The results of CMP's 2nd annual Broker Sentiment Poll

The Broker Sentiment Poll puts out an open call to the Canadian broker community to participate in an online survey where comments are invited. This year CMP received more than 300 responses from brokers across the country.

When CMP conducted its inaugural Broker Sentiment Poll in early 2009, the results were overwhelmingly positive despite it being a period of uncertainty. This time around, the Canadian market is in a much stronger place than it was a year ago, and the results of our poll are a bit more reserved, with lingering economic concerns and renewed fears of the big banks taking aim at the brokers' share of borrowers.

In fact, one of the most surprising findings of this year's survey was the response to the question, "Do you think you might be leaving the brokering industry in the next 12 months?" Last year, 95 per cent said no, but this year, 49 per cent of respondents said yes - a sign that some brokers may still be feeling the pinch of the economic downturn or re-thinking their choice to be an independent businessperson.

"I haven't had any time off in over three years and no one to leave my files to. A salary at a bank and holiday and benefits is very attractive," said one B.C.-based broker.

Others pointed to increased competition from banks and the difficulty to stay independent as reasons to exit the brokering industry.

But enough with the not-so-good news. The above statistic aside, the results from this year's poll were far from full-out negative or discouraging to industry newcomers. Almost 50 per cent of respondents said they would be hiring new staff in the next year (only two per cent said they would reduce staff) and close to three-quarters of those polled said they would increase or keep their marketing budgets the same as they did in 2009.

Here are some more findings from this year's poll results.

Economic concerns
While last year's results showed brokers' main concern was fewer lenders operating through the broker channel, economic conditions took the lead in 2010 with 23 per cent of brokers listing it as their top worry.

"Middle-class, mid-paying jobs are eroding in our country and they are not being replaced," said Anthony Spadafora, an agent with Assured Mortgage Services in Burlington, Ont. "With the low rates, people are budgeting unrealistically, spending more than they make and not saving."

Don Stoddart, a broker with Mortgage Architects in Brampton, Ont., summed it up when he said economic conditions were the only thing not within his control as a business owner.

"If you run a good brokerage company, other issues will not be a concern," he said.

Although there were plenty of viewpoints on economic instability, more than half of those surveyed (55 per cent) said they don't think Canada is on the cusp of a housing bubble - a topic that's been debated in the press since the beginning of the year. For those respondents that did see a bubble forming, many of them said they think it's happening on a regional basis, particularly in urban centres where prices tend to fluctuate most.

After the recent federal government changes to mortgage-borrowing criteria, there were mixed views on whether the government was handling the economic situation properly. Just over one quarter of respondents gave the federal government a seven out of 10, while 35 per cent scored them five or lower.

"[The] changes set for April 19 are good, I feel, as long as lenders do not layer more conservative requirements on top of these," said Maury Lum, a Vancouver-based broker.

Ann Turner of Waterloo, Ont., was more critical. "Default rates are very low and Canadians do not think of homeownership like the Americans do nor do they take risks with their homes like they do, so why this sudden push to make homeownership more difficult?" she said.

Vittorio Oliverio, a Centum broker in Lethbridge, Alta., voiced a similar concern.

"The government announces buying back mortgages so more people can borrow, but then they put in restrictions so that less people qualify," he said.

Some respondents also questioned the big banks' motives in pushing for the federal government to impose the new mortgage rules when the institutions could have tightened the standards on an individual basis.

"The pressures [the banks] are trying to apply to the finance minister are nothing more than a disguised attempt to curtail the growth of mortgage brokers' market share," said Jim Solomon, a broker from Medicine Hat, Alta., while Ritchie Simpson of Charlottetown, P.E.I. said he thinks banks are "pushing back against the mortgage broker channel" due to a loss of branch-originated business in the past few years.

Next page: Thoughts on lenders and business strategy

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Lenders
On the topic of lenders, 20 per cent of those polled said their biggest concern over the next 12 months is fewer lenders working through the broker channel. Minimum volume requirements for brokers received a lot of commentary from poll respondents as well, many who cited problems with this increasingly common lender practice.

"I'm worried about the service we are getting from the lender if we don't make their top 100 list or bring in $5 million," said Valerie Whissell, a Mortgage Architects broker based in Gatineau, Que.

Another anonymous broker from Dartmouth, N.S., said it was becoming increasingly difficult to meet lender requirements without resorting to deal-pooling or "losing one's ability to work with all the lenders."

When asked what percentage of their loans brokers fund through banks versus non-banks, the results skewed toward the latter. Twenty-nine per cent of respondents said they do more than 50 per cent of their business with banks, while almost double that number - 60 per cent - said they send more than half of their business to non-bank lenders. The reasons to go with non-banks included good client care and competitive rates.

"The more mortgage brokers build their market niche without the banks that operate through storefronts, the better the industry will be," said Jim Solomon. "The key will be to develop a number of lenders with diversified product lines that will work only through brokers."

Another Ontario broker who wished to remain anonymous said he has made a conscious decision to not send business to banks if he can avoid it. "Brokers who send business to a big bank and expect to have those clients in the future are deluding themselves," he said.

These comments went hand-in-hand with the responses to the question of what is the biggest change the industry will see over the next 12 months. Twenty-one per cent said more competition from big banks' remote sales teams will be the most significant change (something brought up publicly by the Bank of Montreal in March), and 17 per cent believed that some or all of the remaining big banks who work through the broker channel would cut brokers off in the next year. Another 18 per cent said the biggest change will be lenders implementing efficiency bonuses instead of volume bonuses and 16 per cent believed new commission structures from lenders are on the way in 2010.

Business strategy
In last year's Broker Sentiment Poll, 64 per cent of respondents predicted more than 50 per cent of their business would come from new clients. This year, the emphasis on new clients seems to have gone down - only 38 per cent said more than half their deals would be from this category (although 44 per cent said between 26 to 50 per cent of their business would be new). These numbers signal a return to the database and brokers seeking out repeat business.

"New clients will continue to be a major share of the business but I expect the CRM program and target marketing I'm doing to have more impact all the time," said one Ontario broker.

Another respondent said that after being in the industry for a long time, they had a "huge database and a great deal of repeat business."

Like last year, the large majority of respondents said residential mortgages would be their focus, with 93 per cent saying this category counts for more than half of their business. Many respondents didn't see a huge amount of business coming from HELOCs, insurance, reverse mortgages or leasing, but 64 per cent said they would be looking to take on at least one of those services over the next year.

Another interesting finding on the topic of business strategy was the question of brokers amalgamating their businesses with other businesses in their area. The response was an almost even split of yes and no, showing that working together might be a solution for brokers who want to stay competitive in their communities, particularly during tougher times.

With the mix of responses and concerns we gauged in this year's survey, it will be interesting to see what plays out this year and what major changes we'll be seeing. Will we see a housing bubble form? Will the new government-imposed rules make a big splash when they come into play? Will several brokers decide to go into another industry? Only time will tell.

And as the year progresses, don't forget that CMP likes to hear your comments and concerns anytime, so let us know if you think there's an issue we're missing out on or should be covering more in depth. We're happy to hear from you.

For the full version of this story, please see the March issue of CMP.