Mortgage lenders in search of new business could find it by partnering with wealth managers and private bankers that serve high net worth (HNW) borrowers, but only if they are willing to meet exacting standards, according to a STRATMOR Group release.
In the February issue of STRATMOR Group’s Insights Report, Principal Jennifer Smith outlines how lenders can find success with this business segment, which may require more effort than more typical mortgage transactions.
“Although the mortgage transaction is just that, a transaction, the savvy lender who has the chops to work with a HNW borrower and wealth manager or private banker understands that the mortgage is one piece of a bigger, and more lucrative, relationship,” Smith said. “Treating the client very well with the intent to foster a great relationship with the client’s wealth manager can pay off handsomely.”
Smith advises that wealth advisors who have an in-house lending option often do not want to refer mortgages to them. Instead, many would rather direct clients to a mortgage broker or other external contact, but they face risks in doing so.
“Knowing and trusting an LO (loan originator) with a client is a huge leap of faith for a wealth advisor,” Smith said. “Ensuring that the mortgage experience is as smooth as possible and seamless to the client is paramount; the wealth manager cannot control the mortgage experience, yet that experience impacts their client relationship and subsequent income.
“Building that trust takes time, but perhaps not as much as you might think,” she added. “Two or three deals in a row that go well should start to cement that trust. Be warned: Any bumps during those initial three will reset that clock, should you get a second chance at all.”
To pursue HNW mortgages with success, Smith says lenders and LOs should start with a very clear understanding of what a wealth management or private banking advisor expects.
“The value proposition of a wealth management/private banking service requires white glove service and starts with the LO and their communication with the wealth advisor,” Smith said. “It continues through processing and underwriting, where quick access to and communication with the head of underwriting is often necessary. Managing expectations with transparent, two-way communication is the key to success.”
The client experience is paramount in every mortgage scenario, but even more acute with wealth management clients, according to Smith. To them, flawless execution is considered “table stakes.” Despite what some may think, HNW individuals are just as likely to get a mortgage as the average person, according to Smith.
“Being more affluent doesn’t change whether a mortgage is needed,” she said. “Many do not want to deploy liquid assets, especially for a primary residence. The average American millionaire has 40 percent of their investments in real estate, and many have a mortgage on that asset. Liquidity is a driving factor for the HNW client, and strict lending requirements often advance the desire to utilize a mortgage instead of a line of credit.”