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- Behavioural Economics
In this series, we use a Behavioural Economics lens to help you understand and overcome some of the barriers you may encounter when introducing your customers to Manulife One.
Understand the what and why of their current banking
For most customers, a mortgage is a loan with a fixed term and regular, required payments. Many are not even aware that there are other kinds of mortgages. Before you introduce them to Manulife One, it can be helpful to first understand how their banking is set up. Start by making a listing of their bank accounts, loans, credit cards, mortgage(s) and any other banking products they have. For many clients, this could be a fairly long list.
Next, ask them to talk about why their banking is set up the way it is. They may have set things up in this way for a specific reason. Or, they may simply have accumulated various banking products over time as different needs or offers arose.
As the final step of the information-gathering phase, ask them to talk about what they like about their current method of banking, and what they don't like.
Understanding why their banking is set up as it is, and what they like or dislike about this setup will help you develop and position a customized solution later in the conversation.
Introduce the idea of non-traditional banking
Let's start with a couple of definitions.
- Traditional banking refers to addressing each saving and borrowing need with a separate product. This can be thought of as an account for every need and for every need an account.
- Non-traditional banking refers to addressing most of your savings and borrowing needs with a single, integrated banking solution, such as Manulife One.
There are generally two ways to help customers see the value of non-traditional banking – rational or emotional. Both speak to very real benefits – but most customers will connect more to one than the other. If you've worked with a client before, you may already know which approach will resonate with them.
Below, we look at the first of these – the rational argument. In the next article, we'll tackle the emotional argument for non-traditional banking.
The rational argument – more bang for your buck
When most people think about the cost of banking, they think about the fees they pay and the interest rate on their mortgage and other loans. They're much less likely to think about the efficiency of their banking overall. Stated simply, the rational argument for non-traditional banking is that, over time, it can cost a lot less than traditional banking.
Non-traditional banking can reduce the overall cost to your client by:
- Consolidating their debt at the lowest rate
- Using their low-earning deposits and savings to help reduce their debt - and therefore their interest costs
- Automatically using all excess cash-flow to reduce debt
While the concept intuitively makes sense, a lifetime of traditional banking may make it difficult for clients to get their heads around this new concept. And, there may also be some less obvious behavioural biases holding them back.
Here are two relevant biases, and suggestions for how to overcome them:
- The zero-price effect
Zero price effect refers to a phenomenon whereby the demand for a good, service, or commodity is significantly greater at a price of exactly zero compared to a price even slightly greater than zero. In other words: People love free stuff. Something that's free is much more appealing than something that's simply inexpensive.
But here's the problem: Something doesn't actually have to be free to trigger this effect. People just have to think it's free. And, when people get a no-fee chequing account, or get their account fee waived, they may believe they're getting their banking for free.
In fact, if they also have debt, keeping their money in a savings or chequing account is costing them a lot. They're effectively paying extra interest on their loan for each dollar of their savings they don't use to reduce that debt. The challenge is getting customers to understand that their no-fee account may not, in fact, be free.
Tactic: Leverage loss aversion
To overcome the zero-price effect, use a simple example to show customers a how, if they also have debt, their no-fee account may not, actually be free.
For example, $10,000 in a savings account at 1% simple interest would earn $100 in a year before tax. $10,000 of debt at 4% simple interest would cost $400, after tax. That's a difference of $300.
While this difference may be easy for the client to understand, they may find it more or less compelling depending on how it's framed.
The Loss Aversion Bias states that the pain of losing is psychologically about twice as powerful as the pleasure of gaining. In other words, people are more motivated to avoid a loss than to make a gain.
If you're using this simple example to dispel the myth of “free banking”, describe the difference in terms of what it's actually costing them. In the example above, clients may be more motivated to act if you explain that their current setup is “costing them $300 a year” rather than stating that “switching could save them $300 per year.” It's the same math, but, due to loss aversion, they may be more motivated to avoid this loss than pursue a potential gain.
- Mental accounting
Mental Accounting refers to our natural tendency to divide our money into separate accounts based on subjective criteria, like the source of the money and the intent for each account. Traditional banking is widespread not only because it's more profitable for banks (and therefore it's what most banks offer), but because it aligns with our inherent desire to put our money into different buckets.
To help customers feel comfortable with non-traditional banking, they may need to see how they can still track different parts of their money separately.
Tactic: Create a structure that aligns with their need and comfort level
As compelling as the savings from non-traditional banking may appear, some customers are still reluctant to merge everything into one big pool of money/debt. Fortunately, they can use tools both inside and outside of the account to keep track of different parts of their finances.
- Fixed-term sub-accounts. Clients who want to maintain a regular paydown schedule and predictable interest rates can allocate a portion of their debt into a fixed-term sub-account. They can even choose to make it non-readvancing, so repayment doesn't increase the borrowing room in their line of credit. This can give them confidence that their debt will go down over time.
- Tracking sub-accounts. If clients are comfortable having their debt at a variable rate and just want to track different parts of it separately (like the money they used to buy a car), they can allocate money to a tracking sub-account. That way they can see how much interest is attributable to that part of their debt, and even set up automatic transfers to pay down that debt over time. Clients will be able to set up tracking sub-accounts after their account funds.
- Balance schedule. If clients have a specific goal for paying down their debt, help them create a schedule that shows what their debt should be at the end of each month, in order to be debt-free by a specific date. Each month-end, they can compare their actual balance to their target balance and immediately see if they're ahead or behind on their plan. This can act as a motivator for them to pay down debt, and also help reduce stress associated with spending, since they can feel confident they're still on track.
Nothing in life is free
Helping your customers understand the true cost of traditional banking could show them that their no-fee account may not actually be free. And structuring their non-traditional banking in a way that helps them continue to track different parts of their money separately will help them make the mental shift to this new, more efficient, way of banking. If the rational argument for Manulife One resonates with your customer, take the next step and use the Manulife One calculator to show them how switching could benefit them personally.
Want to share Behavioural Economics insights with your customers to help them make better financial decisions? Visit the Plan and Learn section of manulifebank.ca and search on "Money Hacks".
What is that low fixed-mortgage rate costing your clients?
When most Canadian homeowners shop for a mortgage, their decision criteria begin and end at rate. This isn't surprising, since one traditional mortgage looks pretty much like the next. To most people, a mortgage is a commodity. And, as any first-year economics student can tell you, the sale of a commodity is driven by price.
The problem is - traditional mortgages are relatively inflexible. And the cost of choosing a mortgage based strictly on rate is that it forces homeowners to take on risks that they might not even be aware of.
In the previous article, we discussed the rational argument for non-traditional banking. Here we'll discuss the emotional argument: What if something bad happens?
The risk of traditional mortgages
Traditional mortgages have fixed payments. Every couple of weeks, homeowners need to repay a specific portion of their mortgage, plus interest, or risk going into default. A fixed payment schedule can help ensure debt is repaid over time - but it also assumes that the borrower's situation will remain relatively unchanged. In other words, it assumes their income will stay the same. It assumes their family situation won't change. And it assumes they won't encounter any large, unexpected expenses.
Unfortunately, that's not how life works.
People get laid off. They have to take time off to look after a family member. Their small business has to close for weeks or months due to a pandemic. Life has lots of ups and downs, but traditional mortgage payments must still be made. This is the risk of a traditional mortgage – if the borrower's circumstances change, they can't easily change their payment, much less access the payments they've already made. And, while failure to make mortgage payments can ultimately lead to foreclosure, the impact may first be felt in less dramatic ways: Clients may take on high-cost credit-card debt. They may stop contributing to their retirement savings. And their health may suffer due to the added stress.
The power of Manulife One is that it provides homeowners with a tremendous amount of flexibility so they can easily adapt to change. When things are going well, they can use their extra money to pay down their debt more quickly and reduce their interest costs. And, if things take a turn for the worse, they can reduce their payments or even re-borrow money from the account, as long as they have borrowing room available. In other words, Manulife One banking can buy them the time they need to get back on their feet.
The emotional argument may be hiding in plain sight
The emotional argument for non-traditional banking, then, is that it allows a homeowner to easily adapt to life changes. But this isn't immediately obvious to most people. In fact, there's a common behavioural bias that may be preventing them from seeing the risk associated with fixed, inflexible mortgage payments: The availability bias.
The idea behind the availability bias is this: We make judgments about the likelihood of an event based on how easily an example comes to mind. In other words – if we can easily think of an example of something, we may believe it's more likely to happen. This is why we see people selling their investments after a market correction – a deeper correction suddenly seems much more likely.
Now consider something that could make it difficult to make a fixed mortgage payment: a job loss. Most of us would acknowledge that a job-loss is a possibility. But if we haven't experienced one recently, we may see it as very unlikely. And the same might be true for other things that could threaten our ability to make a fixed mortgage payment.
Availability bias may lead us to underestimate the likelihood of negative life changes, and consequently undervalue the importance of flexibility when it comes to mortgage payments.
Help your customers understand the risks that come with a traditional mortgage
There are two behavioural biases that you can leverage to help customers better assess the risks associated with fixed mortgage payments:
- Salience bias refers to the fact that we respond to concrete images and people in a much stronger manner than we do to abstract ideas. This creates a bias in favour of things that are striking and perceptible. In other words, we're more likely to pay attention to things that seem vivid and real.
Tactic: Ask clients to imagine a specific situation where they've encountered a financial difficulty, such as a job loss or being forced to take time off to care for a sick relative. Ask them to describe how they would manage their fixed mortgage payment. What if the situation lasted for six months or a year? How this would impact their level of stress?
- Social proof, as discussed in the first article in this series, is the idea that people are influenced by, and will modify, their behavior based on information about what others like them are doing. In other words, we tend to copy the behaviour of others.
Tactic: If you've already introduced non-traditional banking to other clients, share their stories (taking care to change any identifying details). Describe the financial challenges they've been able to overcome or opportunities they've been able to take advantage of. And, if you've got your own Manulife One account, share your own story.
Help your clients prepare for the unexpected
People who have never encountered difficulty making a fixed mortgage payment may feel it's unlikely they'd ever find themselves in that situation. The value of payment flexibility may not be apparent until it's needed - and by then it may be too late. Help your customers think through common financial challenges that may interrupt their ability to make a fixed mortgage payment. And tell them about other customers who have benefitted from financial flexibility. This will help them overcome the availability effect and better understand the value of building flexibility into their mortgage.
Want to share Behavioural Economics insights with your customers to help them make better financial decisions? Visit the Plan and Learn section of manulifebank.ca and search on "Money Hacks".
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Manulife Bank offers a better strategic approach to banking with a full suite of mortgage solutions for every need. So whether your clients are looking for a traditional mortgage or a unique solution that adjusts to their changing needs, Manulife Bank has a mortgage to enhance your broker business with highly satisfied clients. That's why we're one of the most trusted mortgage providers.
If you know Fiona (and most brokers do, as she's been working with brokers since 1994) then you were probably also in the industry when it was formalized in 2000. Since then, there has been a steady climb in both the number and size of both brokerages and banks, offering all kinds of products and services. So, Fiona knows that variety is important in any mortgage broker's repertoire. As the brokerage client base has expanded, so have our products.
One way Manulife Bank became known to brokers was as a niche lender, but Fiona is here to tell you that is no longer the case. She sure knows, she has been on both sides of lending – as a broker and a lender. Fiona is known to many brokers from her Invis days, but also from her time with various lenders and she knows how a brokerage stocks their book of business…not unlike a wine cellar – with variety.
Small batch or mass market?
We know brokerages, both big and small, have their brands to maintain: some franchises are small and cater to wealthy clients, while others are large firms with mass market appeal. Manulife Bank now gives you access to a variety of mortgage types to fit any client's palate.
Some brokers have come to know Manulife Bank as a small batch lender. It's true that we still have quality on our side with our flagship Manulife One, but we have expanded into the mainstream with two different Select mortgages (both insurable and uninsurable). We still hope that you continue to offer our top-quality Manulife One, but we now offer a trusty 5-year fixed option. There is no reason we can't be your go-to lender, to meet any client's need.
Why we are now mass market
We had the best rate in the market for months during 2021, but many brokers still associate the larger banks with the lowest rates and that is no longer the case. So, we are making it easier for you to access our rates through our new Manulife Bank Broker Hub, where you can find out more about all of our mortgage products, marketing materials, our team and more.
If you know Fiona, you know she does not mince her words, and she says if Manulife Bank isn't one of your top 3 lenders of choice, you probably aren't offering your clients enough variety. Are you ready to make us your lender of choice?
Contact your Business Development representative to know more about what we have to offer.
When one of your clients, who is an existing Manulife bank client, is looking for an increase, a port, or a roll-in, they'll work with a Broker Mortgage Specialist (BMS).
So, what exactly does a Broker Mortgage Specialist do?
One of our BMSs, Jolene Conrad, likes to say she's a Jo-of-all trades when it comes to her day-to-day role. This is true of the BMS role, because when you send in a request for an increase, port or roll-in to firstname.lastname@example.org your BMS is your single point of contact at Manulife Bank throughout the application process.
You can rest assured they will ensure everything is done to the letter, which means:
- Collecting all required documentation from you
- Ordering appraisals
- Reviewing all documents for accuracy
- Submitting the file to our underwriters
- Keeping you updated throughout the process
Our BMSs will do everything required for our existing customers to ensure they tell their friends about the terrific service they received with Jolene, or any of our Broker Mortgage Specialists.
As the Manager for Broker Inside Sales, Mario leads a team made up of Internal Business Development Managers (IBDM) and Mortgage Specialists supporting the Broker channel. He reports to Geri Sinclair-Klack, National Leader for Insides and Direct Sales.
Mario's team of IBDMs work as educators, supporters, and motivators to brokers who are new to Manulife Bank. Their goal is to bring brokers to a level of proficiency, productivity and understanding of Manulife Bank products, approach and philosophy where they can provide solutions-based mortgages.
The Mortgage Specialists handle client requests, package and submit deals for existing customers, including increases, security switches, and roll-ins. The broker channel Mortgage Specialists are committed to providing a level of service that exceeds expectations. To that end, this team is steadily growing already, with plans to grow even more in the future.
A bit of background
Mario is a 20-year veteran of the Bank. He started his career working in our contact center. After that, he moved into a Banking Consultant role where he supported the region of Montreal. While there, and through hard work and dedication, he was promoted to Director of Sales for the Montreal district. It was during this that he first hired Mario Cloutier as a Banking Consultant and saw the leadership potential in him. When Mario Cloutier came on board the bank was just starting to work with brokers and the two Mario's were integral to the expansion of the Quebec broker business. The whole team exceeded their own expectations, which led to the broker channel we see today.
Mario's leadership style
It's simple, to be there for his teams and make sure they feel supported. If he's there for them, they can be there for you to help you do what you do best.
And when he says “there”, he means it metaphorically and virtually since he calls Ristigouche in the Gaspe Peninsula home, where he enjoys the beauty of the mountains, rivers, and trees on a daily basis.
Manulife Bank created a new role within the organization which specifically focuses on the performance of the Mortgage Broker channel. We are pleased to say that Rebecca Laba has recently moved into that role, focusing on the broker channel from an operational and reporting perspective. She reports to Chris Cheesman, Director of Strategic Partnerships on our Business Effectiveness team.
This new role is specifically focused on:
- Performance metrics which includes reporting to senior management the broker channel performance matrixes, such as analyzing the product mix and funding ratios of broker mortgages
- Evaluating and prioritizing Broker channel initiatives
- Driving the customer experience through service feedback and Net Promoter Scores (NPS)
- Involved in broker operations and processes to ensure we deliver a great experience for our brokers and clients
What does this look like on a daily basis?
For instance, Rebecca works together with our broker-focused internal teams in sales, product, operations, and others to ensure broker and their client voices are heard in our internal discussions. Manulife Bank has a bold ambition to be #5 in the broker space and this requires management. The Bank’s management team is putting a lot of emphasis on raising the standards when it comes to funding ratio and attracting the proper business mix. Rebecca spends a good part of her time on bringing the matrices in front of Mario Cloutier, Head of Mortgage Broker Sales and the entire broker management team.
Not only does Carol also have extensive mortgage specialist experience previously with Manulife Bank, she has acquired additional experience in the industry as both a realtor and a financial advisor. If that weren't enough, her most recent role with First Canadian Title in the southern Alberta region has grown her network in the same region where Carol will be building broker partnerships. We are very fortunate to welcome Carol back to Manulife Bank.
Lila Nsair has accepted the position of Regional Vice President, Broker Sales for the West.
Lila is an Albertan and currently resides in Edmonton. Some of you may remember her as the Director of Sales at Manulife Bank where she developed a high performing Banking Consultant team for Northern Alberta.
She returns to Manulife after six years at another financial institution where she was the Vice President of the Mortgage Specialist, Specialized Sales Group. Similar to independent mortgage brokers, her team cultivated direct sales opportunities and found clients for whom the lender mortgage solution fit their individual needs.
With over 25 years in the banking world and a wide breadth of experience at ATB Financial and CIBC, Lila strives on cultivating great relationships and looks forward to helping the team grow and elevate their key initiatives.
Lila's first day was April 1st and she is looking forward to meeting our western regional partners.
Bart has extensive experience working both in broker development and in the mortgage industry at large. He's worked for well-established companies like ATB Financial and Brookfield RPS, among others, and we are really excited to have this level of experience on our IBDM team to work as a personal coach to our newer brokers.
When we created a dedicated broker distribution channel, Alexander Spicer did not hesitate. When he started in the new broker channel, he had about a dozen brokers that he was able to get to know well, and they can call him anytime…or text him…or phone him (as Atlantic Canadians are wont to do) …or DM him on social media.
What you may not know, if you are new to Alex's portfolio, is that when we first started using social media, we had a group of salespeople with huge social presence that we called the Top Guns. Alex's nickname was the Spiceman. (Think of call signs from the fighter plane movie with the same name) While focusing on becoming a top gun in his new role Alex has been less active on social media, but the Spiceman is back!
Why is Alex on social media so much? Alex loves to keep up with how his partners are doing. He cares as much about improving broker business and building strong relationships as he does about their mortgage files. He's keen about how Manulife Bank can help brokers shift their business from a more transactional basis to one which offers and provides advice, but he's equally eager to know about their plans for weddings, golf games or tournaments, marketing events, BBQs, birthdays, you name it!
Alex admits it has been difficult to visit people during the pandemic, but he's still amazed at how much success our brokers and our underwriter partners at FN have been able to achieve with Manulife Bank during this time. People that he's never met have still gotten to know him virtually.
Alex is so grateful to all of the brokers who've welcomed him into the role. He's already talking about where he wants to visit when provincial travel opens up again for Manulife employees. A trip to his new territories in Newfoundland, New Brunswick and PEI will be capped off with some visits closer to home in Nova Scotia. He misses being able to visualize the places and homes people talk about during their conversations and he can't wait for Max his RVP and Mario our Head of Broker Sales to visit Atlantic Canada too.
There really is something about Atlantic Canada that just can't be described, it has to be experienced.
If you haven't heard of Alex yet, you can follow him on his social media channels here:
Linkedin: Alexander Spicer
Or better yet, give him a call! That's the Atlantic Canadian way after all.
Everyone has met at least one person like Max, but these meetings are usually fleeting. So, when you get to test the waters again and again and you keep coming back impressed with a person, you have to ask…what is your secret? Maxime Stencer is one of those people.
We sat down with Max to find out what makes Max…well…Max! Here is a snippet of that conversation:
Maxime, why did you choose this profession? You seem to have such a passion for it!
Max: I am passionate about the mortgage brokerage industry and its dynamic, resilient, and constantly evolving creative environment…there is honestly never a dull moment, and you always have to be on your toes; that happens to be the type of environment that I thrive in, so I couldn't be happier. I've been in the industry for 18 years and I love how our hard work in the mortgage industry helps support individuals and families achieve long-term financial health and stability by accomplishing their goal of becoming homeowners and building their wealth over time. It is a rewarding career and I am grateful and proud to be part of this community of dedicated professionals who put their clients' needs first.
Max what made you decide to join Manulife Bank?
Max: I love working for organizations that have a ton of untapped potential and where there is lots of room to grow. With Manulife, I recognized that there was already a tremendously strong foundation and a clear vision to increase market share in the Canadian and Québécois broker market. I also felt like the management team was committed to do what needed to be done to make that happen through the development of new products and other significant investments, including the hiring of a number of Business Development Managers knowledgeable in the broker space. I wanted to be part of that growth and so far, it's been an amazing ride!
Max, you recently joined the Mortgage Professionals Canada board as a director. What led you to submit your name?
Max: As you mentioned, I have a strong passion for the Canadian mortgage broker industry. I wanted to contribute to the organization in helping its members thrive through continuing education and countless other opportunities, such as collecting and sharing best practices. If the broker industry is strong and healthy, everybody wins: the lenders, the brokers, but mainly the Canadian consumers who benefit from various financing options that are tailored to their financial profile and goals. I also wanted to help attract talented and hardworking people who are looking to build careers in our wonderful industry.
Finally Max, the most important question is always left for last: if you could have dinner with 3 famous people, deceased or alive, who would it be?
I absolutely love that question. I love people, food and comedy…. So, I'm going to go with Martin Luther King, who I think was an amazing human full of courage and hope. Secondly, Anthony Bourdain, celebrity chef and globetrotter, I admired his curiosity, open-mindedness and authentic nature. Finally, I'd love to have Dave Chappelle at that table because I think he's a creative comedic genius and an awesome conversationalist.
Thanks to Max for sharing a bit of his personal vision and passion with us. If you haven't yet had the chance to experience Max's "joie de vivre" in person, we can't wait for you to meet him in the coming months and years.
Packing more than two decades of experience in financial services with such names as IIROC and Invis Financial Group Terry has his pulse on both the regulatory and practical side of lending. We can't wait to see all of Terry's experience and knowledge transfer to his new role.
By phone, email or personal visits to your office, your local Business Development representative is available to answer your questions. Our goal is to support your success in attracting new clients and servicing existing renewal customers.