Who Needs a Broker?

You do probably..

In an arena that is mainly agent centric, let me take an unpopular position – most real estate agents actually benefit from the presence and symbiosis of the agent broker relationship.  Too often the relationship is typified as parasitic rather than symbiotic, but the stereotypes seem to be generated without regard to the reality.

The stereotype of a broker who does nothing while the poor agent does all of the work is perpetuated by agents whose perspective is limited by their experience, and by brokerage models fueled by compensation driven recruiting programs that discourage the salesperson from recognizing any contribution to their success or financial well being at their current brokerage firm.

The Myth of the RE Agent as an Self-Contained Business

About 30 years ago business models were created that were based upon recruiting agents rather then selling property. The incentive for the broker in these business models was no longer based on the agent’s success, but on the number of agents recruited by the brokerage to pay desk fees. Though the business, like any other was centered around the benefit to the owner (broker) of the business, the purpose of the business operation shifted from selling real estate to recruiting agents. In fact, the most successful national example of this business model directed all of their advertising dollars at the industry rather than the consumer.

Now please, don’t mis-read what I just wrote. I didn’t say that the agents recruited by these companies didn’t sell a lot of real estate, I said that the business made its money from recruiting agents, not from the sales made by those agents.  To further that need for recruiting, the advertising and recruiting campaigns were aimed at creating a vision of the real estate agent as a self-contained business. This made it easier for the brokers in those firms to establish a point of difference for their firms, and appeal to the egos of the real estate agents so that they might be recruited.  Expert at recruiting, this business model positioned the agent as the center of the real estate business, positing that the professional agent was the source of all of their business, needed no supervision, and was actually being held back in their professional development by the relationship with the traditional broker.

Over the past 30 years, in my marketplace at least, this business model has not been successful. Calm down- I ‘m not saying that there aren’t successful agents or companies from this franchise, just that the original business model hasn’t proved viable(at least in our marketplace). In fact, to my knowledge, there is not one franchise of that model in our marketplace that is completely a 100% commission operation- perhaps because that model just doesn’t work for every agent.

Now let’s get off the topic of business models (because that really wasn’t what I wanted to talk about here anyway) because that could be the topic of another post, and frankly my opinion of someone else’s choices really shouldn’t matter to anyone except me. As long as you’re doing business in an honest and ethical manner I wish you the best of luck whatever your business model.

So What’s the Point?

Asa result of this franchise’s very effective recruiting and marketing techniques, a number of imitators developed, and with pressure on the more traditional business models, there were more and more conversations about the agent as the source of business, and as a self-contained business. And this led to agents questioning the role of the broker in their companies.

But I don’t think that’s as valid a position as many agents think. In fact, I find it ironic that many of the agents that complain about their brokers often go out and open  their own firms and after the economic realities of our business push many of their businesses into paths that have already been trod by others (witness the evolution of the franchise I mention above)  they become the brokers that their agents complain about.

I believe that there are good brokers and bad brokers, and every shade in between, though the generalities never allow for a spectrum of competency. But let us assume for the moment that the ratio of competent to incompetent brokers and the ratio of competent to incompetent agents are roughly equal (which I think might be valid since one group begets the other).  Would it not be reasonable to assume that there may be some prejudgement by the agent (who has never been a broker) about the risks the broker takes, the services they provide, and the return they are entitled to for operating their business?

Does a Broker Need an Agent?

Many brokers were active salespeople with large referral bases and a slew of experience. In many cases, they could operate a really small office with a really small staff and make a living without supervision of anyone else. But that’s not why we go into business. We go into business to create something that is greater than our individual efforts. Something that has a life of its own, and can operate when we are not present.

We open a business to grow something that will generate profit from more than our individual efforts. And that requires leveraging our firm to make desk rentals, or to retain some percentages of the fees charged, or to generate business for peripheral companies that we own. All of which requires more than a staff of one or two. Business wants to utilize the economies of scale, and leverage the efforts of a larger group so that insurance is more affordable, and the risk of operation is curtailed by operating policies and procedures.

Even with all of that, ineffective agents don’t make a company profitable. For every good agent, there are a few mediocre or ineffective agents, and they don’t do any good for the firm they work for, or for their broker. As brokers, it is necessary to identify these folks and help them find other jobs where they can make a contribution.

But it would seem that the answer is “yes” – for most companies to be effective and profitable, it is desirable to have competent agents working for the broker.

And Does an Agent Need a Broker?

There are lots of great agents that generate much of their own business, but that doesn’t mean that there is no purpose for the broker. As a broker, I cannot count the number of times I have saved experienced and competent agents from litigation that would have crippled them, either because of policies and safeguards I had put in place, or from handling situations that needed a third party to diffuse them. And, in my business model, our firm provides substantial services for our agent population, including lead generation and management.  I am (by necessity) prejudiced towards my position, but that doesn’t make it less true.

Agents benefit from the company’s training efforts, recognition of the importance of Professional Standards training and knowledge of the arbitration and ethics procedures. And they benefit from mentoring and counseling from the firm’s management team. From a simple ‘kick in the pants’ or an ‘attaboy’ when its deserved, to the more complex goal setting and business planning available in some firms, a management team can make any agent more effective (if the agent wants then to). And it is here when many brokerages have trouble meeting the challenge – and when they do their agents leave.

Finally, there is an espirit de corps in many firms, small and large which is fostered by the culture in the firm, often a result of the broker’s personality, and the people that are attracted by that personality. And that can provide incentive for success that the individual might not find on their own.

Again however, I need to point out that an ineffective or absentee broker may not be the source of good things for his or her agents, and when that’s the case, they may try to find somewhere that they can get the help they lack.

So Do We Need Each Other?

I guess we don’t – unless we want to have greater success than we can achieve on our own – and then I think we do need each other – but symbiotically, not parasitically. When we each contribute to the other, like a good marriage, we end up creating more together than we could ever achieve apart. But like a marriage, the symbiosis works best when there is mutual respect, an understanding that the other person has value, and deserves to reap benefits from the relationship

Image courtesy of creativecommons.org