I was at a coaching event last year listening to an extremely successful loan officer, with a huge team, explaining how he maintains strong client relationships by offering much more than just mortgage services, e.g., moving services; contractor referrals; financial analyses; rate monitoring; house valuation and equity updates; etc.
It resonated b/c we of course do the same thing, and then some.
But, another gentleman in the group, a very successful mortgage bank owner whose business is mostly centered in a very affluent East Coast market laughed and said… “good luck with that strategy; we give the world to our millennial clients only to see them leave us when our rates are off by as little as 1/8%.”
There is an axiom in business that you have to choose either a high cost, high service niche with higher margins (like Nordstrom) or a low cost, no frills, lower margin niche (like Walmart), but you cannot be both.
The loan officer above operates in slightly lower end markets than the mortgage bank owner, and he has been able to charge slightly higher rates in exchange for his superior service.
So, in other words, he is pulling off the Nordstrom Model.
The mortgage bank owner’s clients, however, tend to be more affluent and sophisticated – and less loyal – and they therefore demand both the lowest rates and the best service/client experience.
I share this story b/c this is the way every industry seems to be heading, and the above axiom no longer applies.
Millennials in particular who are used to one-click shopping, easy price comparisons, and stellar online experiences demand that retailers and service providers be both Nordstrom AND Walmart.
We were all “fat and happy” last year, as business surged in response to the drop in rates and increased demand for homes – and we could all get away with Nordstrom margins pretty much no matter what.
But, when business slows down at all (like it already has in the mortgage world with the increase in rates), we will all have to figure out how to be both Walmart and Nordstrom, as millennials will tolerate nothing less.
I am not saying this b/c I am some kind of guru or expert; I am saying this b/c I have seen this proven true time and again over the last ten years every time the market slows down even a little.
As a result, our business strategy teams (overview, marketing, and tech) now focus entirely on becoming both Nordstrom and Walmart, by offering more touches, better experiences, and more services after close – while also constantly lowering our rates.
We are achieving this with far better technology, much less expensive virtual help from overseas, economies of scale, and constantly increased efficiencies.
We are of course doing what every other company is doing that wants to be around for the long haul; we know that we have to learn how to survive with rates that are as much as 1/4% to 3/8% lower than where they are now relative to our competition while still offering stellar service.
But, what always amazes me is the number of companies that are not doing this.
If and when the mortgage and real estate industries contract (or contract further), the companies that are not “both” Nordstrom and Walmart will probably not survive.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167