Can I be a mortgage broker and and insurance agent?

Question

Here's my situation:

I'm 9 months in to owning an independent insurance agency. Things are going good, we're growing and profitable, but this business model is not a get rich quick scheme. I am fully willing (and prepared financially) to suck up the 3 year starvation period. A good friends dad approached me to see if I would be interested in opening a mortgage brokerage in my town. He is from out of state and his brokerage is looking to expand. He would be my mentor, train me, and allow me to use his service staff remotely until I could justify my own. He's doing over $30M of production, granted he lives in a market that is about double pricing what mine is, with 20 years expirience.

First off is it legal? Could I be a licensed mortgage lender along with owning an independent insurance agency?

Second off is it feasible? Right now from an insurance standpoint I get 80% of me leads from realtors anyways... So I'd lose 20% of my referral partners because now I'm competition for the banks(can't blame them)... I'd just double down on my real estate agent partners and focus 100% on those relationships.

Right now I make about $300/yr per house/auto combo package.... every year forever until the client leaves. His brokerage pays 1%-1.4% of loan depending on production. Average home is about $200,000 in my market. So instead of making $300/year I would be making $2,000 year one along with $300 insurance commission as long as I hold the client. I like that math a lot better.

Seems like a too good to be true opportunity which is why I'm asking.

Thanks in advanced.

Andrew Postell · Answer

@Travis Tannahill what you describe is legal but is it feasable?  I mean, why not be an insurance agent, mortgage broker, an attorney, a chef, police officer, etc?  Just have 10 jobs.  You'll make 10 incomes, right?  There's a threshold somewhere in there where you won't have time to do everything.  This is completely allowed as long as you disclose it to both companies and your regulatory bodies.

Joe Stretch · Answer

@Travis Tannahill Travis, I currently own an insurance agency and am also a licensed MLO.  The advice you are getting above is very sound and there is a lot of merit in picking 1 and sticking with it.

In that same breath, personally speaking by doing both, I am able to bring greater value to my clients but the trick for me was to hire staff to pick up the busy work and allow me to focus on increasing and maintaining my client base.  It is legal, it is ethical and it is possible.  Make sure to disclose everything to every governing agency.

What I've found personally is that I have more meaningful conversations with my clients and they feel more comfortable only having to divulge their financial "life story" to one person opposed to many.  I only average 1+ loans a month and granted, if I only did loans  that number could be much higher, but I find great satisfaction is doing both and these loans are coming from people I am already having insurance conversations with so I'm not spending resources originating the loans and I don't market for them directly.   My 2 cents...

R. Brown · Answer

Of course you can do both. I currently own an Insurance Agency and don’t count on the three year starvation period. That can be more like six years. But State Farm the largest Insurance Company with the most Agents, that is a requirement. You have to handle loans, insurance and financial products. State Farm Have mortgages and car loans, credit cards and mutual funds. If you’re a new agent that is required.

Jason Bott · Answer

@Travis Tannahill I second the "focus on 1" statement.

Also, if you are good at the insurance piece, you will out pace the mortgage commissions over time because of the residual income P&C offers that mortgage sales does not.

Chris Mason · Answer

I'm going to say pick one and specialize. Starting a practice takes time, focus, and energy. There's a reason you don't see a lot of people on these forums with both an insurance and NMLS license in their signature block. Actually, I can't think of one.

If you get to the point that your insurance practice is running on auto-pilot with you only putting 20 hours a week in (insurance biz is known for this, mortgages not so much), then it might be something to consider.

Most new businesses fail. I'd focus on making one not-fail at a time...

Can I be a mortgage broker and and insurance agent?

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