Since as far back as the industrial revolution, successful businesses have sought out processes and cost efficiencies to improve their bottom line. By the 1980s, when many organisations had diversified their offerings, outsourcing was starting to make good financial sense: get someone else to perform a part of your work for a set fee, so you can focus on your core business. As a result, outsourcing has become a common business practice in many industries, and has increasingly been adopted by mortgage brokers. Typically, businesses outsource functions like telecommunications, legal advice, accounting and IT. However, the drive to find more business efficiencies has led to other ‘core’ areas being handed over to external providers, often competencies which have traditionally been regarded as sacred to an organisation – for instance, its relationship with its customers. Most of the time outsourcing will save costs, it will improve productivity, allow businesses to scale their operations and make it easier to run the business.
To outsource or not
As a general rule, only functions that are not part of the competitive advantage for the business should be considered for outsourcing. When making your outsourcing decision, you need to consider four key questions. First, is the work value-adding? If it does not result in direct revenue, the role is ripe for outsourcing. As an example: for a mortgage broker, the production of compliance documents is essential, but does not directly result in any revenue gain – so outsource away. Are your staffing costs high? We all know that the cost of in-house staff is more than just salary. It includes office space and equipment, cost of recruitment, training, supervision and employment separation, as well as annual leave and sickness coverage. Outsourcing can reduce the costs and the complexity of employing in-house staff. How do you cost your time? If you’re a sole operator, there is often a cost in sales lost due to your time being dedicated to the non-value adding activities. And the final question is whether your provider is as good or better than you for that particular part of your job.
Mortgage broking functions outsourced
It was inevitable that mortgage brokers would tap into outsourcing, using third parties for functions such as loan processing, loan tracking and some elements of customer service (all of which we provide through XSOURCE). These are functions which fulfil the outsourcing criteria: they are non-core, not part of a broker’s competitive advantage, they are cost beneficial, and can be done by external specialists who are better at these roles than mortgage brokers. There are also some mortgage-broking businesses which outsource lead generation and aspects of marketing.
What to look for
When you’re selecting a provider, your due diligence process should cover the following areas, as a minimum:
- Team experience
- Business sustainability
- Scalability
- Data security practices
- Contract terms
- Is there a conflict of interest (i.e. are they mortgage brokers as well?)
- Who else uses them
Due diligence is especially vital for privacy law considerations. If your business is going to disclose your clients’ personal information to an outsourced provider, you need to take a good look at your potential partner and their practices in this area. Data security is another critical factor. Regardless of their location, the provider’s data security practices (and yours) should match those of the large banks. Outsourcing can be a long-term or even a permanent solution for your business – if you do your homework and source a provider that has sustainable work practices, as well as the ability to grow and maintain quality over time.
Overseas vs. domestic
Should you stay local, or look overseas for a provider? Again, there are a number of considerations.
- Cost benefits (overseas providers are more cost beneficial)
- Quality and scale (overseas providers generally attract higher calibre and more dedicated staff),
- Time zone benefits (e.g. XSOURCE’s Serbian office processes deals overnight, making them ready to lodge within 12 hours of receipt)
- Privacy considerations (overseas disclosures need to be included in the broker’s privacy document)
With many large financial institutions processing their loans overseas, and with the overall benefits of this option, the likelihood is that mortgage broker outsourcing will increasingly be done offshore.
Collaborating with your provider
In our experience, even with all the essential questions asked and answered, and due diligence complete, an effective outsourcing relationship has one more pre-requisite: The broker and the provider have to be on the same page, to be able to collaborate, transparently, at every step of the process. We’ve developed Salestrekker, a CRM solution that allows brokers and processing staff to collaborate seamlessly, and with XSOURCE staff now numbering more than 60, servicing more than 250 clients, the tech has proven itself many times over.
Team-based workflow management
Salestrekker allows XSOURCE staff to collaborate in real time with their brokers via file notes, tasks, VOIP phone, SMS, email and live chat. Our brokers have a live view of the deal status which they can also share with their own clients and business partners. Loan updates keep brokers up to speed with their files so they can focus on growing their business rather than shuffling paperwork.
XSOURCE staff can also collect any missing documents from the borrowers and keep them informed via email, SMS and notifications via an iOS app. These kinds of solutions need to be easy to use, simple to understand and have transparent service terms, which is at the heart of Salestrekker; you also need staff who are well trained and supervised so you have fast turnaround times and quality outputs. XSOURCE has no set up fees and no minimum volumes or minimum time commitment.
* The original article by Dalibor Ivkovic was published in June 16 issue of The Adviser magazine.