What do you see this year for your company in 2016?
We see a record year in terms of transaction volume and value. The end of 2015 and the beginning of this year has been running at a non-stop, record-setting pace. Monthly transaction volume—just for loans above $15 million, for example—is double what we averaged per month last year. I’m confident that we will see that figure increase by as much as two-thirds before the year is out.
What new initiatives are you using to make your 2016 goals?
We constantly look at our internal operations and at how we can improve deal execution. To that end, one of our biggest changes this year is the formation of a new division called QTS, which stands for Quotes & Term Sheets. This is a little inside baseball, but what it ultimately does is streamline the process to ensure that each loan is placed with the best lender by leveraging all company relationships, not just those of the individual brokers.
What we found is that individual brokers tend to work with a few banks, each having different rolodexes. But this new division is made up of financial specialists who shop clients’ deals to Eastern Union’s vast corporate database of lenders—including those who our individual brokers have worked with before—and return to those clients an assortment of the best financing terms available. This frees up the brokers to focus on client service and closing deals. The new process also eliminates the potential for some lenders to be overlooked due to broker preferences.
The benefit for our clients is that they end up getting the best deal from the lender, along with the undivided focus from their broker. We estimate that our brokers spend 20 percent of their day on the back-and-forth involved in locking down financing terms. This is time they can now use to structure the deals for the client. The banks like it, too, because they have a go-to person to work through all the deals that are on the table at the time. From a company stand point, our brokers are noticing that the conversion rate of deals is increasing. Bank wins, client wins, broker wins and the company wins.
How do you stay competitive?
First, aside from our larger clients, we have an unyielding commitment to what we see as a continued under-served market of smaller owners and investors of residential, retail, office and industrial properties. This is what we do, and our clients know that and trust our brokers to be singularly focused. There are no conflicts of interest.
The second factor is we try new strategies that otherwise shock the industry norms. We were the first to cap fees, first at $250,000 in 2014 and when we saw how successful that was, we capped them again last summer at $135,000. And what happened? We had a resounding latter half of the year, especially in December, when others in the industry were reporting static activity.
Finally, as volume soared, we raised our commission structure. It’s the highest in the industry. Top performers escalate to take home 83 percent of a transaction—that’s remarkable.
What makes this business challenging?
The industry is always changing, that’s what makes it challenging, but also gives us new opportunities. Today, as banks have grown, they are marketing directly to customers. But that’s where our technology, expertise and use of a streamlined QTS division comes in and underscores why it’s in the client’s best interest to use a firm that has relationships with all the major lenders in the marketplace to get the best terms. The mortgage business used to be just about people and relationships. Now it’s evolved to include data and technology and our firm is merging all those factors. The value for our clients is our brokers are unfettered by any conflicts and are solely focused on getting the best deal using established business relationships and technology.
What is the most important life lesson you’ve learned?
The only thing we have in this world is a good name. Make sure nothing ruins it.