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Brokers have been urged to follow the lead of other industries and charge for their services.
Customer service expert Martin Grunstein said clients would pay to use brokers as long as brokers could sell themselves as trusted advisors during a highly stressful period.
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“If you look at all other professionals, they are all charging fee-for-service. Just because brokers get paid by the banks, doesn’t mean they shouldn’t be charging for their services as well. And the client is used to paying fee-for-service,” he told The Adviser.
Mr Grunstein said brokers had to provide more than just the cheapest home loan, because clients could find that for themselves on the internet.
He said one way brokers could differentiate themselves from lenders was through availability.
He urged brokers to offer clients 24-hour availability – he said they would be reassured by the offer, but almost none would phone outside business hours.
Mr Grunstein said brokers should also sell clients on their experience and independence, and reinforce their claims with client testimonials.
He said it would be difficult to transition current clients to a fee-for-service model, but said “you’ve got to bite the bullet and do it”.
More Group started charging an upfront ‘commitment fee’ in early 2013. More keeps the fee if clients don’t take out a loan but refunds it if they do, said chief executive Aaron Upcroft.
“It’s about how do you weed out those clients that would be shopping you around even though you didn’t know about it,” he told The Adviser.
Mr Upcroft said the commitment fee is hard to sell to new clients and that More compromises with existing clients by providing some initial work for free.
Origin Finance director Graeme Salt said fee-for-service might become easier to introduce once Australia’s mortgage market matured.
“I think that right now, the client is still expecting to have a commission relationship and it’s easier right now to do it that way,” he said.
“The customer is still getting their taste for how to use a mortgage broker. It may well be that in a few years’ time, when they’re fully au fait with the benefits of a broker, fee-for-service may work.”
FinancialPlus has long considered introducing fee-for-service, but has always shied away for fear of losing clients, said co-principal Kathy Rogers.
She said the Gold Coast firm might change its pricing model one day to put brokers in line with other industries.
“Our issue is that there are a lot of deals that go nowhere, that you’ve done a lot of work for nothing,” she told The Adviser.
“Our consideration has always been, generally speaking, the clients we deal with are not straightforward clients that could walk into a bank, so there is definitely room to be able to charge fee-for-service.”
