Dodgy lead generation companies are rife in the mortgage industry and inexperienced brokers could be exposing themselves to legal risk, according to digital growth strategist Martin Khoury, who specialises in financial lead generation.
From fake broker websites to out-of-date mortgage calculators, Khoury, founder of Sydney-based media agency Belief Media, said brokers might have “introduced non-compliance into their business” if they had employed the use of “illegal advertising agencies”.
“We object to the messaging used by some of these organisations that belittle and discourage more effective marketing solutions and strategies,” Khoury said. “More importantly, we object to the baiting practices used to deceive the consumer market – essentially turning the industry into a cesspit of finspam.”
Brokers too have noticed these tactics. Aidan Hartley from Blue Owl Finance said the main two types of bait used were expired interest rates that were applicable around six months ago, and cashbacks that had also recently expired.
“People are naturally feeling vulnerable from the RBA cash rate hikes, it’s understandable that these so-called deals look attractive,” Hartley said. “They often also have a qualifying tool, where basically any data entry tells you you’re eligible, often with some big congratulations message. Fake reviews and even fake profiles also round it off.”
The temptation of easy leads
With potentially legal consequences, it’s easy to wonder why brokers would engage with these companies in the first place.
According to REFS Australia mentor Debbie Hutchings, new brokers in the industry often struggle to generate leads in a volatile market.
“Leads is absolutely the key challenge. They are asking, ‘how do I grow a healthy book in a volatile environment?’,” Hutchings told Australian Broker in March.
Hartley said it was also important to remember that brokers work on commission.
“If you haven’t written a loan for two weeks and the phone is gathering dust, I can see why some brokers may seek this quick route to a promised bounty of leads. We get a couple of emails a day from these companies, so there’s a constant reminder that they are out there to call on,” Hartley said.
“At $25 a pop, I’m sure it would get a lot of traffic and appointments, but I’d hate to be the broker on the first phone call as you’re then backtracking immediately when you have to tell the client the rates don’t exist.”
While the promise of leads could be exciting to some, Hartley said the risk is could invite lower quality clients into your practice.
“If you win them on cheap, you’ll soon lose them on cheap,” Hartley said.
How to generate leads organically
At this point, many brokers may be questioning how can they generate leads.
Hartley said he can get around 70% of leads that come from word of mouth and repeat business, and the rest come from LinkedIn.
“I’d post maybe three times a week and get decent reach with around 10-20 solid leads on the back of them, and all for free of course,” Hartley said.
Hartley said this route took “a lot longer”, but it meant brokers built a community and a brand reputation, rather than just doing a one-off transaction and going in “straight for the kill”.
“Most social media posts are boring as hell – so I personally try and add an element of surprise in there, give them a fresh angle they’ve not seen before, or a little-known trick they didn’t know about.”
Khoury agreed but said he was dumbfounded as to why brokers would choose the easy route if they knew the consequences.
“Why any broker will knowingly engage with a lead-gen company when they have the capacity to introduce their own amazing experience that returns business for cents on the dollar remains one of the industry's greatest mysteries,” Khoury said.
Khoury said his lead generation tactics for his clients revolved around providing integrated systems to brokers that enhance organic leads.
“There's a certain pleasure working with brokers that do things right, and it's a drug watching them achieve tremendous outcomes as a result.”
What can be done about deceptive lead generation companies?
So, what can be done about these lead generation companies?
Hartley said a lot of the lead-gen companies were based overseas, so it would need to be stopped by the broker themselves, or their aggregator.
“I’ve seen one particular refinance company for years posting deals that are way past expired, and I wonder how they’ve got away for it for so long. No doubt it’s generated thousands of leads for them, and they’ll continue doing it until they’re told they can’t,” Hartley said.
While he has called for more stringent regulation, Khoury said that brokers, who had to adhere to best interests duty, should not begin a relationship by exposing their clients to an illegal lead generation service.
“I personally hold the opinion that any broker that engages with any company that operates 'illegally on their behalf' should be expelled from the industry,” Khoury said.
“It's harsh, but surely most brokers are aware that they're introducing blatant non-compliance to their business. How dare any broker expose genuine borrowers to a 'deception funnel’ – it's literally criminal.”
Have you come across any suspect lead generation companies? Comment below.
