated and irrelevant. In such a situation, an assessment and review of your brand positioning can help reinvigorate your organization internally, and can communicate a new sense of innovation and energy to your customers, allowing you to compete more effectively. Trademarking or legal issues: From time to time, trademarking or other legal issues may arise and necessitate a rebrand. An example of this might be a Canadian business expanding to the US, where its current name may already
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be trademarked and unavailable for use. If this should happen, seek the advice of trademarking lawyers to ensure that you protect your rights to use your new brand name and logo on an ongoing basis. Negative publicity: A worst-case scenario is when your organization is embroiled in a
WHEN NOT TO REBRAND It is generally not advisable to rebrand if you have launched a new brand within the past three years. Building a depth of understanding and trust in a brand takes time, and brands that are continually changing and reinventing themselves can risk not being taken seriously by their target audi-
Building a depth of understanding and trust in a brand takes time, and brands that are continually changing and reinventing themselves can risk not being taken seriously controversy so significant that you need to rebrand to demonstrate to the market that you have moved on from the contentious situation and are ready to begin rebuilding trust with your stakeholders and customers.
REFRESH, DON’T REBRAND In some situations, you may not need to rebrand; you may simply need to refresh or strengthen your existing brand. Reacting to a sales decrease: Broadly, it is unlikely that a decline in sales can be solely attributed to brand. Similarly, rebranding alone will not necessarily fix a sales challenge. However, declining sales may be in response to recent negative publicity or new challengers in the market, and may signal the need for an organizational strategic shift. Low brand awareness: Low brand awareness alone is not a reason to rebrand. You may simply need to invest in educating your customers and prospects about your brand and the benefits it can offer. On the other hand, low brand awareness may be one symptom of a broader relevancy challenge, and may be a sign that a rebrand is needed.
ences. Additionally, rebranding can also be a costly process, so a reasonable ROI is difficult to obtain over a shortened period. If your organization does not genuinely meet one of the criteria for needing a rebrand listed on the previous page, consider why you are pursuing a rebrand. Minor tweaks to the logo could achieve the revitalized look and feel you are seeking, or an innovative new marketing strategy or brand communication campaign might help you stand out from your competitors without requiring the complexity and cost of a true rebrand. Finally, a rebrand will not help you to grow and prosper if it doesn’t reflect a genuine change within your organization. A rebrand alone cannot turn a poorly performing firm into a market leader. All a rebrand will do is to create a polished and professional-looking version of a poorly performing firm, and the market will see through the guise almost instantly. Paul Nelson is managing director of BrandMatters. He is an accomplished international marketer with more than 20 years of marketing and brand management experience obtained in a diverse range of industries.
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PEOPLE
BROKER INSIGHT
Giving brokers a sense of ownership Steve Rogerson, president of Verico Paragon Mortgage Group, explains how allowing brokers to harness their own creativity can lead to great things
CMP: So, what’s the story behind Paragon? Steve Rogerson: I’ve been in the lending industry for about 30 years, mainly with insurance companies and banks. We started Paragon back in 2005 when Verico was created. I knew [Verico co-founders] John Kelley and Colin Dreyer from previous associations. They were starting a company that had a different philosophy from some of the others out there, so I jumped on board at that point. We started in 2005, and we expanded to Alberta in 2007. We have approximately 130 agents now, and we’re north of a billion dollars in volume.
CMP: That’s pretty impressive for just over a decade. What’s your secret? SR: We’re basically running very traditional brokerage operations. We allow our agents to develop their own client base. We focus more on what we call subfranchising. A lot of the networks out there have a lot of control over their agents – they’re very much top-down. We turn that upside down and allow our agents to have sub-franchises under Paragon Mortgage Group. That allows them the creativity to grow and build their own brand within Paragon Mortgage Group. It’s very much a co-operative, collaborative effort. It seems to work quite well. That culture is a big part of what we do here.
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CMP: What’s your general impression of the current state of the industry? Is it a good time to be a broker? SR: I think it’s actually one of the best times. It’s a fantastic time to be a broker. I would say a lot of that is increasing customer acceptance of what we do. Some of the growth in the brokerage industry is a result of the challenges that the banks and their captive sales forces are having in the changing market. Bank reps really only sell one product line in this market. And with what’s happening in the market, you need f lexibility in structuring the financing. You can’t do that if you have only one product, so the talents of a good broker are invaluable.
CMP: Is there a challenge affecting the industry right now – one that might not be obvious at first glance? SR: If you look at what’s happening with online presence and the growth of the Internet in our industry, I view that as
an opportunity – but also a challenge. If you’re active in online business, there’s huge potential. But it’s also a challenge; the ability to advertise across the country, and to reach out to a number of consumers at the click of a button, is allowing the customer to force down the pricing to the point that it affects profitability – not just for the agent, but also for the brokerage.
CMP: If you had any advice for brokers, what would it be? SR: It really hasn’t changed from 2005 when we started. Back then, we joined Verico because Verico stood for openness and honesty, and that’s exactly the way we ran our business. If you’re starting out as a broker or looking to grow your business, you really have to base it on professional and ethical behaviour. There’s an old saying: “A good reputation will disappear in a heartbeat.” So you have to be honest in your approach to lenders and clients alike. Make sure you associate yourself with the best in
LEADING THE WAY Founded by Steve Rogerson and Nick Douce in 2005, Paragon Mortgage Group was one of the first brokerages to become part of the Verico network, and has provided both commercial and residential financing to thousands of customers. Rogerson and Douce each brought decades of mortgage experience to the table. Both had extensive experience at major financial institutions, and Douce had also worked for the Canadian Mortgage and Housing Corporation. Their combined expertise led to Paragon’s rapid growth. Today, Paragon has expanded to 130 agents and more than $1 billion in volume.
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VERICO FAST FACTS
Founded in 2005 to unite top mortgage originators in Canada
In 2010, reached $10 billion in collective loan volume – a number that rivals the mortgage business of Canada’s big five banks
Today, more than 200 mortgage business owners are part of the Verico network
Originates more than $13 billion in loans today
Helps more than 45,000 families with their mortgage needs each year
In 2015, Verico welcomed 14 new firms, adding more than $1.5 billion to total annual loan volume
“Lenders are changing their needs. If you’re not focused on the lender relationship, you’re going to have a challenge building your business”
Last year, Verico brokers and agencies won four CMA Awards: Employer of Choice, Best Newcomer, Mortgage Brokerage of the Year, and the Lifetime Achievement Award
the business. And for us, that was Verico. Another thing is that you need to be flexible in your business planning. Lenders are changing their needs. The focus in the last few years has been on pure volume, and that’s not the case anymore – 2016 is all about efficiencies and improving their bottom line. If you’re not focused on the
Also last year, Verico began the Helping Hands program, dedicated to supporting the charitable pursuits of Verico member agencies
lender relationship, you’re going to have a challenge building your business. And I guess the last thought I’d have is: You want to embrace technology, but at the end of the day, we’re all still salespeople. We’re dealing with real people. And as far as I’m concerned, it’s those people skills you have to keep front and centre.
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Years celebrating excellence in the canadian mortgage industry
Join the CMA Honourees Congratulations to List all the infinalists! 2016 For 10 years, the Canadian Mortgage Awards has been For 10 years, winning a CMA has been the established as the most prestigious and sought-after most prestigious andinrecognized awards show the industry. accolade
in the Canadian Mortgage Industry
Celebrate excellence with the industry’s best at the annual black-tie Experience anrecognized awards show with Make sure gala. your peers are first-class treatment, high-energy entertainment and a this year by nominating them! post-awards party you’ll never forget!
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PEOPLE
CAREER PATH
FINANCIAL ACUMEN
Robert Clancy worked his way through many jobs in the financial industry before he found his true calling as a mortgage broker 2011
MOVES TO SAFEBRIDGE FINANCIAL Looking to take his business to the next level, Clancy moved to SafeBridge Financial Group, where he’s grown his business by at least 25% each year “I wanted to work with a company whose primary focus was on the customer – building relationships through knowledge and trust, and most importantly, maintaining those relationships”
2006
JOINS SCOTIABANK AS A MORTGAGE SPECIALIST Inspired by the lending work he did as a financial advisor, Clancy decided to move into mortgages, taking a position at Scotiabank. It was a great introduction to the mortgage world, he says, but working through a bank did pose some restrictions
In the mortgage industry, you need choice to satisfy the customer’s needs, and the customer should have access to choice so they can truly pick a mortgage that is right for them. I believe only in the mortgage broker world can this truly happen
BECOMES A MORTGAGE BROKER Looking to offer clients that choice, Clancy left Scotiabank for Mortgage Alliance “I was looking for a company that had a strong identity on culture and the people who worked for them. It’s not about how big the company is, but the quality of people who work there and the service they offer the client”
2004
MOVES INTO FINANCIAL PLANNING Clancy wanted experience in all aspects of the financial industry, so in mid-2004, he took on a financial planning role at CIBC “As a financial advisor with the bank, you worked with the investments and credit side of a client’s assets. It was in this role that I began to focus more on the lending side”
2003
MAKES THE JUMP TO A BRANCH
2000
BECOMES AN INVESTMENT BANKER Clancy got his first financial job in the Investors Edge online investing division of CIBC, right before the dot-com bubble burst “This was an exciting time in the stock market industry, with the tech sector flying high. Unfortunately, we did have a major crash the following year”
2009
To expand his knowledge, Clancy decided to move over to the branch side of the bank to gain experience in commercial banking and financial planning “I really enjoyed working with self-employed clients. They were very different to your 9-to-5 client. They were entrepreneurs at the end of the day, so their expectations were different. Deep down, I always wanted to work for myself, so working alongside these clients gave me more motivation and drive to make this happen”
1997
ARRIVES IN CANADA
Upon arriving in Canada, Ireland native Robert Clancy worked several odd jobs, including a stint at the Irish pub P.J. O’Brien in downtown Toronto “The clientele in this pub at the time were predominately bankers and people from the financial world. It was a great place to work and meet people, and my conversations with the clients did have big part to play in me choosing a path within the financial industry”
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PEOPLE
OTHER LIFE
BUILDING HOMES, SAVING LIVES
TELL US ABOUT YOUR OTHER LIFE Email mortgagebrokernews@kmimedia.ca
$204,000 $200,000 Total amount raised by the Homes4Home Canada Foundation
Amount of matching funds donated by Habitat for Humanity Global Village
40
Number of homes to be built in Fiche, Ethiopia
An eye-opening trip to Africa inspired Chris Karram to give back on a global scale A 2012 TRIP to South Africa changed Chris Karram’s life forever. The co-founder of SafeBridge Financial Group travelled to Durban, South Africa, with his wife, Arlene, to help build a home as part of a pilot project between Christian Blind Mission [CBM] and Habitat for Humanity Canada. “After that amazing yet overwhelming experience, we committed to each other that we had to do more for those living in extreme poverty around the world,” Karram says. “Although we knew we couldn’t ‘fix the world,’ we believed then, as we do even more so now, that we can at least impact it.” That commitment led Karram to found the Homes4Home Canada Foundation, which, over the course of two years, helped raise enough funds for the CBM and Habitat initiative to build 40 homes and two communal latrines in Fiche, Ethiopia. One build team has already travelled to Fiche to help construct one of the latrines; Karram and a second build team departed in March to continue the job. “We believe a home is a basic necessity in life, yet so many people around the world live without one,” he says. “As a result, we can’t help but feel a responsibility to at least try and help wherever and however we can.”
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MCAP Fusion Mortgage is a mortgage and a line of credit… …a POWERFUL combination with flexible financing options to meet your customers’ financing needs. Ask your MCAP Business Development Manager for more details.
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