Starting a Mortgage Broking Business in a Recessiongary
Starting down the road as an independent mortgage broker, or any new business for that matter during the Covid 19 pandemic might sound just plain crazy, but maybe not in all cases.
Let’s make it clear that this article deals only with starting a mortgage broking business since that’s our area of expertise. However I’m sure there are similarities with most small businesses so even if you’re not in Financial Services you might still want to read on.
First of all you need to look at your motivation in starting up as an independent broker. It might be the case that you’ve always intended to do this at some point and you now think you have the necessary experience and introducers for it to work, you might be furloughed but have a sneaking suspicion that post pandemic you could be out of a job or putting up with a smaller income or you might have already been paid off and can’t find anyone who is taking on advisers at this point in time. Although the first set of circumstance might suggest the most motivation and certainly the most preparation, a year or so down the road that might not be nearly as important as you’d think. What is important however is, if you decide to go down this road then you need to be dedicated to seeing it through. I’ve been in and around mortgage brokers and networks literally for decades now and during my time in the industry experience has shown that if you try to start up as an independent with the attitude “I’ll give it a go, at least until something better turns up and if it’s not working very well I can always just start looking for a job again” then your chances of success are between waif like slim to none.
If we look now at what, if any are the advantages of starting up your business in the current climate, well if you are already in a Registered Individual position which is to say self-employed, one of the things we routinely advise is to run down your pipeline before you make the jump since everything at work might be very friendly today but generally you can’t guarantee things will stay the same once your principal discovers you are about to become part of the competition. I know the mortgage industry is going through a mini boom at the minute but once the recession bites, I think you’ll find this change and reducing your pipeline wont really be a problem. Don’t immediately think this means that because business volumes are going to drop, you’d be better off as an Registered Individual or in an employed position. The good news is as an independent you get to keep far more of the money you make, often between 80% to 90% compared to 50% to 65% as an Registered Individual and 5% bonus (if your lucky) plus an often very mediocre wage in an employed position. I always think it also helps to remember that working for someone else whether in a self-employed role or directly employed isn’t necessarily really the “safe” option. 18,000 staff were made redundant by Deutche Bank last year with HSBC planning to cut 35,000 jobs this year. An employed position often just tends to give you a false sense of security as the pay gets put in the bank every month with most people having no idea what’s happening within their company at senior management level…………………………….until of course you get the 90 day redundancy letter. Perversely, I’ve always considered independence to be safer in the long run. As an independent, if your income drops severely then you do more marketing or look around for new products to sell such as equity release or keyman insurance and just push that little bit harder until business picks up again. In short with just a tiny bit of imagination and perseverance your income might go up and down but won’t just end!
Another factor in your favour if you start to business now is the very fact that things are likely to be slow to start with which means you will have time to set up your systems, introducers and lead sources so that you are ready to rock n roll as the markets pick up again. Maybe this is one of the factors to explain why a lot of big businesses were founded during or after recessions, Groupon, Uber and Just Eat to name but a few.