Special Feature 2011 broker sentiment poll

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3 CMP presents our third cross-canada broker sentiment poll to gauge what s on brokers minds. Some of the results may surprise, while others simply confirm what brokers already know The Broker Sentiment Poll puts out an open call to the Canadian broker community to participate in an online survey where comments are invited. This year CMP received nearly 300 responses from brokers across the country. With the recession in the rearview mirror and the housing market holding its own, you might think worrying about the economy would have faded from mortgage brokers consciousness. CMP s third annual Broker Sentiment Poll, however, shows that to be a misleading statement. When asked to name their biggest concerns for the year ahead, 33 per cent of brokers cited the economy slowing and interest rates rising as their No. 1 fear. While not a majority sentiment, brokers this year seem to have an eye on numerous issues, as they also cited fewer lenders in the broker channel (26 per cent), household debt (23 per cent), falling house prices (22 per cent) and reduced revenue due to lower commissions (20 per cent) as being concerns not far behind economic worries. your marketing budget for 2011 will: 43% 31% 15% 7% 4% Stay the same Increase less than 50% Increase more than 50% Decrease more than 50% Decrease less than 50% 88% OF CANADIANS want to obtain their mortgage from an institution where they have other financial products. SOURCE: CAAMP Survey, January but you ONLY do mortgages! For information on how you can do more than just mortgages contact Wane Davis, VP Marketing & Business Development Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. 64

4 will you be hiring new staff over the next 12 months? 54% - yes 46% - no Special Feature if you answered no, will you be reducing staff? 2% - yes 82% - no 16% - only if market conditions worsen my biggest concern is that the banks are not on a level playing field with brokers Challenges from the banks are on brokers minds, as according to one-quarter of brokers who when asked What will be the biggest change in the industry over the next year? responded that competition from bank mobile mortgage specialists will change the mortgage landscape. Banks leaving the broker channel (19 per cent) and lenders moving towards efficiency bonuses and away from volume bonuses (16 per cent) were other changes brokers say are coming in My biggest concern is that the banks are not on a level playing field with brokers. They still do what they want and what are your biggest concerns over the next 12 months? (Respondents were able to choose more than one answer.) Economic conditions Interest rates rising 10% Reduced revenue due to lower commissions Meeting the requirements of new licensing 20 22% House prices falling 8% Greater scrutiny from regulators 15 23% Consumer/household debt 3% My brokerage failing 10 26% Fewer lenders working through the broker channel 11% Other 5 Industry reputation damaged by rogue brokers 0 65

5 this year, brokers did a complete about face, as 92 per cent said they have no intention of leaving the business use tied selling to pull people in for a mortgage, said a broker from Leamington, Ont. There were some surprising positives compared to last year s Broker Sentiment Poll that reflect the improved economy. One of the most surprising findings of last year s survey was the response to the question, Do you think you might be leaving the brokering industry in the next 12 months? Last year, 49 per cent of respondents said yes a sign that some brokers were still feeling the pinch of the economic downturn or re-thinking their choice to be an independent businessperson. This year, brokers did a complete about face, as 92 per cent said they have no intention of leaving the business. That outlook was also reflected when 54 per cent of brokers do you think you might leave the broker industry in the next 12 months? 92% - no 8% - yes what do you think will be the biggest change in the industry over the next 12 months? (Respondents were able to choose more than one answer.) % 25% A massive drop in overall broker numbers Big bank remote sales teams competing more heavily with brokers 16% 10% Lenders moving to efficiency bonuses as opposed to volume bonuses New commission structures 10 7% 10% Brokerages to merge Brokers as multi-product sellers 19% 3% Remaining big banks dropping mortgage brokers Other 5 4% Brokers charging upfront fees 0 66

6 on a level from 1 to 10 (1 being the lowest), how do you feel the federal government is handling the issue of mortgage regulations? % 8% 17% 15.5% 14% 10.5% (ANSWERS) 8% 9% 2% 1% indicated they would be hiring staff this year and of those who won t be hiring, 82 per cent said they won t be reducing staff. Mortgage rule changes After the government announced early in 2011 that it would be tightening mortgage qualification rules for the second year in a row, CMP wanted to hear from brokers about whether they think the Feds did the right thing and what effects the new rules may have. The three main changes made were a reduction in the amortization period from 35 to 30 years; the lowering of the refinance limit of a home s value to 85 from 90 per cent; and the withdrawal of government insurance on home equity lines of credit. Nearly half (45 per cent) of brokers said a decrease in mortgage volume would be one effect of the new mortgage rules. An increase in consumer unsecured debt (36 per cent) was also chosen as was an increase in mortgage defaults (24 per cent.). It will be harder for first-time buyers (again), which will result in less people purchasing entry-level properties, said one broker. Said a Victoria broker, Consumers will be forced to carry high interest rate credit cards without the ability to utilize the equity in their homes, while the values of RATE ONLY RANKS 6 th in importance to Canadians when choosing a mortgage provider. SOURCE: CAAMP Survey, but you ONLY do rate! For information on how you can do more than offer great rates contact Wane Davis, VP Marketing & Business Development Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. 67

7 what percentage of your loans will come from: existing clients 39% 0-25% 26-50% people had to get their debt in line instead of using their home equity or spending over and above what they could afford for a home new clients 8% 22% 42% 27% 9% 51-75% % 0-25% 26-50% 51-75% % their homes continue to erode because of the changes. Not everyone agreed that the rules were uncalled for. People had to get their debt in line instead of using their home equity or spending over and above what they could afford for a home, said one Edmonton broker. Others thought the rules will serve homeowners well when interest rates eventually rise. It will force some people to live within their means and there will be less of a payment shock when their mortgages are renewed, said a broker from Regina. Business strategy When it comes to new business not much has changed during the past year. Last year 38 per cent of brokers said more than 81% OF CANADIANS don t have a financial plan but think it is very important. SOURCE: Maritz Research Canada, but you DON T do plans! For information on how you can offer financial planning contact Wane Davis, VP Marketing & Business Development Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. 68

8 if an independent, would you consider joining a national brokerage this year? 56.5% - no 11% - yes 32.5% - if the right offer came along rank in order of importance (1 being the most important, 10 being the least),each marketing strategy that you plan to capitalize on in newsletters Social networking Direct mail Blogging Seminars Community events/trade shows Ads in print publications Other Ads on radio/tv 10. Yellow Pages what percentage of your business will come from: (Respondents were able to choose more than one answer and answers reflect the average for each category.) Residential Equipement Leasing % Commercial HELOCs 10% Referral Realtors 30 23% Insurance 8% Other 20 26% Reverse mortgages

9 what percentage of your loans will be put through: Banks Non-banks 48% 26% 14.5% 11.5% 23% 28% 24% 25% 0-25% 26-50% 51-75% % 0-25% 26-50% 51-75% % half their deals would be from new clients. This year, that percentage was 36 per cent. The biggest range was between 25 and 50 per cent, as that was the amount of business that 42 per cent of brokers said they would be new this year. Residential mortgages are still the mainstay of the industry, as they account for on average 67 per cent of the business for the brokers who responded. As for where brokers will be looking for new business this year, there were several categories mentioned, including private mortgages (14 per cent), commercial mortgages (13 per cent) and HELOCs (10 per cent). Most brokers also seem to be happy with their situation, whether it be as an independent or as part of a national broker network. Eighty-seven per cent of independent brokers and 81 per cent of national network brokers indicated that they had no plans to switch their status. As far as looking to amalgamate with other businesses in their area, this year s results showed a majority of brokers (87 per cent) aren t considering that option, up from last year when nearly half of the brokers said it was a solution they were thinking about to stay competitive. which services will you be looking to build over the next 12 months? (Respondents were able to choose more than one answer.) 20 Residential Private Lending 15 HELOCs 10% Servicing 22% Insurance 8% Private Mortgages 10 23% Commercial 3% Development 5 26% Equipment Leasing 11% Construction Reverse mortgages 0 70

10 if part of a national network, would you consider a return to being an independent broker this year? do you use any of the following social networking programs? (Respondents were able to choose more than one answer category.) % Facebook 81% - no 19% - if the right offer came along % 4% 16% LinkedIn Twitter Blogging 10 24% Never 5 9% Other 0 YOU NEED TO DO MORE! Financial Planning, Insurance, Investments, Wealth Management, and MUCH MORE!...we DO! For information on how you can do more for your customers contact Wane Davis, VP Marketing & Business Development Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. 71

11 a majority of brokers (89 per cent) said that they will allocate the same amount or more for their 2011 marketing budget The better economic outlook for 2011 also seems to be having an affect on how brokers are spending money on marketing efforts. A majority of brokers (89 per cent) said that they will allocate the same amount or more for their 2011 marketing budget. As the year progresses, it will be interesting to see how the feelings and thoughts of brokers may change as economic and mortgage industry conditions fluctuate depending on things such as interest rates, the continued effects of mortgage rule changes and most definitely the outcome of the federal election. And as the year progresses, don t forget that CMP likes to hear your comments and concerns anytime, so let us know if you think there s an issue we re missing out on or should be covering more in depth. We re happy to hear from you. CMP are you looking at amalgamating your business with another from your area? 87% - no 13% - if the right offer came along DON T CHANGE YOUR BRAND, change how much you do for your customers!...want to do more, CALL TODAY! For information on how you can add Canadian First to your brand and offer more contact Wane Davis, VP Marketing & Business Development Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, values change frequently and past performance may not be repeated. 72

12 PRESENTED BY COULD YOU BE CANADA S N O 1 MORTGAGE BROKER? COMMENCING MAY 1, CMP WILL BE COLLECTING SUBMISSIONS FOR ITS TOP 50 BROKERS LIST FOR THE FINANCIAL YEAR FOR 2010 DON T MISS YOUR CHANCE TO BE RECOGNIZED AS ONE OF THE INDUSTRY S TOP PERFORMING BROKERS! ENTER ONLINE AT SUBMISSIONS CLOSE FRIDAY JUNE 3, 2011