Adviser industry still attracting recruits

Eric Frykberg takes a closer look at who is entering the mortgage-advice business – and whether the number of newcomers points to industry growth or a revolving door.

The mortgage-advice industry is continuing to attract recruits – newcomers who are undaunted by taking a pay cut compared with their old jobs or facing a sluggish real-estate market.

The appeal of a career in mortgage advice remains independence, variety, the people-focused nature of the business, and the chance to build up a capital stake.

Providing an extra spur is a steady trend towards more adviser-arranged deals, as banks shut down branches to avoid paying high fixed costs for bricks and mortar.

This shift to the adviser channel, away from walk-ins at bank branches, is helping to smooth over the impact of a cyclical property market on its intermediaries.

It means there is more work to go around.

One recent arrival, at Loan Market, is 35-year-old Aaron Cooke of Auckland, whose early career was spent as a salesman.

His work ranged from selling advertising spots in the media to persuading people to buy training courses at Air New Zealand, often from outside the company.

He had long eyed a career as a mortgage adviser from afar, before making the leap to a business whose subject matter was in his blood already.

“I love finance; I love the concept of how finance works, how numbers work,” Cooke says.

“There are a lot of areas in New Zealand where financial literacy is lacking, so this job gives you a chance to help people's lives in that space.”

Jamie Maclennan, 31, is another recent recruit to Loan Market in Auckland.

He, too, came to the job as a salesman. His commodity was office equipment such as photocopiers, but selling mortgages held out a better chance of boosting his career.

“In my previous role, I was selling products for a large business, whereas now I can provide advice under my own business,” Maclennan says.

“I look at it as a salesperson's version of a trade. If you were a plumber or an electrician, you could set up your own business as a plumber or sparky.

“So I saw this as a chance to run my own business: to put the skills I had learned as a salesman into a business of my own.”

Finding the best recruits

Looking on from the other side of the desk, as new advisers walk into the office, are people like Dan Bell, chief customer officer for Squirrel.

Like all managers, he wants the best new recruits he can find - and has a well-developed way of assessing their talents.

“Typically, we have targeted people who have a passion for property, and for helping people through the buying journey.

“We want people who have a natural curiosity about residential property.

“They have not necessarily come from a real-estate background; we’ve had more success hiring ex-retail-bankers.

“I don't think that’s been a new strategy; banks have been reducing their client-facing teams for years. We have picked up on some really good property lenders who have come out of that environment.”

Bell says these arrivals tend to be in their late 20s or early 30s and have had several different roles in a bank, before leaving for a job with a different structure and a greater focus on clients.

“If I were to break down the headcount that we’ve had of people coming into Squirrel in the past two- and-a-half years, it has primarily been ex-bankers: people looking for an environment where they can be offering the best solutions to clients, instead of being focused on distributing just one product.”

Bruce Patten at Loan Market says many of his recruits have also come from banking, following the path from bank to brokerage that he himself set many years earlier.

The cost of switching

Switching to a new line of work can be costly. That was certainly the case for Jamie Maclennan.

“There was a significant pay cut. I went from being employed, with a salary and commission, to basically earning zero,” he says.

“I had to set aside six months of savings just to make sure I could do it.

“I actually ended up selling my house so I had some money in the bank, which meant that I could safely go to no-income for a few months while I started.

“I was kind of lucky when I began, because I got going pretty quickly; I started getting some settlements within a few months, so it wasn't too bad.”

Maclennan insists that going from salary to commission, even at the cost of selling his own home, was still worthwhile.

“I myself left banking because I got to the point where I didn't like the way the bank was going, and I felt that I could do more for my clients if I had a business where I could provide options for them.

“I was considered a bit of a maverick, because I was trying to get the bank to send deals to brokers. I thought that if the bank could not help clients, maybe a broker could place [a loan] somewhere else.”

Not everyone who went from bank to brokerage jumped of their own free will. Some were pushed.

These are the people who entered the mortgage-advice industry after a change of career was forced upon them.

“We had a big influx of people into the industry four or five years back,” says Patten.

“That was when one of the banks made a whole bunch of people redundant, and many of them came into mortgage broking.”

“It's a few years down the track now and I am loving it. It's a challenge every day, and that was what I was looking for. This job has definitely provided it.”

For Aaron Cooke, the process was a similar one. Did he take a pay cut? “Yes.” Significant? “Yes”

So how did he feel about that? “It's an investment.”

And did it pay off? “It's an ongoing journey. It certainly will pay off over time.

“There are two things: one is that you want to maximise the cash flow, and then [the loan book] will be an asset at the end as well.”

Will he stick at it? “One hundred percent.”

Is it the churn factor?

If Cooke and Maclennan are both relative newcomers, either the industry is growing in size or else there’s

The churn argument would appear to be supported by repeated suggestions that a lot of older people are quitting the profession, in protest - or despair - over the wave of regulations imposed on the industry in the past few years.

Proof of how real this trend is will emerge as final figures from the Financial Markets Authority (FMA) indicate how many advisers made the final deadline for full licensing and how many missed the boat or decided not to try to catch it.

But the size of adviser churn – or whether it is happening at all – is still up for debate.

Dan Bell of Squirrel says he has not seen many strong signs of churn taking place.

“People have been talking about that for a long time, but I’ve not really seen it,” he says.

“People keep on talking about advisers leaving the industry and their loan books being put up for sale, but I’ve not seen the reality of it. Maybe it is coming, but ultimately I think there are a lot of people in the industry who love what they do.

“They don't love all regulations and compliance, but they are still very connected with their clients.”

Enough work to go around

This raises another question: if new people are joining the industry and older people are not quitting, despite suggestions that they would, how is the mortgage-advice business getting enough work to go around? Especially when a real estate downturn is hitting both volumes and price.

Bell cites a fortunate trend to offset that impact.

“The share of the market going to mortgage brokers continues to grow,” he says.

“In New Zealand we’re on a trend towards similar levels to Australia, where 65% to 70% of all mortgages are written through mortgage brokers.

“That provides further upside to our industry.”

According to this view, turnover in the mortgage business may be slipping, but advisers are getting a bigger share of it.

In other words, advisers are getting a larger slice of a smaller pie.

Bell points to another trend: newcomers going to a well-established firm rather than going it alone.

He says that’s partly because of the help a big company can provide in complying with the waves of regulation which have been imposed on the industry.

The standing of these companies is also appealing.

“I think brands are important for people. There’s that sense of security working for a well-known brand; people want to be aligned with a wellestablished brand that they respect and admire.”

The Mortgage Lab is another large company, one which recently became even larger by merging with insurance brokers Maurice Trapp.

National manager Jarrod Kirkland takes a different view from Bell, saying there are definitely signs of adviser churn in the mortgage-advice business.

“We are getting a lot of new-toindustry people who want to be advisers coming to us.

“But at the same time, there are older advisers who can't be bothered basically to keep up with regulation, and they are exiting the industry.

“We are in the position to be able to acquire their client bases, or their businesses in some cases. So we are experiencing [churn] from both ends.”

Short-term recruits

Kirkland also points to another layer of churn.

He says many people come into the industry thinking it is exactly what they want, only to find out that it does not suit them at all.

They then go back to their old jobs, or seek another one after six months or a year.

Overall, this means that adviser personnel levels remain more or less constant - and Mortgage Lab is careful to keep it that way.

“We could double our adviser force tomorrow if we wanted to,” Kirkland says.

“I’m getting CVs emailed to me all the time.

“There are a lot of people wanting to get into becoming mortgage advisers. My job is to sit down and find out why they want to get into the industry.

“It's not for everyone. It's like the realestate industry: when times are great, everyone wants to get into it because all they see are big dollars and flash cars, but the reality is much harder than that.

“So we try to have that honest discussion with advisers and tell them, ‘Hey, it's not all glitz and glamour.’”

Unlike at Squirrel, Kirkland says his newcomers are not primarily departing employees of the banking industry.

“They come from all walks of life; they’re from a mixture of different professions.

“Maybe they have just become a bit disgruntled and thought, ‘I always wanted to get into financial services’, or maybe just, ‘I’ll give this broker gig a bit of a crack.’”

Of that mixture, sales staff make up quite a big chunk of the company's new arrivals.

This was especially true of people who had practised selling in retail or service-type roles such as telecommunications.

“They might have been selling mobile phones and thought, ‘I am quite good at selling, maybe I want to do something a bit more substantial’.

“It is more of a career focus for them. They say, ‘Hey, I’ve been in sales, but I’m looking for a long-term career, and brokering is something that I’ve picked up as having that potential.’” ✚