Why new brokers need a different franchise business model

10 Dec, 2018
Why new brokers need a different franchise business model

Being a broker is a great way to balance work with your other commitments. Using the right business model, it can also be a lucrative way to earn money, with a six-figure income a reality for the most successful brokers.

However, around 50 per cent of new brokers fail within their 18 months because they don't adopt a business model that works with the current Australian market. Every business needs to change according the needs of their market, and brokers are no different.

With around 16-17,000 brokers working in Australia, it can be hard to break through the existing offering and stand out from the crowd. In the traditional broker business model, there's not much difference between operators, and success is heavily based on the prices they can offer because borrowers can always go direct to the banks.

For new mortgage broker franchisees to succeed, they need to buy into a business model that works for the people who really need brokerage services.

Why mortgage broker business models are changing

Recent years have seen a huge shift in the financial market in Australia. The creation of the Royal Commission in 2017 means that lenders are under mounting pressure to loan responsibly, while banks are also having to conform to APRA auditing requirements such as those around interest-only loans.

With the increase of systems like credit scoring and positive credit reporting, lenders now have access to much more information about their potential borrowers than ever before. The result is a shrinking prime loan market, with lenders increasingly tightening their criteria and looking more closely at the type of borrowers they want.

Suddenly, many people who used to fall into the prime loan space have found themselves classified as specialist lending, or non-conforming. These people can no longer walk into a bank and secure a loan, they need brokers who can find them lenders who are willing to consider their individual circumstances and agree a loan.

The need for a specialist mortgage broking franchise

A specialist lending franchise model provides a solution-based approach that allows the franchisee to build a sustainable business, with better loan margins and more opportunity to make money through loan fees. The services specialist lending brokers provide are more in demand, and reflect the changing approach to market needs.

Specialist or non-conforming lending is about people who can't get traditional finance for a variety of reasons. With the changes in the Australian climate, more and more people are falling into this category.

Whereas traditional lending uses a choice-based approach to serving clients, specialist-lending brokers work to provide a recommendation tailored to their customer's specific circumstances. Mortgage brokers in this space work with a panel of specialist lenders to meet their borrowers requirements without wasting their time with organisations who are never going to be flexible enough for their circumstances.

The Red Rock mortgage franchise opportunity

Red Rock mortgages are the leading broker group offering a specialist lending franchise opportunity. Our franchises can expect:

  • A very affordable investment.
  • Potential for a six-figure income in as little as 12-18 months.
  • To work from home with low overheads.
  • Better loan margins and the opportunity to make money through loan fees making the potential for return on investment greater still.

We offer a robust training and induction system specific to specialist lending. Alongside providing regulatory training such as the Certificate IV and organising appropriate insurance, we offer face-to-face and online education specific to the non-conforming market and our tried-and-tested processes and procedures.

Our franchisees have access to our national brand presence and lead generation, as well as funding partners we've worked with for many years.

A Red Rock franchise allows you to provide crucial services to the borrowers who need them the most. Request an information pack today or watch our information video to find out more.