A $500 Million RBC Group Becomes Brokers

A $500 Million RBC Group Becomes Brokers

A group of five high-performing RBC mortgage specialists have decided that the grass is greener in the broker world. The group formed a company called Denova Group and has joinedMortgage Alliance, a national mortgage brokerage.

Mortgage Alliance President & CEO Michael Beckette pegs the team’s trailing 12-month volume at half a billion dollars.

We spoke with David Goncalves, one of the group’s founding partners, to find out why he left the “golden lion” to be an independent.

Goncalves, a 10-year RBC vet, has been a top-10 RBC mortgage specialist (in total sales) for five years running, says Mortgage Alliance. RBC has somewhere around 1,500 mortgage specialists.

The Why

“It came down to more entrepreneurial activities,” said Goncalves, who wanted to expand his private and commercial lending.

Rates were another key issue. “The rates are similar,” he said. “The difference is that banks are cyclical and they go through stages when they’re competitive and not competitive. In the broker word it’s a lot more consistent.”

“The ability to advertise (good rates) gives brokers a bit of an advantage,” he added. Banks don’t allow mortgage specialists to mass-advertise the lowest rates.

“One of the things that restricted us [at the bank] was that when we’d send up an advertisement, it had to have a marked up rate." That’s no longer necessary as a broker, he says. “Now we can send out mass marketing with best pricing. It’s exciting.”

Rates Aside

“The biggest advantage of brokers is not so much rate, but selection of products,” Goncalves notes. RBC, for example, offers one lump-sum prepayment option (10% lump-sum prepayments makeable once a year). By contrast , brokers can access lenders with up to 30% lump-sum prepayments, makeable anytime.

“As a broker, you might start off with 10 lenders that fit the client’s bucket," he said. "Then you can start narrowing it down to one or two lenders that meet the client’s needs very well.”

Goncalves also cites compensation pressure as a factor in his group's decision. With banks forced to match brokers, specialists often have to give up compensation to “buy down” their rates. That's sometimes hard to swallow because they make less per deal to begin with.

And then there’s the matter of creditor life insurance. Banks often use quotas to pressure mortgage specialists to sell creditor life insurance. Sometimes they’re expected to sell insurance to one out of every three applicants. But many clients don’t need it. Moreover, bank-issued creditor life is typically inferior to regular life insurance, or even broker-offered creditor life (which is portable, unlike most bank policies).

Joel Sida Mortgage Broker extracted from Mortgage trends