Why Social Media Is Not the Best Place to Pick Up New Borrowers

Andrew Rowat/Andrew Rowat

Social media offers a unique opportunity to make personal connections online, but mortgage lenders should tread lightly when using this channel as a lead source for new borrower prospects.

That's because many consumers look to social media as an outlet to vent about their negative experiences, and are less receptive to a sales pitch from a loan officer, according to a recent PricewaterhouseCoopers study.

Direct referrals from friends and family or professional contacts like real estate agents, as well as traditional marketing channels and existing banking relationships are far more effective at generating new business, said the report, which covers home, auto, student and personal lending.

"While the digital revolution can be seen in the influence of lender websites, Internet searches, and online review or comparison sites, these sources are not yet as important in generating leads as the 'gatekeepers' or more traditional referral sources — such as friends and family or marketing campaigns via television or print," the report said.

The best source for a referral, according to the PwC study, is an existing banking relationship, cited by 29% of the 2,000 consumers surveyed as being among the top three places they would turn for a name. Friends and family were cited by 27%, a point of sale advisor like the real estate agent was at 21% and traditional marketing channels got a 20% response.

The highest scoring technology channel was a lender's own website, at 18%, followed by an Internet search at 15% and a review/comparison website at 14%. The employer got a 4% response. Social media was cited by just 1% of the respondents.

But that's not to say that lenders shouldn't be active on social media, though marketing strategies for this channel should concentrate on reputation management rather than actively target getting new business, the report adds.

And technology is increasingly playing a bigger role in helping lenders create the personal connections needed to drive referral business. Vendors like Pavaso, Roostify, Big Purple Dot and others are developing technology to improve communication between the parties in a transaction.

Tactile Finance in New York, for example, offers technology that allows loan officers to share screens detailing different loan scenarios with referral partners and their clients. Nicole Hamilton, Tactile's CEO, said the vendor encourages users to team up with as many as 10 investment advisors. Most advisors don't have any insight into their clients' property, she said, so the loan officer can create screens and give a link to the advisor so they can see the client's current equity. They can work together on refinance and sales scenarios, sharing this information with the client, Hamilton said.

"The best kind of referral benefit is one that provides valuable knowledge for their business that helps with their ability to serve their referral clients better, and in turn gives the referral partners' clients better insight and service," she said.

The consumer's experience is the driving factor of whether they will recommend a lender's services to their family and friends, said Craig Martin, director of the mortgage practice at J.D. Power & Associates. In November, the research firm released its 2015 mortgage origination satisfaction study, which found 71% of highly satisfied customers said they would refer their originator to family and friends. This falls to 29% for moderately satisfied customers and just 5% of dissatisfied customers.

"It's a combination of best practice behaviors, but also that connection with the consumer. They [the consumers] leave going, 'they have my best interests in mind. They were truthful and honest and upfront and they educated me and kept me informed and gave me good advice. And if I had another opportunity, I'd work with them again,'" Martin said.