A question for the brokers...from a trainee broker

Maybe half the upfront for sub contractor, and maybe $50ky salary plus .1 of the upfront.
That would be for experienced brokers, and probably expected to bring in about half their own leads. Both models would expect minimum $2mil a month meaning gross income around $75ky.

For new brokers it'd be something less to start with.

 

You need a mentor who's been in the industry for a while - they need to mentor for the first two years.

I'm currently mentoring a couple of new brokers who have set up their own shop.

Cheers

Jamie

 

Awesome stuff you are like the Obi Wan Kenobi of the broker world

 

An AFSL is an Australian Financial Services Licence - not for accountants but financial planners. I think you need around 5 years experience to qualify for one, but they are very difficult to get. 90% of planners would not have one, but would be an authorised representative of a licence holder.

Your accountant friend is probably talking about becoming a registered tax agent which would need 2 years experience plus the relevant education etc.

 

There was a recent High Court case involving contractors (where the cleaners employed as contractors where deemed to be employees) which may be the reason your 'employer' is changing their internal structure.

 

So how dose a mentor work if people go out on their own from day 1?
Is a mentor just somone you can call an ask questions?
I assumed it was basicly someone you put your loans through using their agg.

 

You need to have your own accreditation with lenders.

You can either have your own direct agreement with an aggregator - or operate under your mentors (if possible).

A broker mentor acts in the same manner as a mentor in any field. They will help with deal structure, answer questions, challenge you, etc.

Cheers

Jamie

 

Think long and hard before going into mortgage broking. The hours are very long. The work is very time consuming, and unless you have a well developed referral network, the income is low. And the new generation of customers have almost zero loyalty ...

Those who make a better than average living at it , do so because they market themselves well, develop excellent referral networks , work well beyond 9-5 , Monday- Friday and are extremely organised. It's not every now and then that you have to work weekends and nights - its every now and then that you dont have to. Especially the first 2 - 3 years while you build a book.

I say all of this to be as honest with you as possible... if all of those challenges are the kinds you eat up and thrive on, go for it. But if they are not ... you will find it very very tough going .

 

You told us the downsides. OK. What about the other side of the coin?

 

If you get to a point where you've built up a decent size business - you can (depending on your level of ambition and ability to delegate) slow down and service your existing clients only. The income is decent and the workload isn't as horrendous. Getting to this point is a hard slog though!

Cheers

Jamie

 

Well that certainly brightens up the day doesn't it. It nice to know that hard work leads you somewhere reasonable at least. Every job has 2 sides. Its nice to hear a balanced view

 

You have to be realistic. Most people new to broking think its going to be easy, and find themselves drowning quick smart. Most will take a long time to get around lender and mortgage insurer policies, which are forever changing, and even if they do that quickly, they will need to write lots of deals to get real world experience. Then there are the immeasurable other ingredients - persistence, excellent organisation and time management, referral development etc- which is often lacking. That's why so many go to Aussie or Mortgage Choice rather than AFG, Connective or PLAN, and live off leads - they just arent cut out to self develop their businesses. They get good at writing loans eventually, and the "brand" gets them all their business. But they also give away a huge % of every commission, and they have to work for years to get anywhere... why do you think Aussie John is so stinking rich???

To help you understand how it really works. Up front commissions are generally 0.6%-0.65% of the loan amount. There is some variation to this, but 0.6 - 0.65% is typical, minus aggregator and referrer costs. So its not hard to understand that $1 Million per month in settled loans will earn you @ 6-6.5K minus aggregator or referrer costs.

We also know from industry data over many many years that most brokers barely write $1 Million per month, meaning they barely make 70-75K per year minus costs (insurances, aggregator fees etc) They would be lucky to Gross 55-60K after costs, and that's OK, but hardly the kind of income to make someone wealthy. They are often able to survive because hubby or wifey has a stable income...or they don't survive at all.

Now, those who can write $2Million + per month, consistently...can obviously see incomes approaching 150K minus costs, and those writing 3-4 Million per month are making 230-300K per annum minus costs. But unless you are settling 3 or 4 x $1Million loans per month, all year round, settling 3-4 million in loans per month means usually writing 10-15 loans per month . That is not going to be achieved by most. Until you try and juggle 10-15 deals per month, you dont realise how difficult it is. You will need to take on staff to assist, unless you are incredibly efficient and organised. That adds cost to your business.

Then there are trails. Trails are generally paid at 0.15% of the loan amount, so if you happen to be a broker who can write $15-20 million per year, and experience very little run off, you may after 3-4 years hit a loan book approaching 50 - 80 Million, which would add an additional 75- 120K in trail, minus costs.


This may explain why I was so blunt in my assessment earlier. Unless you are well above average and incredibly organised, it will take years before you can stop working 80+ hour weeks . But as I also said, if you are the kind of person who is inclined to love that kind of thing. The kind of person who will sit and work all day and all night. The kind of person who will thrive under those challenges...it can be very rewarding if you stick with it

 

Now is not a good time to become a broker either. It is very hard to get loans for investors now and the market is just turning down.

 

I did this, legitimately without intending to. We decided to move in as a spur of the moment thing only after it was unconditional... The finance agent guy said I can do what I want after it settles.

 

It is harder - I've definitely seen an increase in the amount of potential clients I've had to give bad news to.

It makes it all the more important to plan ahead - see a broker early! That way you have time to tweak and make changes to your circumstances so that when you're ready to buy you are ready to go, rather than thinking you're ready but actually need a years worth of debt reduction/savings/major lifestyle adjustment before the lenders will look at you.

Fun times

 

Each to their own - currently looking at expanding the number of brokers in the office over the next 12 months, as always it's just a case of having a core niche for your service proposition.

An increasing % of loans being written by brokers compared to direct to bank coupled with an aging profession, it's creating some very interesting trends.

 

I should have said differently - not a good time to be starting out as a new self employed broker. Always a good time to become an employee (or contractor).

 

Its okay loan structure is fine. I checked and double check with the bank.

 

@Terry_w - All a matter of perspective

I don't want to make out that it's easy. FAR from it.

And sure, there have been more ideal times.

Yes, APRA has absolutely sledgehammered things and put a tight lid on what's possible but..

It's a damn good time to be starting out independently, if you have the drive and ability to do/learn what it takes.

There are close to 2,000,000 owners of investment properties in Australia (not to mention home owners).

That's a big pool of potential clients for someone willing to make it happen.

 

No, your right Steven. There are still people out there in need of loans and the percentage of loans being written by brokers is constantly rising. So there are plenty of opportunities out there still for the right person.