Private consultant or a large mortgage consulting firm?

One of the questions I'm often asked is whether it's worth hiring a private consultant, like myself, or a "large" mortgage consulting firm. First of all, I welcome anyone who asks this question. It means they have understood that they won't receive good advice from the bank, but rather advice that benefits the bank. This is the first step. Regarding the decision of whether to hire a private consultant or a firm, I am of course biased, as someone who not only wants you to choose a private consultant but specifically to choose me.

But despite the interest in "bribery," I would like to raise a number of points that I believe are true in many areas and not just for mortgages. At the end of the article, I will explain why I buy from Eli at the corner store and not at the giant supermarket. It will all come together.

Why I prefer working with people over a "company"."

When working with a specific person, let's call them "Pomegranate" for the sake of discussion, you can inquire in advance about their education, curriculum vitae, what they have already accomplished in their life, and why they believe they can assist you.

When working with a company, you talk to one salesperson or another who tells you how wonderful the company is. The company may indeed be wonderful, but ultimately we’re not interested in the fact that it has 90% satisfied customers (if that’s the case). What matters to us is who the representative will be who works with us, and we want them to deliver the best possible results. In reality, we have no way of knowing whether the representative we’ll be assigned started working at the company a decade ago or ten days ago. We have no idea before the meeting what their background is or whether we have basic chemistry with them. Chemistry is important. A good advisor touches on many points, some of which are at the core of relationships and family life. Talking about money can certainly cause tension, and it’s important that at this stage we’re dealing with an experienced person—not just someone who knows how to use Excel well.

 So we have no idea who the advisor we will get from the company will be, but by observing the job advertisements of mortgage consulting companies, we can know what is important for companies for their advisors to have. We will look at a number of such advertisements that I collected by searching job sites online:

From observing this collection of job ads, all gathered in April 2016, one thing can be learned: the most important thing for companies that provide mortgage consulting is that their consultants They will know how to sell you the advice. The quality of advice is, at best, second-rate. A bit of relevant education? For some companies, it's important; for others, not, and there are even those where a degree of financial familiarity is a kind of advantage, but definitely not essential. The "advisor's" profile as a salesperson stems from the marketing methods of most of these companies: come for a free meeting, and we'll see from there... Well, if everyone comes for free meetings, you need someone who knows how to sell.

The decision to buy an apartment and take out a mortgage is one of the most important and significant decisions you will make in your life together. In my personal opinion, the rising divorce rate (30% of the total population, according to what I’ve read, 50% among the secular Jewish population) is directly linked to financial pressures.

As readers of this article, you are among the 20% who don’t do what most people do—go to the bank for advice. Instead, you seek out information and research things on your own before making a decision. But think about this: if the advisor in front of you is paid based on whether you take out a mortgage or a sale goes through, what are the chances they’ll tell you that you’re about to make a deal that’s too risky and will ruin you financially in the future? Why would the company that employs him even build a predictive tool for such a possibility, even if the advisor wanted to do his job faithfully?

This is why I don't have "free consultations." I absolutely believe that the clients to whom I've provided the greatest value are those clients to whom I said that even though the bank approved a mortgage of 950,000 shekels with a monthly payment of 3,500 shekels, this is not the actual monthly payment they would be making, and that if they don't have the ability to pay around 5,000 shekels a month, it's better not to sign the purchase agreement.

If the advisor sitting in front of you is "nearing graduation" or has just graduated, they might be brilliant, but as a single guy or girl, in their first job after their degree, living with a roommate in a rented apartment, do you really think they have enough life experience to advise you on your financial system for the next decade with a mortgage, children, etc.? Do they have enough ability and desire to create a good atmosphere for you to make decisions in case of disagreements? Even if the company they are employed by has given them workshops and taught them for hours how to be mortgage advisors, you can see above what is actually important to the company – A sale to be executed.What will happen to you in the next twenty or thirty years is of no importance whatsoever to society, and please excuse my bluntness.

I've been asked by several potential clients if a large company is less good, how is it that they charge much higher prices? This is of course a fixation we have in our minds: high price = high quality. It has been proven many times that this equation is not necessarily true. But if we assume it is true, I can assure you with great confidence that even if you pay twice as much at a large company as you would with a private consultant, the consultant sitting in front of you will ultimately receive a lower salary than that of a private consultant. Everything else will go to the CEO, the secretary, the cleaner, luxurious offices, and the landlord. A private consultant, by nature, is a much leaner organization and all the money you pay goes to cover direct expenses and their children's tuition. And to answer your question, how are clients willing to pay higher prices at a company? A company has a budget for advertising, marketing, and "sales sharks" that allow it to find clients willing to pay higher prices.

Who advises you at the bank?

At Mizrahi Tefahot Bank:

At a different bank:

Notes:

1. Generalizations are inherently unfair to those who fall outside of them. There are excellent companies. However, as mentioned, even in an excellent company, it is more difficult to know if you will receive excellent results. One of the things worth paying attention to if you are examining a company is whether its website shows who the people behind it are. Who are the owners? The management? The advisors? In a company where people are identified by their names and resumes, it will be more important for everyone involved to protect their good name. If the company's name is that of its founder, then you can trust it much more than a company like "Wonderful Mortgage" (a name I just made up and does not refer to any existing company).
2. There are private advisors who, to put it mildly, are not good. Mortgage consulting is not a regulated profession, and anyone can produce a business card that says "mortgage advisor." Don't be shy about conducting a phone interview before meeting. Don't be tempted by a "free introductory meeting." Your time is valuable. Try to gauge whether your advisor is motivated by a desire to "strike gold" in a developing field or if they have the motivation and ability to truly advance your interests.
3. Thank you to my dear client, Limor, who encouraged me to write this article.

Before finishing

As I mentioned above, I overwhelmingly prefer to work with people rather than companies. For example, I prefer to shop at the corner grocery store rather than at Shufersal or similar chains. I like knowing that I'm supporting Eli at the grocery store; instead of Tycoon A or Tycoon B, who pay their employees minimum wage.

So there are those who claim it's more expensive at the grocery store. I think even that claim is wrong.

What will cause a family a larger monthly expense? A bottle of wine for 40 shekels from the grocery store or three bottles of wine for 100 shekels from the supermarket?

In most cases I've checked, three bottles of wine for 100 shekels will cause us to drink more wine and ultimately lead to a higher monthly expense on wine. This is precisely why the supermarket offers us this deal in the first place. Similarly, one can look at many things in the supermarket as temptations that cause us to spend more money, and even if a particular product is cheaper, the overall basket will be more expensive. And of course, I haven't even talked about the difference in time between walking 200 meters to the grocery store versus getting in the car, standing in traffic, looking for parking, wandering through all the aisles, waiting in line at the checkout, and returning home angry (in my case).

And one last thing, when I support Eli, who lives down my street, Eli will most likely have money to pay my daughter for babysitting or me for mortgage advice, and so ultimately the whole community will benefit. This idea was first proposed by Henry Ford, whose colleagues all laughed at him because he paid his workers too much. His answer was: this way they will have money to buy cars.

Eli, thank you for getting up at 6 AM and closing around 7 PM, and in between, receiving everyone with a pleasant face and joy.