The Dow decreases by 38 percent and then increases by 42 percent, all in one year. There is a high likelihood that the market will correct itself. Mortgage rates have increased and then decreased. It has been easy to qualify for a loan and now it’s hard. Even if the Fed is able to stabilize the credit markets, people are frightened of change. Your hope is to maintain your client base, but you can do much more. You can grow your business even during these treacherous times.
Are you diligent in making calls to your top tier clients? In past “turbulence,” you have learned the lesson that making frequent client calls is a great way to hand-hold your clients. In a Forester research study, brokers who talk to their clients at least once a month during volatiles times, lose fewer clients to the competition and gain many more referrals. But what should you say on those calls? Here is a four-step process to not only avoid losing clients and their assets but also build your practice.
I. Bring your client back to their original goals
One of my coaching clients audio records with permission the opening meeting laying out the needs and desires of the client in preparation to create a mortgage plan. When making the monthly follow-up calls, he then uses the exact words the client stated in that meeting. “When we first met two years ago, you mentioned that your most important goals are having an income of $8,000 a month and make it last until you pass away, pay your home off in 15 years and provide for your children’s college expenses. You also want to travel during retirement at least four times a year at an expense of $5,000 per trip. Are these goals still important to you?”
Bringing your clients back to their original goals will assure them you are still in control and still on track to meet their goals.
II. Let your clients know that their own biases will cause them to make bad mortgage choices.
In one University of Michigan study, if an investor missed the 40 best-performing days in the market from 1963 to 1993, the average return would have dropped from 12 percent to seven percent. While you aren’t an investment broker, the same concept is true when looking for the right mortgage. In the Journal of Economic Behavior and Organization, Richard Thaler wrote that more people make mistakes by not making decisions than by making the wrong ones.
There is also a high tendency for your clients to avoid making changes to their mortgage plans despite good reasons for doing it. In one Boston University study, subjects were offered a choice of various investment products and expected returns. After making choices, the participants were informed some of the choices were already in their portfolio. Forty-seven percent changed their mind and decided to stay with the products currently in their portfolio. This is one of the reasons clients are often willing to ride an inappropriate mortgage into ruin. This status quo bias of only accepting 30-year-fixed loans or the lowest monthly payment may be the wrong decision but yet the one the client is used to owning.
III. Be armed with at least three solid stories of your clients who weathered volatile periods in the past and came out ahead using your advice
The reason your clients panic during recessionary periods is due to emotion, not logic. Don’t try to console them only with logic, they won’t stay convinced. They cannot remember the logic and are again consumed by emotion. That is why you should always use solid behavioral economics arguments followed with stories the clients can remember. If you can do that, you won’t have to say the same things over and over to the same clients.
IV. At the end of the conversation, ask for referrals
I am sure the last thing you think of in a volatile period is ask for referrals. It’s like asking a car crash victim to buy life insurance while still in the ambulance. Yet while most brokers don’t even call their clients during downturns. You will be able to pick up more market share (clients) who are terrified about losing their home or making payments in the future. You may also be able to attract more clients already disgruntled with the lack of client contact from most brokers. I played tennis recently in my regular Sunday match in Newport Beach, Calif. The topic of conversation was how much money we all lost the prior week. The conversation also migrated to our respective home mortgages. I flippantly asked if any mortgage broker had contacted them over the last 12 months. All shook their heads no.
According to one study, 57 percent of your clients would never use you again if another mortgage broker approached them. This means that many high net worth (HNW) clients would meet with you if you had the courage to ask. In another study at the University of Connecticut, researchers discovered that 89 percent of clients cared more about the relationship with their broker than about interest rate.
After steps one through three, here are the words you can use to gain referrals:
“I really enjoy working with you. I am always trying to build my business with my best clients. Who do you know who could benefit from the kind of relationship we’ve had so far?”
Using this script will secure two referrals and one new client within six months from every referral request.
Contrary to common sense, your clients depend more on your ability to communicate than your ability to pick the right mortgage for them. There is no rule that you have to lose clients during volatile periods. In fact, most of my coaching clients who keep in contact with their own clients are having a record year. They are gaining clients and because prospects are scared and need someone to advise them on the right real estate financing decisions. Seventy percent of these HNW prospects don’t have a mortgage broker they can trust and the remaining 20 percent have absentee brokers. This is the best time since 2003 to protect your client base and gain more referrals.
Dr. Kerry Johnson, MBA is a best-selling author and speaks at mortgage industry conventions around the world. His personal coaching company, Peak Performance Coaching, promises to increase your business by 80 percent in eight weeks. He may be reached by phone at (714) 368-3650.
