Induction Program.
Module 15: Referral Network
Objectives:
At the end of this module you will be able to:
• Understand the importance of building a referral network. • dentify key referral sources.
• Research, Plan and Implement a Business Development Program. • Consider whether or not you should pay Referral Fees.
• Know how to maximize referrals from real estate agents. • Understand NCCP referrer requirements
THE IMPORTANCE OF BUILDING A REFERRAL NETWORK:
One of the most important skills that must be developed by a mortgage broker is the ability to develop and cultivate new business relationships to ensure an ongoing flow of new referrals. Advertising is very expensive and the results can be hit and miss. Referral sources provide higher quality and a more reliable source of referrals than any other source.
If you ask a long term mortgage broker why they are successful, one of the reasons they would invariably list is “Customer Referrals”. A new business owner starting up a broking business has no customers, therefore it is important they:
1. Are able to identify where they can source referrals. 2. Put a business development plan in place.
3. Implement the business development plan. 4. Persevere, Persevere, And Persevere.
Even when a broking business is humming and a large number of leads are being generated from the client base, business development with new and existing referral sources is critical to ensure referrals continue to flow.
TOO MANY REFERRALS is a great problem to have and an oversupply of referrals can support the next stage of the business’s growth where the business owner can employ a processor / administration staff and or loan writers.
KEY REFERRAL SOURCES:
Key Referral Sources include, but are not limited to:
Real Estate Agents
Accountants
Financial Planners
Builders
Real Estate Agents:
As far as referral sources go Real Estate Agents are gold. A real estate agent comes into contact with more prospective borrowers than any other referral source and can provide a steady stream of quality referrals.
Real Estate Groups – A real estate group provides an excellent opportunity to be exposed to a large number of individual agents. The larger groups, particularly the franchise groups, already have long term financial services in place, however larger groups tend to have little control over each member office in the group. Smaller groups of four to ten real estate offices provide outstanding opportunities as they tend to work more closely together as a team.
Real Estate Offices – A partnership with an individual real estate office has the advantage that you are dealing directly with the decision maker i.e. the Principal. Ideally the principal has a large amount of control over the salespeople, to ensure they will support you with referrals. It is quite often the case that the real estate sales people already have existing relationships in place with other brokers and bankers, however the support of the office Principal is critical and provides the time you need to develop relationships with all employees in the office.
Real Estate Salespeople – Salespeople are the bread and butter as they are the ones who actually provide the referrals. If you intend to pay the salesperson a referral fee they need to organise an ABN. A broker who has solid relationships with five different real estate salespeople can generate 5 or more referrals a week.
SUCCESS TIP: It takes a significant amount of time (sometimes years) to form a relationship with a real estate group, so it is recommended new brokers focus on real estate offices and real estate salespeople.
Accountants:
Traditionally accountants were not a popular referral source because a large percentage of their clients were self-employed. With the advent of low doc lending, accountants became a lucrative source of mortgage referrals. Accountants will quite often want a broker who can organise Asset Finance and Car Leasing for their clients also, so if you are just starting out make sure you have an EF specialist that you can refer to, if you intend to target accountants. Every Broker should have at least one good accountant relationship.
Financial Planners:
Brokers who deal with financial planners report the quality of the referrals to be very high and therefore the conversion rate (referral to settlement) is also very high. Financial Planners are extremely cautious about who they refer their customers to and usually like to maintain a high level of control of the process. Every broker should have at least one financial planner relationship, but be warned they will want cross referrals.
Builders:
Builders / Building companies can be a reasonable source of referrals. With commission being paid after settlement and construction loans taking 6-12 months to settle, builders do not represent the best target for brokers just starting out. Builders also tend to have lower units of sales turnover so referral opportunities tend to be low in most cases.
Solicitors / Conveyancers:
We recommend that you have a good solicitor / conveyancer to refer your clients to in the event that they ask you if you can recommend a good solicitor. As far as referrals coming back your way, they tend to be low in both quantity and quality. By the time many clients, especially buyers find their way to a solicitor, finance is already arranged.
YOUR BUSINESS DEVELOPMENT PLAN – PLAN FOR SUCCESS:
In the early stages of a new broking business there tends to be a lot of spare time. The process of meeting all the initial licensing and industry membership requirements, then organising all the lender accreditations can take quite a while, so this period is a perfect time to draft your Business Development Plan. It is important to maximise every minute.
Planning & Research:
Once you start meeting prospective referrers it is critical that you are in a position to write business, so it is recommended that you spend your pre-accreditation time planning and researching your marketing area. A good business development plan will consider the following key points:
1. What is your Marketing Area? If you are part of a franchise system your marketing area will have already been determined. If you are not part of a franchise system it is important you determine which geographical location is going to be your marketing area e.g. Brisbane Northern Suburbs, Sydney Eastern Suburbs, Melbourne Inner East, Adelaide Hills.
2. What is your Core Suburb(s)? As your business grows you will be writing loans for customers located everywhere, however when it comes to business development once you have established where you are going to market your services, it is important to identify what CORE suburb or suburbs you are going to focus on. If you have a large business centre within your marketing area e.g. Chermside (Brisbane Northern Suburbs), Bondi Junction or Randwick (Sydney Eastern Suburbs), South Yarra (Melbourne Inner East) then there are more than enough potential referrers in just that suburb alone to keep numerous brokers very busy. As a rule of thumb it is recommended focusing on a suburb or a group of suburbs that have at least 20 real estate offices as well as accountants, financial planners and solicitors/conveyancers.
3. Research your Marketing Area. Spend some time online at websites such as
www.realestate.com.au, www.domain.com.au, www.fpa.asn.au, www.cpaaustralia.com.au. Google Real Estate Institute of QLD…NSW…VIC etc. The Saturday real estate section in the newspapers provides very useful information about which real estate offices and sales agents are selling most of the properties in your marketing area. Don't be afraid to jump in the car and drive around your area. Drive through the residential areas and see which real estate agents have the most For Sale signs up.
4. Data base your Prospective Referrers. Once you have collated as much information as you can about the real estate offices / salespeople, accountants, financial planners, builders, etc in your marketing area then input around 20 of these prospects on your software
platform. You can add more down the track, however it is recommended you start with the 20 or so prospects you would like to initially target. The mix of the prospective referrers in your data base is up to you, however we recommended adding at least 10 real estate contacts, being offices or individuals.
SUCCESS TIP: You need to live and breathe your CORE SUBURBS and become an area expert about everything going on in that region.
Implementation:
As noted earlier it is recommended you research and plan during the early stages when you are still securing your lender accreditations. We recommend not commencing the process of
introducing yourself to prospective referrers until you are ready to write loans. If you are personal friends with a real estate agent or financial planner than chances are they would already know you are becoming a mortgage broker and it will have already been established if you are going to do business together. In the case of prospective referrers who don’t know you, first impressions count for everything.
Picture this scenario. You do not yet hold any lender accreditations. You are so excited by all the opportunities that exist in your marketing area that you decide to drop out to some real estate open homes to introduce yourself to some agents. You drop into an open house and introduce yourself to the agent. Being impeccably dressed and a good communicator you and the agent hit it off immediately. The agent goes on to note that she just had a falling out with the broker she used to work with because he never provided any feedback about her referrals and as such she would like to give you a go. As it turns out she just had a young couple through the last open home who are very keen to buy and happy to talk to a broker. Don’t risk this happening if you are not ready to go.
SUCCESS TIP: You must be ready to write business before you ask for business. You only get one chance to make a good first impression.
Ok so you have all your lender accreditations in place or most of them at least and are raring to go. Where should you start? The key is to start somewhere.
Getting in front of all prospective referrers can be daunting.
Getting in front of prospective referrers regularly, developing these relationships and generating regular referrals is the lifeblood of every successful broking business.
Fortunately it is possible to put yourself in front of all the different types of referrers and we provide some practical tips on how to achieve this.
Getting in front of Real Estate Agents:
A real estate agent can be hard to get in front of at their office, however most of them all run open houses each weekend. We say most, because a small percentage of real estate offices in
Australia run marketing systems that do not include open houses e.g. Jenman system.
Dropping into an open house is a great way to meet real estate agents. You will have a captive audience with the agent, however if there are people looking at the home you need to be
considerate of what the agent is there for. That aside open houses are a great way to put yourself in front of real estate agents. It is important not to be pushy. In fact you might find this introduction and approach a great one to learn and use:
“Hi Tom, Barry Broker from Barry Broker Home Loans. Do you mind if I have a quick look through the home? As part of the service I provide to my preapproved clients I like to check out a few homes each Saturday to see if I come across anything suitable for them…”
On Exit “Thanks Tom… [nice home/how much are the owners looking for? / have any contracts been given out on this home? (if auction) / How long has this home been
on the market?]…TALK ABOUT ANYTHING OTHER THAN FINANCE. Unless the agent raises the topic of course.
The purpose of dropping into an open home is to present yourself as a professional broker and the fact you are out working on a Saturday or Sunday like they are will impress them.
Remember to follow up the meeting at the open home with a thank you card, SMS message and a phone call to arrange a meeting.
Getting to the owner of the real estate office can be a lot harder. The chance of getting to the Principal of a real estate office by calling the office or dropping into the office is very low (unless you know someone with a house to sell of course). Some Principals still list properties and conduct open houses, however many don’t. It is suggested that you post an introduction letter, with a personal profile then follow up by calling them on their mobile phone.
SUCCESS TIP: The best way to secure a Principals phone number if you can't locate any other way is to call the office and ask to confirm the Principals mobile number.
Getting in front of Accountants:
The logical place to start is your own accountant.
Do some additional research before approaching accountants. GOOGLE them, check out their website to determine whether or not they have an in-house broking service, then send them an appropriate introduction letter. Enclose a personal and business profile. Highlight how working with you can add value to their business and mention any existing referral relationships you have in place with other accountancy firms.
Ultimately an introductory letter can only get you so far and it is important to follow every letter sent with a phone call with the aim of securing a face to face meeting.
Getting in front of Financial Planners:
A phone call direct to the planner, or perhaps after an introduction letter is sent, is the best way to get to a planner. With most planners switched on to the benefits of working closely with a broker, there is a strong possibility they already have a relationship in place, however it's a numbers game. The more prospects you contact the closer you get to doing business.
SUCCESS TIP: The CLIENT NEEDS ANALYSIS includes a section where the clients nominate who their financial planner or accountant is. Ask them to give their financial planner or accountant a rating out of 10. If they rate them highly ask them if you could introduce yourself to their planner or accountant, using their name as an introduction.
“Hi Tom, Barry Broker from Barry Broker Home Loans. I am currently organising some finance for Mrs and Mrs Smith and they rated you 10 out of 10 as an accountant. I like to work with
successful professionals so I thought I would take the opportunity to introduce myself”
If your clients do not have a financial planner or accountant or they rate their existing professional lowly, it provides you with the opportunity to introduce them to highly rated professionals.
Getting in front of Builders:
Dropping into housing estates with display villages can be a great way to meet sales people working in the building and construction industry. These sales people tend to have a lot of time on their hands though so be careful about not getting bogged down in long visits each time.
Getting in front of Solicitors / Conveyancers:
Solicitors and Conveyancers are usually open to meeting with brokers, as brokers are in a strong position to refer clients to them. In fact many brokers with relationships in place with Solicitors and Conveyancers report that the referrals can often be all one way traffic and when they do get a referral it tends to be a sticky deal. Nonetheless every broker should have at least have one solicitor and conveyancer that they can recommend should a client ask.
SUCCESS TIP:. Busy brokers don’t have time to sit around and chew the fat all day. Get in, have a quick chat, provide them with some topical information, ask for referrals, then get out of there.
SHOULD I PAY REFERRAL FEES?
The decision to pay referrals fees or not is a personal decision. Many brokers have built successful businesses without paying referral fees and many brokers have built successful referral partnerships by sharing some of their upfront commission (and trailer in some cases) with referral partners.
Upfront only – An upfront referral commission could either be a percentage of the commission earned e.g. 20% or a flat fee e.g. $200, which is paid after settlement and after receipt of commission.
Upfront and Trail – You may wish to consider paying the referrer a share of the trail income also e.g. 20%. This would only be offered to an referral source that offers tremendous referral potential e.g. real estate office with strong management, an accountancy practice with large client base, a financial planning practice with large client base. A typical upfront / trail referral arrangement is 20% upfront / 20% trail however if you are lucky enough to be in a position to present to a larger real estate group of say 4 or 5 offices you need to keep an open mind to sharing a larger percentage of the trail.
SUCCESS TIP: The most important thing that a new broker should be aiming to achieve is to build their client base to 100 customers as quickly as possible, so don’t be afraid to pay referral fees when starting out.
TOP TIPS FOR MAXIMISING REFERRALS FROM REAL ESTATE AGENTS:
There is no substitute for time invested when it comes to formulating relationships with real estate referrers, however there are a few quick tips which will help you fast track the referral process. 1. WIIFM (What’s In It For Me?) is all Referral Partners really care about. The most important
thing to a real estate agent is making sales. How can your service assist this process? 2. Referrer Partners are used to being let down finance brokers. Stand out by providing great
service and regular feedback you may not get another chance.
3. Planning is important but don’t over plan - get out there as it is difficult to do business development from your home office.
4. Attendance at a weekly sales meeting at a real estate office will generate immediate referrals almost every time.
5. You must visit every referrer at their premises at least once a week or twice a week if you are starting out.
6. If you are visiting a real estate office and some of the sales people are out of the office, drop a business card on their desk to let them know you dropped by.
7. BUSINESS IS ALWAYS GREAT. Don’t be negative and make your visits short and sharp as busy mortgage brokers don’t have time to sit around chatting about the weather all day. 8. Principals don’t usually sell many properties, so when you visit the office say hello to them,
but spend most of your time with the salespeople.
9. Don’t be a friendly Fred – sure talk about the football on the weekend, but remember you are there for referrals so ask for them.
10. Referrers love gifts – 20 x $20 bottles of wine with a thank you card will generate more business than a $400 newspaper advertisement. Bit tight with cash? Try 20 thank you cards with a $1 scratchie tickets inserted.
11. Don’t stand around at Open Houses handing out business cards and brochures – map out 10 or more open houses over a 2-3 hour and drop by for 2 minutes to let them know you are out there working on a Saturday, just like them.
12. Know who your top five individual referrers “THE RAINMAKERS” are and aim to speak to them at least twice a week.
REFERRERS UNDER NCCP:
From October 1, 2010 there were new obligations imposed on referrers and brokers who have clients referred to them by businesses such as real estate agents, accountants and financial planners. These obligations do not apply to privately generated referrals from clients.
Broker Obligations:
In order for a referrer to provide contact details of the consumer to a broker, the following conditions must be satisfied:
Broker must:
1. Have an agreement with the referrer which specifies the conduct in which the referrer can engage.
2. Keep a register of referrers including the date and the means by which the agreement with the referrer was entered into and the date of commencement of the referrals.
3. Contact the consumer within 10 business days of receiving the referral.
4. Inform the consumer that you have obtained their contact details from the referrer. 5. Inform the consumer of any referral fees paid/to be paid to the referrer.
6. Ask the consumer whether they are happy to continue with the conversation. Example of initial consumer contact:
“I am contacting you because we have been provided with your contact details by (name of referrer). Can you confirm that you agreed with (name of referrer) to have us contact you?” “Before we continue, I would like to let you know that if you take up any of our products or services, (name of referrer) will be paid a referral fee. Are you happy to continue this discussion?”
Contact by letter or email:
If you contact the consumer by letter or email, the letter or email must contain statements to the following effect at the start of the letter or email:
a) You are contacting the consumer as a result of being provided with their contact details by the referrer (identifying the referrer by name); and
b) The referrer will receive a referral fee.
Proof:
Since there will usually be no written record of the initial consumer contact, we advise you should make a diary note/journal of initial discussions and comment.
Consequences:
If you accept a referral from businesses that do not follow the above referral processes if they are not licensed, then you will be in breach of the NCCP Act.
If you accept a referral from businesses that are exempt from obtaining a licence under the ‘referrer exemption’ and there is no referrer agreement in place you will be in breach of the NCCP Act.
Quiz to test competency:
Multiple Choice
1. Which of the following were listed as important for brokers just starting out: a) Being able identify where they can source referrals.
b) Putting a business development plan in place. c) Implementing a business development plan. d) All of the above.
2. The following referral source was listed as a key referral source, however it was identified as not being the best target for brokers starting out:
a) Real Estate salespeople b) Financial Planner c) Builder
d) Accountant.
3. The official website for the Financial Planning Association of Australia is: e) www.fpaa.com.au
f) www.fpaa.asn.au g) www.fpa.asn.au h) www.fpaa.org.au
4. Brokers who deal with this referral source report the quality of referrals are very high and therefore the conversion rate (referral to settlement is high):
a) Builders b) Solicitors c) Hairdressers d) Financial Planners
True and False
1. The easiest referral source to do business with is a large real estate group.
True / False
2. One a broking business is humming with large number of referrals coming from the client base there is no need to do business development with new or existing referral sources.
True / False
3. The best time to visit real estate agents at open houses is before all the lender accreditations have been secured as this is when a new broker has the most spare time.
4. When a new broker is inputting prospective referrers into their data base they should aim to add at least 100 prospective referrers to the data base as the more the merrier.
True / False
5. Under NCCP legislation a broker is allowed to ‘cold call’ names and numbers on a open house attendance list provided by an agent, without the clients permission to call.
True / False
Short Answer Questions
1. Name five key referral sources:
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 2. List the four key points that a good business development plan will consider:
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
3. A CLIENT NEEDS ANALYSIS can be a great tool for getting in front of new Accountants and Financial Planners. Explain how this can be the case.
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 4. There were 12 tips provided on how to fast track the process of securing referrals from real
estate agents. List 4 tips and explain each tip.
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 5. Since October 1, 2010 certain obligations have been imposed on referrers and brokers who
have clients referred to them by business such as real estate agents, accountants and financial planners. Outline the 6 conditions that must be met by the broker.
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
Certificate of Completion
Module 15: Referral Network.
I certify I have completed Module 15: Referral Network. I have a good understanding of what is required and of my responsibilities.
Mentee’s name ……….. Signed ………..
Date …./…./….
I certify the module on Referral network has been successfully completed.
Mentor’s name ………. Signed ………
Date …./…./....
