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Looking back on a lifetime of achievement with Art Appelberg
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Amidst thundering applause and an ovation from friends and colleagues, Art Appelberg took the stage recently at the Toronto Liberty Grand to accept the CMA Lifetime Achievement award. “I’m a little surprised to receive the lifetime achievement award halfway through my career… Maybe somebody’s sending me a message but at least I am here to enjoy it,” Appelberg smiled on stage. Northwood Mortgage was founded in 1990 by Appelberg. In 1995, he partnered with Steve Kates and since then has grown the company to a multi million dollar, premier full menu brokerage house and can boast about some eye popping results. Here is a look back on Mr. Appelberg’s career, his take on the industry and where we might be headed.
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“I found out that I did not mind working long and hard as long as I had what I believed was an attainable goal and that there were many motives beyond simply making a profit such as building something I could be proud of. 3
WORK OF ART who had a computer in his home in 1989 to do this work. After getting well paid for my work, I realized there was a need and an opportunity for thoughtful and sophisticated mortgage advice. I loved that we would be rewarded for results and I would have no accounts receivable collection problems. When I started, there was basically only one choice for the consumer, the Financial Institutions. I saw there was a need and in fact, people were willing to pay for advice beyond what the Banks were able or willing to give on how to get the financing they needed. My feeling was that my service was excellent and at the same time virtually invisible to the public! My number one priority at the beginning would be to become visible to the public but at a minimal cost.
What was Northwood’s early days like and how did you build it to what the company is now? In 1989 in I decided to join a brokerage called Raycan with an office in Aurora, ON. I spent one year full time learning the logistics of the brokerage business. How and why did you start Northwood? I didn’t want to work for anybody else. I turned 40 and had enough experience in my 10 years of banking to start my own business. I had earned an MBA from Shulich School of Business at York University so I felt I understood business and was ready to manage on my own; but first, I had to cut the umbilical cord with salary and get out of my comfort zone. I resigned my management position at Scotiabank and set out to succeed in business on my own. I was ready! I created an environment for myself where I was all in. I spent a couple of years investigating business opportunities and used up all my savings. A friend of mine from banking had gone into the business and asked me to do a financial analysis for one of his clients regarding a business and real estate investment. He was one of the few people
I minimized my costs by selling my house, and minimizing all expenses. No restaurant meals, fancy cars, or expensive vacations! I chose an office space in Richmond Hill, directly beside Bank of Montreal and across the road from TD Canada Trust where I thought there was little competition. When I say no competition, I didn’t consider the banks competition but my closest ally! I believed that mortgage brokers should be out on the street in full public view and borrowers should consider this first class (not second class) borrowing. After the prospective client got a quote at the bank, they walked right across the street to my office where they received first class advice and a lower rate! The office was 500 sq. ft. on Yonge St. in Richmond Hill (formerly a jewelry store) and I pro-
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Art Appelberg and Steve Kates have built Northwood Mortgage into one of Ontario’s largest mortgage brokerages.
ceeded to paint, fixture, clean the carpets and wallpaper myself in order to save costs. The name of my new business, Northwood Mortgage, was provided by my wife Carolyn. It was the closest town to the farm where she grew up. Finally, I was ready to open. There I was sitting on the floor of my new business, bright and early Monday morning in September 1990 waiting for my first customer. The clients came because they saw my rates, which I posted on my neon sign in plastic sleeves while standing on a ladder out on Yonge St. In winter, I was often splashed with slush from passing buses! I still had to work on the small details of running a business such as getting furniture, fax machine, phones and a photocopier! No suppliers wanted to give any credit to a new Company without any history of success. After $18,000 on my credit cards (I had no money), I solved these small problems and was ready to go.
There was only one other problem. There was a full-fledged recession going on in the early 1990’s and interest rates for a 5 yr. mortgage were running at about 11%! I was not deterred. With 5 years of hard work and the moral support of my wife, I started to make a profit by 1995. With the help of my summer student (still in high school), Jason Smith (now a former Director of Basis 100 and currently the CEO of Solidifi) we developed our own mortgage system which allowed Northwood to present typed documents to our clients and lenders without the need to enter any information twice. Essential to the success of the business would be to develop a strong professional community so that knowledge could be shared. This would make each of our agents, whether experienced or not, as knowledgeable as our most experienced agents. It was at this point in 1995 that Steve Kates joined me and became a partner in the business. He
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WORK OF ART dabbled in print media. I had written a series of newspaper articles explaining the differences between various mortgage products and attempting to explain the kind of issues my clients were asking about. My idea was to string these articles together into a book. This strategy was very slow and it became certain that my book, “Everything You Wanted to Know about Mortgages but were Afraid to Ask”, would never be a best seller. In 1995 Steve and I decided to undertake a comprehensive advertising campaign on the radio. While the cost was extremely high, the result created visibility to the public that was generally lacking for mortgage brokers.
Where is the Industry Headed? In my opinion, mortgages are not a commodity. Obviously it’s one of the biggest decisions an individual will make in their lifetime. A mortgage arrangement is to be carried out with careful consideration to the needs of the borrower.
already had about 15 years experience in the industry and knew more about the brokerage business than anyone I had met in my entire career. Steve had a good business head for managing people and for getting both residential and commercial mortgages arranged. He believed in and supported long-term strategic thinking. I don’t underestimate the important role Steve has played in developing Northwood Mortgage into what it is today. When it came to making tough investment decisions, like advertising or hiring management, Steve understood the importance and was fully prepared to participate in all the risks of failing. I felt strongly that if the public knew about my professional service, that everyone would want to come to me. The question was--how I could reach the people when unlike the banks, I did not have thousands of corner branches. We had previously
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This requires the broker to understand their client’s current and future needs. A comprehensive discussion with the client is required. I personally spend between two and three hours with each of my clients. While rate is the number one question a client will ask, our clients appreciate the many hours we spend with them discussing their concerns and explaining their mortgage to them. Obviously, rate is very important but it is not the only thing. The challenge for brokers is that borrowers carry out their research via the Internet which makes for an extremely competitive market place and squeezes the profit out of our services. It surprises me how important the Internet has become in the last 20 years. It used to be that if you weren’t in the yellow pages, you did not exist. These days, it is all about internet visibility. The big difference is that Internet visibility cost a lot more than the yellow pages. I recall challenging a Yellow Page representative to find a copy of that book in my office. They of course could not. All business must learn the most effective ways to harness and manage the power of the Inter-
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net. The strategic importance of the Internet cannot be ignored. Those who do ignore it will be left in the dust!
Will Brokers gain more Market Share? I am optimistic about the future of the mortgage brokerage industry for two reasons. Firstly, the tougher lending regulations have provided opportunities to meet the needs of the alternative borrower without competition from the banks. There is a massive amount of investment capital available looking for a safe place to go. Mortgages provide a relatively safe and reliable investment to meet the needs of the investor. There exists both a large supply and demand for these funds with a limited distribution channel providing for a profitable opportunity for brokers. While these opportunities will not last forever, in my opinion, there is a five to ten year window. Secondly, the public has spoken regarding the need for mortgage brokers and they have become much more popular over the last 20 years. While the
Three important lessons to impart to brokers: • Develop a professional community to share knowledge while surrounding yourself with a talented management team and top-notch mortgage agents. • Become visible to the public. • Be perseverant and never lose sight of your vision of the industry. banks have mastered customer retention, brokers continue to become more sophisticated in this area. Smart brokers are now contacting their existing clients more than once per year with helpful strategic information as well as providing multiple maturity notices. Brokers are now continuing to correspond with prospective clients for years, even if they do not initially take the mortgage; eventually resulting in a completed mortgage transaction.
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WORK OF ART me as much as possible. As a strategy, this did not give rise to quick profits but in the long-term it was the basis for lasting mutually profitable relationships with both clients and staff. I also learned there is a high degree of gratification from helping people to meet their difficult financial needs. I was amazed that people would actually thank me for doing my job. I found out that I did not mind working long and hard as long as I had what I believed was an attainable goal and that there were many motives beyond simply making a profit such as building something I could be proud of.
What would you change if you were to start your career over? The one thing that I would like is more time to implement my vision of the industry. If I could start my career over, I would enter the brokerage business 5 years sooner!
To achieve this, I chose to align myself with VERICO, acknowledged in the industry for professionalism and innovation. Integrating VERICO’s technology systems and platforms, we have strengthened our ability to capture renewals through a multi-pronged CRM strategy. I expect a continuing world recession during the next decade. Darwin’s Law will prevail with the strongest brokers thriving. Many lenders are now paying trailer fees to brokers providing a “book”. Renewals help maintain cash flow for brokers providing for a more sustainable business model. What’s the most impactful or significant memory you have about your career? This may seem trite but I learned that, if you give something to somebody, they will want to give something back. It seems to work in all aspects of life. The more you give, the more you get! I set about to give everyone who associated with
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I used to think in terms of 10 year plans but I grew to realize that a person only has about five, 10 year plans available in their business life and that time is precious and once lost can never be recovered.
Proudest moment? This is a very difficult question for me. Business is fraught with continual challenges and frustrations. That means that only one out of ten attempts to improve is successful. Proudest moments happen when that one idea occasionally succeeds. When I think about it, I have not had much time for pride because, in truth, success is always fleeting! One can never become smug about accomplishments. I guess I am guilty of a little pride. When wearing my Northwood logo jacket while standing in line at the supermarket and people start singing our radio jingle “We’re working harder for you” it makes me smile!
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“When people ask me what is my secret to success without hard work? My answer is that the secret to success without hard work- is still a secret!
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Art Appelberg and Steve Kates recognized for 25 years in business by VERICO President Colin Dreyer and VERICO COO John Kelly in Quebec
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