Hiring Guide for UK Mortgage Brokerages in 2024: Self-Employed VS Employed Mortgage Brokers

Coming into 2024, there is a clear buzz across the mortgage sector and despite the dreaded recession, brokerages and advisors are feeling positive about the year ahead.

Companies need good Mortgage & Protection advisors more than ever in a market where there is only circa 16,000 regulated advisors.

For mortgage brokerages across the UK, the decision around whether to hire employed or self-employed brokers remains crucial, and the shifting landscape may mean it’s time to review your existing model and consider what you are offering.

As ever, each option has its own unique set of advantages and challenges. Our experienced finance professionals here at Integro have compiled a useful guide to help you make the right decision for your business with a deep dive into the merits and challenges of recruiting both employed and self-employed mortgage brokers for your business.

• EMPLOYED MODEL

Employed Mortgage Brokers: The Pros

1. Greater stability and control

Sticking to the employed model generally offers employers a high level of command over key controllables, such as work hours, target setting, and consistency within team culture. This structure is conducive to maintaining a consistent level of service, a high performing environment and a unified brand image.

2. Earning potential (Profit)

For Employed brokers that are fed a consistent volume of leads, this can be a highly profitable situation for any business as long as the business levels are maintained and consistency of leads is there. The basic salary + commission offering would be a cheaper solution if you can offer individuals sufficient leads. Contrary to self-employed where the commission paid out would be much higher. (Typically 50% to 60% on leads provided and up to 85% on self-generated business)

3. Team Collaboration

An employed workforce is generally understood to foster more of a sense of teamwork, collaboration and innovation. Staging regular team meetings and shared office spaces encourages real-life exchange of ideas and experiences, ultimately enhancing the collective expertise of the brokerage; and often taking responsibility for developing new approaches to client solutions.

4. Consistent Brand Image

Great brokerages aim to create an air of trust and credibility around their brand. Having an employed workforce helps to contribute to a consistent brand image as the employees proudly represent and feel a part of the company they work for. This can lead to improved client perception of the business; a crucial aspect in building a reputable brand in the competitive mortgage market.

Employed Mortgage Brokers: The Cons

1. Higher Overheads

Salaries (plus pensions, holidays, sick pay and N.I etc), benefits, office space, and other associated expenses can strain the financial resources of a brokerage, effecting bottom line and margin. It's essential to get a detailed and thorough understanding of the totality of these costs when deciding whether to take on employed or self-employed brokers. If profitability is your main goal / issue, this factor is likely to tip the balance.

2. Limited Flexibility

Employed brokers are often expected to work fixed hours, limiting the flexibility of when they are prepared to input their time. This could be a key factor when it comes to adapting to client needs, potentially leading to missed opportunities. In a rapidly changing market, adaptability is a valuable trait that should not be overlooked.

3. Dependency on Individual Performance

The success of a brokerage with employed brokers is often heavily dependent on the individual performance of each broker. If one broker underperforms or leaves, it can impact the overall productivity of the team, creating potential vulnerabilities for the business. This is also dependant on the leads and support they are provided with. Employed Brokers will always expect leads, whereas self-employed brokers are typically more established, self-sufficient and usually have their own client bank. (Or at least know they need to self-generate a lot of their own business) 

·         SELF-EMPLOYED MODEL

Self-Employed Mortgage Brokers: The Pros

1. Cost Efficiency

Self-employed brokers operate as independent contractors, reducing the financial burden on brokerages. They hold their own responsibility for their own expenses, including office space and equipment, which can lead to significant cost savings for the brokerage.

2. Flexibility and Autonomy:

Self-employed brokers generally prefer the freedom to set their own schedules, manage their own work-flow and work independently. This flexibility can be attractive for brokers who value autonomy and prefer a work-life balance tailored to their needs. Aiming to attract brokers who work in this way may lead to a an overall more motivated workforce.

3. Performance-Driven Compensation:

Compensation for self-employed brokers is directly driven by their individual performance. This can be a motivational factor, driving brokers to excel and contribute to the brokerage's success. A commission-based structure aligns the interests of the broker with the success of the business. Higher commission splits for self-generated business is also attractive to more established brokers, but typically most brokers will always appreciate enquiries or ‘leads’ regardless.

4. Diverse Skill Sets:

Self-employed brokers bring diverse skill sets and experiences to the table. They may have unique strategies for client acquisition and retention, adding a variety of approaches to the brokerage's overall business development and performance.

Self-Employed Mortgage Brokers: The Cons

1. Limited Control

Brokerages have limited control over self-employed brokers. While they may set performance expectations, they cannot dictate work hours or office protocols. This lack of control can impact the consistency of service and brand image.

2. Potential for High Turnover

Self-employed brokers may be more prone to changing affiliations or establishing their own brokerages. This can result in higher turnover rates, leading to a loss of experienced professionals and disrupting the continuity of client relationships, as well as increased recruitment costs if the retention is low. (They may also want to take their client bank / network with them when they leave)

3. Varied Brand Representation

With self-employed brokers operating independently, there is a risk of varied brand representation. Each broker may have their own approach to client interactions, potentially leading to inconsistencies in service and brand messaging. (Values, process requirements and obtaining google reviews, social media activity etc)

Conclusion

Ultimately, the decision to hire employed or self-employed mortgage brokers in the UK hinges on the unique goals, values, and resources of each brokerage. You should also consider why a broker would want to join you instead of another brokerage and stay for the long term. 

Striking a balance between stability, flexibility, control and autonomy, is key to building a successful team.

The choice should align with the long-term vision and growth strategy of the brokerage, ensuring that it remains adaptable to the ever-evolving landscape of the financial market. 

Integro offer tailored advice, industry specialist consultants, and guaranteed results to help you identify, attract and secure the right people. 

If you are considering a review of your proposition, Integro can support you in making sure it’s attractive to the market and in line with your goals.