Poor client management could be costing you a small fortune. Here's what to do about it.
Poor client management could cost you more than just missing a few birthdays - you could be missing out on thousands of dollars, says Peter Heinrich. Here's what to do about it.
In today’s market brokers are always looking for ways to grow revenue and cut costs – but National Finance Institute trainer Peter Heinrich says many brokers are letting tens of thousands of dollars go overlooked.
In his book The Mortgage Marketing Handbook, Heinrich warns bad practice by brokers has left millions of dollars in unmatched commissions either forfeited by brokers or held in accounts by aggregators.
Heinrich tells of a broker who recently reconciled his loan book over a quiet period and found he was owed more than $40,000 in unclaimed or unmatched commissions - $1,500 of that from a commercial loan lodged at a bank business centre four years earlier.
“He quite openly blamed himself, but also suggested aggregators could be more proactive in finding out who was owed money. He admitted that his aggregator supplied him with an excellent reconciliation program as part of his software package but he was using it sparingly and incorrectly. When lending times were good neither he nor his assistant had time to reconcile all commissions, but now times are slower every dollar counts.”
The author and ex-broker suggests the problem is a common one, with one aggregator joking to him that his largest account, totalling over $1m, was his unclaimed commissions account.
Some trail commissions are automatically forfeited if not claimed within 12 months, says Heinrich, and one aggregator is thought to retain commissions if not claimed within three months.
Brokers also miss out on interest by not claiming commissions, warns Heinrich, and the oversight could be indicative of other poor business practices.
“If a broker is not reconciling commission entitlements they are probably not proactive in maintaining a client data base and are equally neglectful of client relationship management. The two key aspects of business administration are closely linked.
“To have excellent client contact a broker must maintain comprehensive, readily accessible and up to date records. If they don’t then it is impossible to maintain regular contact with clients and reconcile commissions.”
A good client relationship program not only helps brokers to reconcile commissions, but also pumps up the value of a broker’s loan book should they ever wish to sell it, says Heinrich.
“If a broker is reconciling regularly they will have a good understanding of their client’s movements and if they have an effective retention program in place the runoff will be minimal – thus increasing the value of their loan book.”
Heinrich offers a few key reasons why upfront commissions are sometimes not matched:
- Incorrect names or companies or trusts with guarantors used and the names listed out of order by the lender when payment is made.
- More than one surname on the loan and commissions paid on the alternate name.
- A loan submitted directly to a bank business centre and the payment not manually processed by the lender.
- The broker omitting to put their broker reference number or recording it incorrectly on the loan submission.
And a few reasons why loans may have dropped off the system all together:
- Clients are more than 2 months in arrears.
- Clients have refinanced or sold their property, possibly using the lender of another broker to finance their next purchase.
- Clients have been directly contacted by a lender and switched to another product and the introducing broker’s trail is not honoured.
- Clients pay out their loan from sale of other assets.
- Clients die!
For more insights and tips on the mortgage broking business, check out Peter Heinrich's The Mortgage Marketing Handbook here.
