More on Originator Recruiting: Commission Splits vs. Income Earned
First things first....I hope everyone had a great Thanksgiving.
Every year 300+ mountain bikers ride a 4.5 mile, 2000 foot climb up the Kennedy Trail in Los Gatos, CA to share a Thanksgiving Day Picnic. It's a very steep, remote ride with amazing views of the entire Bay Area. This year I missed it, but HERE are some pics of the event:
Ok, I stand corrected by a few readers who said, “it’s all about the money”. In other words, loan officers want to get a competitive split. While I agree, I also believe both the loan officer and the operation (branch manager) need to earn their fair share of income.
Early this year I attended a loan production seminar in Lake Tahoe sponsored by C.O.R.E. Both loan officers and production managers were present at the event. I had two distinct takeaways from the experience:
1. Branch managers need to consider the "end" in mind when recruiting, hiring, and managing loan officers.
The "end" is how much income should be made from operating and managing a branch. Several managers at the event stated if a branch can’t generate a minimum of $100K a year, not including the commission the manager generates, they should ditch the branch idea and go work as a loan officer somewhere.
Furthermore, the manager should calculate a minimum amount of revenue each loan officer contributes to the branch. Revenues can be a combination of gross commissions, fees, lender incentives and gain-on-sale (mortgage bank affiliation). Revenues are impacted by the percentage of gross commissions – the higher it is, the more revenues for both loan officer and branch.
2. Another take away was a recruiting technique used when loan officers bring up commission splits early in the interview process.
The dialogue might go this way after a few brief pleasantries:
Prospect: So tell me, what’s your commission split?
Manager: Before we talk about that, let me ask you what you made last year.
Prospect: Well, I made $100K.
Manager: Ok, what if I could help you make $200K this next year? Would you be interested?
Prospect: Of course, I’d love to make $200K a year.
At this point, the manager needs to go into detail about the specific value props the branch, the company, and himself/herself will provide to help the originator double their income next year. Stay focused on discussing the tools that will lead to the loan officer earning $200K; avoid talking about the actual commission split.
If the prospect is only focused on splits, he/she is probably leaving their current company for one reason: to earn more money, something that is likely to occur again in the future. It’s kind of like someone cheating on their spouse, after you do it once, it becomes easier to do it again and again.
Garrett, Watts & Co.
Helping mortgage lenders increase revenues, control costs, and better manage risk.