A few short years ago, there was no hotter car company than Tesla who was touted as the next great thing in automobile manufacturing. Recently, the company has fallen on difficult times. In Barron’s last week, Bob Lutz, a former Vice Chairman of General Motors, commented on Tesla’s current situation: “It’s an automobile company that is headed for the graveyard. The jaws are tightening, and I think in another year or two we’ll see a movie called ‘Who Killed Tesla?’ Elon Musk is a nice guy, but he doesn’t know how to run a car company. They will never make money on the Model 3 because the cost is way too high. He’s got 9,000 people in that assembly plant producing less than 150,000 cars a year. The whole thing just doesn’t compute. Tesla has no tech advantage, no software advantage, no battery advantage. No advantages whatsoever.” Lutz further pointed out that Tesla’s competitors can outlast them because they can make up losses on other models which Tesla doesn’t have “while Tesla keeps hemorrhaging cash.” In my opinion, a very similar scenario is playing out in mortgage banking where companies have been losing money and not addressing outdated financial structures.
As I’ve discussed previous posts, most mortgage banking firms are pretty much the same from the standpoint of competitive advantage. Although lenders claim in their advertising and recruiting efforts that they are unique, the fact remains that the majority have near identical technological capabilities since a limited number of technology vendors serve the financial industry. Technology isn’t a key differentiator in most cases.
If technology is relatively the same, how about loan investors? Again, there are only so many investors and the two biggest ones still dominate the market and most lenders sell their loans to them. What about software? No again. Although a handful of lenders have invested in new technology, 98% do not have the staff or capital to take that step. So, what distinguishes better lenders from the rest of the pack? In my experience, the quality of sales professionals and first-line managers are the factors that make a difference.
For mortgage firms, future success depends on hiring sales professionals who can not only capture new business but generate referrals among their customers’ friends and family. Delivering an exceptional customer experience at every touchpoint is mandatory before home buyers will send business your way.
In today’s volatile marketplace, companies that can create their own “tribes” of consumers that love doing business with them and will recommend them to their circle of friends will win.
Certainly, some companies with credit unions and depositories have an advantage because they already have a relationship with a consumer and can outlast mortgage bankers due to their capital position. But, this doesn’t mean that they win automatically. In fact, if consumers’ present relationship with these types of institutions is poor, the likelihood of switching providers is very high.
Companies and originators who want to cultivate success must figure out how to be easy to deal with; transparent; convenient and trustworthy. These are the qualities consumers want in a lender and it is up to direct managers to ensure that their producers are delivering to prospects and customers.