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Some mentors are “ripping off” new brokers by charging $1,000 per month while delivering little in return, according to the FBAA.
President Peter White said angry recruits “bombarded” him about high up-front fees while he spoke at a TAFE last month.
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Mr White told The Adviser that some mentors were taking advantage of a section in the National Consumer Credit Protection Act 2009 that stipulates new brokers need a mentor.
“Unfortunately, some of them are taking it as a license to print money,” he said.
“In one example we have seen, the mentor charges an initial large fee, plus a percentage of the mentee’s upfront and trail, and then they continue to take a quarter of the trail for the life of the loan even after they stop mentoring in two years.”
Mr White said that unethical mentors were giving the industry a bad name and creating significant barriers to entry for new talent.
He stressed that not all mentors were doing the wrong thing – but that it was time to expose those who were.
“People should not be out there ripping off people who are just entering our industry and have no income,” he said.
Australis College director Paul Eldridge said the key concern was not so much what mentors were charging but what they were delivering in return.
Mr Eldridge said new brokers and professional mentors are often pulled in different directions: the students need one-on-one attention to master their new trade but the mentors need to manage large groups to make their service profitable.
“If you’re charging $1,000 per month and you’re not offering any personal time, you need to think about whether you’re providing those new entrants with value,” he told The Adviser.
Mr Eldridge said one solution would be for experienced brokers to mentor the next generation as a matter of course – not to make money but as a form of industry service.
[Related: Brisbane broker mentors new talent for free]
