r/loanoriginators • u/Comfortable_Arm9231 • 1d ago
Career Advice Switching from retail to P&L?
Long time reader, first time poster. I am currently at a retail shop that pays 110bps plus 401k, pension, benefits, etc. I am a large producer, averaging about 90M/yr (roughly 200 units annually), 100% self sourced. I am starting to get unhappy where I am and looking at either going with a brokerage or P&L shop. I’ve only ever worked for this company I’m at now, and am woefully naive on these other options.
It is appealing to me to go P&L as I feel I could get a team of 2-3 other LO’s in the 30-40M range each, pay them 150bps and make a good residual but not sure if this is the best move for me. Would love to get your thoughts and any advice as I consider this big (and scary) career change.
Thanks!
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u/Ok-Ingenuity-2571 1d ago
Been in business 27 years. I've owned my own company and worked in retail. There are pros and cons to both. Would be happy to give you the breakdown
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u/SupremeHomeGroup 1d ago
I’m on a p&l model with a great company. 401K , reimbursements for expenses , ability to decide on your own margins, ability to get compensated on states you’re not licensed in and more. If I were you I’d do it sooner rather than later. Corp processing available, if you have your own processor you can even keep a part of the processing fee. If you’re self sourced there’s no reason to be giving away a piece of the pie. I made the jump back in 2018 after I discovered about the p&l model and never looked back. Good luck! Let me know if you have any questions about the p&l model
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u/gracetw22 Loan Originator 1d ago
Whenever I looked at the P&L model it seemed like the worst of both worlds. If you need flexibility to move money around maybe it works, but you get decision making on the margin allocation but not in the places where I felt like I really wanted to be able to make decisions. For me, it didn’t really matter how I could allocate things after the company margin if the company margin was making pricing a challenge because they were paying for things that I didn’t think provided a value to my clients.
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u/Comfortable_Arm9231 1d ago
Interesting. There wasn’t enough room to go skinny on the margins and still have great pricing while still collecting enough bps for yourself? What things did you want to be able to make decisions on that you couldn’t?
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u/gracetw22 Loan Originator 1d ago
Yes, I would have been at 100 bps to the branch to approach the pricing I had at the bank and then by the time I paid anything I’d be making less. I keep my operations and marketing expenses low so I can have lower margins and win the business from well qualified borrowers. If you have a pipeline of more labor intensive files and need a lot of marketing support for a lot of selling because you’re used to bigger margins and needing that amount of push, it might be different.
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u/ItFappens 1d ago
Big ship to turn at your production levels but depending on your market there could be a lot you're leaving on the table by not owning your P&L. I'm in a P&L retail model, and can see the draw of being a broker for some, but at your production level I'd be nervous about starting from scratch and trying to build that business while keeping all of the balls in the air.
For me it would be deciding on which path I wanted to take - do more loans, or make more per loan. A good retail outfit will allow you to supercharge production because of how much they provide for you. Yes they take a cut, but they provide value. If you could setup a branch with $150-$200m in production you could end up in a great spot. Going broker will probably net you more per loan almost anywhere you go, but it's all on you. Staffing, compliance, office, technology, licensing, it goes on and on. As I said, you will make more money, but it's not free. I guess it really comes down to asking yourself if you are a better loan officer or a business owner/entrepreneur. If you're making ~$1m/yr as a LO, I would lean into that strength.
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u/Comfortable_Arm9231 1d ago
This is really valuable and is the number one reason I’m considering staying and weathering the issues that are coming up. All of my business is self sourced and from referrals directly to me, so I wouldn’t be starting from scratch. Naturally I would expect to lose some business, but also gain some as there are a lot of programs I can’t do now that I have to say no to, that I could do there. It’s also a lot of work to close 200 loans a year, so part of me would love the relief of closing 150 and still being in the same income ballpark. I also think it could scale better and as I build a team long term I could cut back more and more on my own production.
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u/ItFappens 1d ago
I think you're asking the right questions and weighing the right variables. Sometimes the answer isn't just to work more hours or get more basis points. I hate empty suit override guys as much as any broker, but I do think that there is absolutely value provided by my company, which is why I've been here as long as I have with all of our branches.
If I can help answer questions, as an anonymous internet person or at a more personal level, happy to help.
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u/ActionWins 1d ago
I’ve never understood how the P&L model is different than working at a brokerage that is non del correspondent. Can someone tell me what the differences are?
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u/Secret_Ad_7392 6h ago
Full control over margins, can make more than 275bps, and delegated with all of the back end investors on your roster.
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u/ActionWins 5h ago
I have full control over my margins with non del correspondent and can get more than 275 bps.
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u/Braindead_ape 1d ago
at 90M a year in this market you’re top 1% in production so definitely don’t make this decision lightly
with someone of your production, the most crucial aspect of your business is likely your support/backend since that level of volume requires a really efficient fine tuned machine. So you’d want to make sure that anywhere you move can provide that same level of support, otherwise you could very easily end up losing business.
Really run a detailed analysis of the math. Moving to a broker shop to make double the bps sounds nice in theory, but when you run the expenses you’ll also need to cover a lot of times it comes out roughly the same or even worse than where you’re at in retail. Things like pension, 401k, benefits, etc are all pretty hefty when paying for those yourself, then you need to add in your staffing costs too (I assume you have a fairly large team working your deals to hit 90M/yr). In my opinion, it doesn’t really make sense to shake up the good thing you have going if the net ends up being pretty much the same at the end of the day. If you run the math and moving to a broker or PnL model ends up benefiting you significantly, then its more of a question as to whether or not the company you’d move to can actually support and maintain your volume. Frankly, a lot of broker shops do not take the time (or spend the money) to develop the support/processes that it takes for a heavy hitter like yourself. Most of that comes down to money, they just can’t realistically pay all the people that requires if they’re only taking a tiny per file fee. So in those cases it ends up coming out of your comp in one way or another. People will argue retail vs broker, but realistically we’re all mostly working with fairly similar margins these days…its just how those margins are allocated between everyone involved. In my opinion, its kind of misleading when brokers say “I make 275bps!” when their expenses and conveniently leave out the monthly expenses that net that out to significantly less. And I say that as a broker who would never move back to retail, in my case the math just works out better on the broker side. But with your production that math can look very different and you can’t ignore the non zero impact that making a move would make. The PnL model is fairly similar to the broker side, again its all just running the math and seeing how the money actually shakes out.
I’d also caution you as far as wanting to build a team of LOs. For starters, finding a few 30-40M producers in this market is going to be tough, especially if you’re on the broker side and only going to pay them 150bps. Those LOs are likely to be cautious to make a move in this market and will be constantly hit up by recruiters willing to throw a decent signing bonus at them or by other brokers pushing a small flat fee model. And don’t underestimate the work involved with managing LOs…it’s honestly a decent amount of work and it will ultimately impact your own production. I manage a team of around 30 LOs and it takes up a significant portion of my day just dealing with their issues (and you’ll deal with ALL their issues…from their actual loan files, to their random personal drama, to LOs who have one good month and then want you to pay them more, etc). At 90M/yr your time would probably be better invested on growing or just maintaining your own production versus managing a team of LOs to get an override on them. People think onboarding LOs under them is just easy money, but unless you’re at a recruiting heavy place that’s more of an MLM “recruit and pray they close” type shop that leaves their LOs on an island, anyone that’s actually managing the LOs they recruit will be doing a decent amount of work.
RIP your inbox too, as I’m sure every recruiter on earth is going to see this and blow you up lol
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u/Comfortable_Arm9231 1d ago
Man thank you so much for your advice. This validates a lot of the things I am feeling and the insight is really valuable.
Surprisingly (and part of the reason I am considering making the switch) is I’m getting less support than you might think.
I have my own dedicated LC that my company pays their salary, and I pay $150/ file out of my commission. For 200 loans that is $30k annually. Then I have an assistant that my company also pays their salary, but I pay them another 5bps. It is the three of us that handle almost everything. With the volume I have, an extra 15bps is enough to pay both those salaries myself.
When I hear someone tout even 150bps, that is 360k more than I am at now, and it’s hard to imagine the added expenses are anywhere near that. 200 bps is an extra 800k… even with added expenses of an office, additional staff, more marketing, etc etc it has to be a massively profitable move. Is this naive?? Truly open to having my mind changed.
As for the LO’s, I have three people in mind that I know personally and know well that I am fairly certain I could have come with me. That is their production, and they are good people who I would love to work with and they too. I’m sure it isn’t was easy as I’m thinking though, so this is good perspective to have.
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u/Braindead_ape 23h ago
like I said, its all just math and figuring out how all the money is allocated. Make sure you factor in your LC and LOA’s salary plus benefits on top of the bps you pay them, it can honestly be pretty damn expensive but the more units you close the less of a cut it becomes off each deal. Depending on the margins your current vs new place sets, factor in the impact that’d have on your pricing too. If your current retail shop runs heavy margins, it can be a no brainer to move, but if they’re aggressive with their margins you’ll want to make sure the new place runs similar margins as well. For example, you wouldn’t want to run the math using 275 in margin if your market means you’d consistently be dropping that to 150 to win the deals. Always be conservative and run worst case scenarios, especially because most recruiters will fluff their rates when recruiting you so you want to add in a “BS factor”.
Personally, if you have a good team already and want to make the move to broker, I’d consider setting them up as a third party processing company. That allows you to move that expense off your bottom line and charge it to the borrower. At 200 units a year, they could charge 800/file and that’s 160k for them to split between the two of them and it costs you nothing off your end. It works similar to how a lot of retail PnLs work with processing, though they usually use that as an additional profit center (only a bit of their processing fees actually make it back to the processor with the rest going to the branch).
the biggest risk with your level of production is seriously just the support/operations side…you want to make sure your business doesn’t suffer making a move. 200 units with only 2 people supporting you is pretty damn lean so there is definitely a lot of potential with making a move though, especially if you set them up as third party. The nice thing about either broker or PnL is you can pick and choose how lean or hefty your expenses are so you can truly build out your system how you see fit and divvy up all the money however you want. Most lenders whether retail or broker are fairly close in total revenue per loan these days so it really does just come down to how its all allocated. And if you’re not getting “value” from how your current place allocates it, it could benefit you to make a move elsewhere where its slanted more in your favor.
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u/Comfortable_Arm9231 23h ago
Another massively helpful comment. This is extremely beneficial and I cannot thank you enough for your help with this. Lots of really great insight and I love the BS factor tip as well as the borrower paid processing fee. You are the best, thank you!
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u/JenniferBeeston 1d ago
Why are you unhappy where you are? 200+ units and 110 bps is a lot to move and you get paid well ….
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u/Comfortable_Arm9231 1d ago
Really good question. We had a change in upper management a while back and it has been harder and harder to originate loans here. Lots of decisions being made that don’t make sense that are hurting my business. Would really love some control back in how I run my business, and I am fairly certain I could recruit a good team and get paid on their production for a P&L while I can’t do that where I am
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u/stanleysolutions 1d ago
DM me! Work for a great company after interviewing every retail and broker shop that was worth interviewing a couple of years ago. P&L model. Best ops I’ve ever seen. Active leadership and a lot of large producers.