When people think of Walt Disney, they picture the world-famous entertainment mogul.
But what is largely unknown about Mr. Disney is that before he became a household name and symbol of success, he experienced epic failure.
In fact, before setting up his eponymous empire, his first venture, Laugh-O-Gram Films Inc, was forced to file for bankruptcy.
The lesson to draw from this allegory is that running a business is difficult – even if you happen to be one of the 20th century’s great entrepreneurs.
Therefore, it’s unsurprising that more than one in four new mortgage brokers have failed in the past five years, according to recent research by support firm AptPayment.
So many potential pitfalls exist when setting up a brokerage. The market may turn; leads may dry up; you may not adequately diversify your sources of income nor successfully execute your chosen business model. Any one of these can prove fatal.
However, one of the main reasons is that brokers often try to do it all, instead of focusing on their strengths – supporting their customers.
That’s why I’ve always been a proponent of the Appointed Representative model, especially in the early days when you’re making the switch from being an employed broker to an entrepreneur. That was my view some 20 years before running a network and still is.
This isn’t a sales pitch for my own network – I am talking about benefitting from the protection of a network, in general.
Typically, firms choose this route because of the compliance and regulatory support. Quite rightly, they believe their time is better spent growing their business rather than interpreting and adopting regulations.
Compliance aside, networks clearly offer a range of important benefits, often including software provision, sales training, and a collaborative culture to swap ideas with like-minded business owners. “Belonging” is certainly something which our members tell us they highly value.
But with so much choice out there, how do you pick the right network for you?
To help answer that, these are the questions you should ask of any network before you commit.
What sort of compliance support can I expect?
No two compliance functions are the same, so find out what you’ll be getting for your money.
You’ll want to ask who is carrying out the checks, what experience they have and how many staff there are.
You’ll also want to find out how often you’ll receive a case check. If it’s too infrequent, they may miss potential issues emerging because of your advice process.
But equally, if a network insists on checking most or all of your cases, in some instances this could be a red flag.
What other support will I receive?
You should expect a raft of wider business support, so make sure you find out what is on offer and how it compares with others.
For example, what if you need help and guidance with sales training, marketing, or perhaps adviser recruitment? Is there a BDM you can easily speak to? If so, are they field-based?
What happens if you can’t get hold of them? Are they supported by telephone-based BDMs who can offer you a speedier response?
Having a well-staffed support function is vital in order to get the help you need, when you need it.
Then there’s training. Does your prospective network offer any? If so, who supplies it and is it covered under your network fees, or is there an additional charge?
If your network promises to supply you with leads, find out what kind of leads they are and what the average conversion rate is. If they can’t supply that, then ask them why.
What technology do you have in place and how will it help me?
Don’t settle for sub-par technology that holds you back or is frustrating.
Find out what systems are used. At the very least, ask for a demo. Better still, ask for a test login so you can really get under the skin of the system and decide whether it works for you.
If the network refuses to do that, it probably tells you everything you need to know about the state of its platform.
Lastly, how much is all of this going to cost me?
This may seem an obvious question, but you’d be surprised how many brokers don’t – and later come to regret it.
Some networks – though not all – have punitive exit fees requiring you to hand over significant sums of money to cover any potential future liabilities that may arise after you leave. Many networks charge fixed fees and weekly or monthly minimum charges, irrespective of your own progress or turnover: this can really hurt when business levels are low or the market dips.
How does the network charge for helping you to grow or to recruit advisers? It goes without saying, but don’t sign up until you’ve fully considered how much it will cost and how that compares to the wider market in terms of all of the non-cash aspects, such as technology and mentoring and operational support.
By asking the important questions upfront, you’ll save yourself a giant headache further down the line.
Rob Clifford is Chief Executive of mortgage and protection network Stonebridge.
You can find out more about joining Stonebridge here.
