Should brokers pay for referrals?

Zak Wilford is a specialist recruiter that works with both commercial and residential finance brokers, sub-aggregators and other groups to help them grow through hiring great people.

For those of you that read my articles and are not yet following Adam Baker, take a look. His recent move has put him in the limelight, and he is now sharing ideas and experiences within the mortgage broker industry. 

His most recent article and video is on ‘referral fees’. Adam, you wanted to start a discussion, so here’s my 2 cents worth. Should brokers pay for referrals? Should it be based on trust? Is it mutually beneficial?

An area I’m often consulted on; brokers and companies approach me for advice on how to best monetise a lead source they've developed. So, I feel I can provide a view from the other side. 

Just the other day, I received a call from a buyers advocate advising he’s frequently asked about the finance side of the deal and, unfortunately, doesn’t know any mortgage brokers to consult. His question to me was: do I know any one that would have the capacity to take on these leads? In order for him to get the deal done, he needs his customers to have pre-approvals, or to know if they’re eligible for finance and so he was looking for a relationship that offered transparency.  He wanted someone that would help his customers with the finance side and provide him visibility on how much they could borrow, and what their situation was. 

I asked how he wanted to be renumerated and he said he didn’t. It would save him time which is the asset and it would provide a value-add to his business. 
I really think it comes down to a brokers mindset, experience and credibility. New-to-industry brokers desperate to build a business and generate leads often make themselves vulnerable by giving up their commission too willingly. They need the business. We put value on things that are rare and hard to come by which, for a band new broker, is a lead and so they go above and beyond to acquire it, paying more or giving up a bigger split because ultimately 50% of something is better than 0% of nothing.

Conversely, those with more experience, more credibility and a bigger brand will find it easier to acquire referral partners. A strong positive and well-known brand will reflect positively on the referrer’s brand too. A referrer, just like a customer, needs to be confident in dealing with you, even more so because a bad experience with the broker is going to reflect on that referrer. 

Ultimately, I think it’s a case of how much you want to hustle. If you put in the time, the effort and the work to find good referrers you can develop a good partnership with; you will build a strong business with dependable lead sources.  I read a quote recently intended for personal relationships, but I think it’s applicable here too: “money spent is meaningless, but time spent is priceless.”

When developing a business plan, take into consideration what you want long-term and play to your strengths. If you're a networker, the type of person that can work a room and win people over, developing a network of referral partners is for you. I have a good friend who is exceptional at this, and I often see him during PD days and other events and only wish I could work a room as well as he does. In turn his business is solely referrals, he doesn't have a website, he barely markets himself through any other channel but handshakes and conversations. 

Different types of people will dominate in different arenas. On the flip side you have people that aren't interested in maintaining a network, that are uncomfortable in networking situations and struggle to manage multiple relationships, but kill it online. They are developing Facebook dark posts and buying Google AdWords and generating leads this way. Do these count as referrers? 

Zak Wilford first stepped into the mortgage industry in 2013, aggressively targeting aggregators and headhunting their brokers and groups to join the then start-up aggregator Finsure and 1300Homeloan. After a year with Finsure, he joined recruitment agency Drake International, and a year later he stepped out on his own to fill a gap in the market – to start a recruitment agency specialising in working with finance brokers. Find out more at www.zakwilford.com.
Add your comment
  • New Broker and Referral Fees23/05/2016 2:19:08 PM

    I am new to the Finance Industry (Broker) and have recently referred a few clients to a Financial Planner that I believe will service my clients well. However, when it came to asking about a Referrer's Fee, I could not find the words to ask. I would appreciate some sort of script I could use as a new Broker for this situation.

    1
  • Stuart26/05/2016 4:54:24 PM

    I have been in mortgage finance for almost 20 years and can count on one hand the number of times I have had to "Pay" for a lead. If you are paying for them then the referral is only about money. The next broker comes along and offers more money for the lead and boom, your business plan is worthless.
    If you offer quality service the business will flow to you. I settle between $4m and $6m most months but am only on the road 3/4 of my time these days. With Australian Credit and Finance we now pre set appointments, not leads, for all our partner brokers. Between a very well qualified appointment and back end support this is the best solution for anyone in the industry looking for more business. My new to industry people get the support they need and a steady flow of business and the experienced ones appreciate the continuity of business.

    2
  • Colin Rice2/06/2016 10:00:54 AM

    @New Broker - be blunt and say " I have been sending you referrals and wanted to know whats in it for me?" Pause and wait for a reaponse.

    3

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