65: Why Most New Mortgage Brokers Fail

Welcome to the 10 Loans a Month podcast, where mortgage brokers become business owners. And now, your host, Scott Peckford.

Hey, Broker Nation. So why do most mortgage brokers fail? You know, once I heard a stat that as high as 75% of new mortgage brokers don't renew their license once it comes up for renewal. I don't know if that stat is 100% true that I know that the failure rate is extremely high because the number of people that come in to the mortgage industry every year and the number of people, when you look at the number of active people, the number of active people does not grow that much.

and yet the number of people that come into the industry so we're having some attrition for sure some people are leaving but there's way more people coming in than can account for the attrition

And so what's happening is there's a huge churn. So they come in and I'd heard, you know, one of the companies that does licensing in Ontario, they had 10,000 people go through their program last year, 10,000 new mortgage brokers. Well, and the year before that was like 7,000, 17,000 mortgage brokers in the last. two years and that's just in one province in this is in canada of course

But if you look at the number of active brokers, it's actually not gone up that much. It's only gone up a few thousand. So where do these people go? Well, the truth is that the failure rate is extremely high. No different than when people get into life insurance or financial planning. And there's a variety of reasons for that. But I'll break down why I think for more.

mortgage broker so the first i'd say i believe the reason most new mortgage brokers fail is the barrier to entry is extremely low like really low it's almost harder to become an uber driver than to become a mortgage broker in some provinces and so you know you can be licensed in a week or two

And so you don't really have to have a ton of motivation. You're like, yeah, I kind of feel like maybe this is something I should do here. They make a lot of money. So why not? What the heck? You go take your course and then you don't have a hot clue what you're doing. You literally don't have a hot clue.

I always find it funny when I tell people this, but it takes longer and costs more money to become a hairstylist than to become a mortgage broker. I'm nothing against hairstylists because actually my one daughter actually might do that. And I think it's a fantastic career. But they become a hairstylist. It's $10,000 to $12,000. It's 10 months, tons of training. And when they're done, they actually know how to cut hair.

When you take your mortgage licensing course, you do not know how to do a mortgage when you're done. You don't know how to find a mortgage. You don't know how to fund a mortgage. You literally know just barely enough to be able to speak the language. That's it. and so the failure rate is extremely high because the barrier to entry is really low and so then people just come in they dabble at it and then they leave the problem is though that i think that for the consumer that's out in the public

If they're dealing with some of these folks who have not been properly trained, it makes mortgage brokers look kind of stupid. It's like, man, you guys must not know what you're doing. I don't worry with that too much because I focus on what I can control, which is being really good at my job. But the truth is, is that there are a lot of people out there, you know,

a cab driver and they're a mortgage broker. And you're like, okay, that's awesome. But are you going to be the person to advise me on my largest debt that I ever have? How really? effective are you going to be at that? And how much knowledge are you going to have? I always think, you know, like my business partner, Jules, who she did a hundred million last year. And if she's competing against a part-timer, she's going to eat their lunch.

all day every day she's in this everyday focus dialed in they have no chance they literally have no chance you know so it's very difficult right so the first thing is the barrier to entry is so low that it makes the failure rate high i've said this in the past i think that the industry should be more like an apprenticeship model where you've got an apprentice under someone who's experienced for a certain period of time and then that way the license

are linked together. There's going to be less mortgage brokers, but the quality would be higher. The public would be better served and our industry would have more respect than I think it currently has. So it's the first very entry. The second is, is that

When people get into the mortgage business, they have a wrong assumption about what we do. They kind of think, well, if I'm a mortgage broker, I'm going to go and get you the best rate. Or it's going to be everybody that I know needs a mortgage, so of course they're going to use me. These things are not true, by the way. The reality is that a mortgage broker is a technical sales job. I want to emphasize the word sales.

it is very much you have to develop sales skills you know when you talk to a mortgage broker the 10 000 mortgage brokers that came into the you know it was probably higher than x that was one company but let's say the 12 to 15 000 mortgage brokers that came into ontario in the last year You all have access to the same products, the same rates. For the most part, everything is pretty much vanilla. And so why is somebody going to use you versus someone else?

This is why sales is so important. And when we say technical sales job, so when somebody sells high-end computer systems or sophisticated computer systems, you need to understand the systems or how the machines work, but then you also need to know how to sell it. People come into this industry thinking that all they need to do is they just want to help people. And that's fantastic.

Good. I hope you do want to help people. But if you don't learn how to do sales, you're not going to be helping anybody, especially yourself. And when I first got into the mortgage industry, my wife was a new mortgage broker. I decided, hey, I'll come do this. This sounds great fun. This was back in 2006. And the guy who hired my wife, she gets this job and then he's like, oh, by the way, I'm pregnant. She says to him and he's like, oh, what is he going to say? Right. So then.

She said, but don't worry. I got a plan. My husband's going to come and work with me. We're going to do this job sharing thing. And so he said, okay, he interviews me, meets my wife and goes, I've met your husband. This is a terrible idea. He should not be in the mortgage business. And the truth was he was actually right because I had such a bad. attitude about sales. I didn't understand it.

And so him saying that I wasn't going to make it was actually the best thing he could have told me because it actually motivated me to go out and learn the skills that I didn't have. And, you know, many years later, we laugh about that now. But the truth was that I wouldn't have made it if I didn't build those sales skills. And I spent a ton of time, energy and money.

In those first few years, getting sales training, getting sales coaching, because I had to shift my mindset. And for me, when I think about sales, if you think of sales as a dirty word, first off, you've got to change that.

I think of sales as serving. So I was a paramedic before I was a mortgage broker and I can serve people, but sometimes serving them is telling them, no, I'm not a good fit. I shouldn't help you. You should go over here. Also, sales is about communication. And so the better you get at communicating with someone.

the better you can influence them for their own good. And so this is the things that you need to learn and develop if you're going to be a successful mortgage broker and too many mortgage brokers. completely neglect the fact that this is a sales job they don't even think of it they think oh sales are terrible well then you're never going to be successful in this business and the ones that are even if they don't think of themselves as sales people they are

Because they've made the same shifts in their mindset that I've made, which is I'm not a salesperson either. I serve people. Sometimes I say yes, sometimes I say no. And I just work on my communication skills so that I can do a better job of helping people. And so that's how I think of sales. So the first reason they fail.

Barrett entry is really low. Second is they don't understand that this is a technical sales job. The technical part of it, let's talk about the underwriting. So the underwriting is also a big piece of this. So mortgages are not like one plus one equals two always, because if it was that simple.

they wouldn't even need us. They could use software to figure out where to place loans. Currently, it's very complex and you change one thing in an application and where that file can be approved changes, the way you have to package it changes. And so there is a technical component that you have to learn. However, I believe that this is best learned.

file by file by having a good mentor or having some kind of support system around you to help you figure that out because you can't just learn it all in your head and then go out and you won't remember it you won't retain it so develop the sales skills and then get help with the underwriting you'll develop the underwriting over time

All right. So first, barrier to entry. Second, they don't understand that it's a sales job. The third is they have no plan on what to do. So they basically dabble in a lot of non-essential things. I see mortgage brokers, you know, they're new, they're excited. And they're like, give me your opinion on my business card. Doesn't matter.

Like does not matter. You don't even need a flipping business card. First off, who uses them anymore? And it's not like, oh, my gosh, I got to remember that mortgage broker, Susie, that I met at that lunch and learn. I better pull a business card out of my what. you know, my wallet that I never carry. So business cards don't matter. Logo design doesn't matter. Website stuff doesn't, none of that stuff matters. Like that is non-essential.

What you need to do is have a plan for where am I going to get clients from? I recommend most new people build a referral based business because you don't have the money and sophistication to. build a advertising based business. I've been doing podcasts on that a couple episodes ago, where I talk about should you pay for leads.

And yes, maybe, but for most new people, absolutely freaking not. You shouldn't, you're going to just waste your money because you don't know what you're doing. So you spend your time on non-essential things and then you end up, you know, six months, 12 months go by, depending on what you have for a runway.

you know maybe you got a significant other who can support you to figure it out but there's a lot of time i've got to create this perfect social media post nobody cares you know and so you can spend all this time on stuff that really is not going to move the needle and i think that's the big mistake i see people making when they're new is they're just really

doing non-essential things and they have no plan so they wake up monday morning and like what do i do today what do i do tomorrow i don't know and what should i do in the next day to get my business going it's a little bit of a shotgun approach and some people find success but a majority of them don't

So those are the three main reasons I think most new people don't succeed. So what do you do instead? And if the failure rate is, you know, 75%, I don't remember that movie, Saving Private Ryan. And in the movie, they show them going to Omaha Beach, which was the highest casualty rate of any of the beaches on D-Day.

And I remember when I saw the movie in the theaters, I was like, oh, my gosh, that was a terrifying scene when they're rolling in those boats and then they flip the gate down and then there's like it's just mayhem. Well, apparently the survival rate on that beach was 50 percent. If you're a new mortgage broker, you have a better chance of surviving Omaha Beach.

than you do of succeeding in the mortgage business. Just let that sink in for a second. I think you really need to understand that your success rate is very low.

So the first thing I would tell you to do is assume this is going to be much harder than you expect. Don't assume just because you know people and don't assume just because they've got mortgages that they're going to want to do them with you. They may not. Often what goes on in their head is they go, okay, great, awesome. I like you, Scott.

I got to wait two years to see if you're still around because I'm not trusting you with this. Or they go, hey, I know you too well and I don't want to share my personal information with you. So either way, you're kind of hooped, right? And so if you come into this, assuming just like when the guy who hired me said, hey, you don't have what it takes.

If he would have said, oh, Scott, you're going to be wonderful. You're going to be so great at this. I'd have been like, he's right. I'm going to be awesome. And I would have sat back on my hands. I would have not put the work in and I would not have been successful, guaranteed.

So that's the first thing. The second thing is you have to get sales training. You absolutely get sales training from mentors, from books, from courses, coaches, and best in learning sales skills. You have to master sales. If you don't, you're going to find this to be a very difficult business.

And you'll take 10 years to get to 10 million a year, which is completely insane to me. And it does not need to be that way. But you're going to have to. And if you don't like sales, shift your mindset around it. So it's not sales, it's serving as long as you have good intentions. And the better you get at communicating, which is what I think of sales as is communicating, the better you can serve the right people. And then all of a sudden the coin drops and it goes, okay, this I can do. I can't.

be a sleazy car salesman who's going to sell something that I'm like, I don't even believe in it, but hopefully you buy it because I really need to eat. And the third thing is to decide on a referral partner or a plan and then focus on that plan. So what we recommend or what I coach on is targeting your network.

So the people that you know, to connect with the real estate agents that they know, and then using a presentation that we have, we call it our perfect realtor pitch, pitch to realtors. And then we have a follow-up system with those realtors. So you follow up with those realtors.

And then we show you how to create a great customer experience with those clients so that you get more clients. And then that's how you get your business going. And we've helped numerous clients build very successful mortgage businesses very quickly. referral-based businesses by using that specific claim. So that's my thoughts on this. Agree, disagree.

It would be cool if the licensing bodies would actually share how many people renew. That would be cool to see the percentages. Maybe it's not 75%. Maybe it's 55%. In any case, it's ridiculously high.

And I'd love to see that. And if you're listening to this, a couple of quick things. First, if you're an experienced mortgage broker, you do more than 100K a year and you want to get your business going better, more efficiently, check out 10loansamonth.com. We have an academy there with a bunch of amazing coaches. We open up a couple of times a year.

And you can get on the list there. We'll send you an invite, let you know what we got for coaches and when it's coming up. And if you're new and you're listening to this, you're like, okay, how will you help me if we're new? Go check out rookie to rockstar.ca.

And we have a free webinar that you can check out and we'll walk you through exactly how we help new agents be successful and check it out. I'd love to help you out. And either way, you know, this is an amazing industry. It's going to be harder than you think. Focus on the sales training and then.

have a plan and stick to that plan and do the essential activities, get your business going and you will be successful. And one day I'll probably be on my podcast and I'll be like, Hey man, congrats. High five. Can't believe you crushed 50 million in, you know, whatever time that was. Anyways, hopefully you guys found that helpful and I will be seeing you on the next podcast. This is an I Love Mortgage Brokering production.