The leap from mortgage broker to business owner can seem daunting but with careful planning it can be a rewarding challenge, says Tom Barnett, sales and recruitment director at broker network HL Partnership.
The process of setting up a broker business can take several weeks, not least because of the wait for FCA authorisation. But in reality it starts months in advance, and careful planning is needed to ensure the business gets off to a good start.
In a webinar, dated June 19, Barnett explained the five 'Cs' every broker should consider before setting up a mortgage advice business in today's market.
1. Clients
Mortgage advisers wishing to set up their own business first need to consider where their clients are going to come from, says Barnett. Do they have a client bank they can draw from or do they need to establish one?
"Clients are key," he says, "the difference between a good mortgage broker and a mortgage broker that struggles a little bit is clients.
"And it's being able to know that from day one you can go out and you can write mortgage and protection business."
He says friends and family can provide a source of income at first but are unlikely to get a new broker through their first year of trading.
In order to get clients, brokers need a clear marketing strategy, whether it be a networking strategy, speaking to local estate agents, or linking up with IFAs in the area that might not advise on mortgages. It could also be connecting with other professions such as tax advisers, accountants, or lawyers.
Importantly, brokers should also consider whether they are bound by any contracts that may prevent them from contacting their current clients.
Barnett says: "It's very tricky in the mortgage industry to state who the client belongs to, because a client can literally deal with whomever they wish.
"But there may be some restrictions in your contract you need to consider, to ensure you're not in breach of your contract, and that down the line you don't receive strongly worded letters ending up in court cases and things like that."
If in a position to take current clients with them, brokers should consider how these clients would contact them, whether they have their new phone number or are linked on social media.
When it comes to retaining clients, brokers should have a clear retention strategy in place. This means ensuring clients come back to them at key points such as remortgaging.
"You shouldn't just think that your client is your client today; he or she should be a client for life," says Barnett, adding brokers should never shy from asking clients to make recommendations.
"A lot of people now send gift vouchers and things like that for a recommendation when a mortgage completes," he suggests.
