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Mortgage brokers will soon “have to” charge fees for some, or all, of their services, one of Australia’s top loan writers has revealed.
Speaking during a panel on broker remuneration at The Adviser’s Career in Broking event in Melbourne last week, the CEO of My Mortgage Freedom, Anthony Alabakov, was asked by a member of the audience whether it was usual for brokers to charge a fee for service.
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Mr Alabakov replied that while brokers generally don’t charge customers for their time now, he said “we will get to the point where they will have to”.
He said: “I think that is around the corner, I don’t think that's too far away. But at the moment you don’t have to.”
However, while the CEO of My Mortgage Freedom said that he believed fees for service may become a necessity, he added that trail commissions were still a crucial part of the broker remuneration model.
The elite broker, who last year placed 16th in the Elite Business Writers ranking, explained that his company currently charges a small fee for onboarding new clients.
“For any new client, we charge $395 and that's for our time to go through the recommendations, set them up as a client and go through the application process,” he said. “That pays for a lot of administration duties, while the remuneration from the [trail] commission — is really for us to service them on an ongoing basis…
“When you get them as a client and you have that ongoing income, it's all paying for you to provide an ongoing service to that client. So, touching base with that client at least two times a year. And that is also key, because it’s such a competitive market out there, and if you aren’t touching base with your clients, another broker or bank will.
“So, brokers have to ensure they value their trail — not just the income of the trail, but the opportunity it provides you to keep in contact with that client, in the end will help your client value you.”
While acknowledging that charging a fee was “not the norm”. he said that he had found it an effective way of “getting rid of tyre kickers” and that 9 out of 10 clients were happy to pay it.
“We get rid of tyre kickers by charging a fee to engage our services, because we really value our time and our engagement with other customers… We don’t want to be wasting our time. We find that when people pay $395 (and it’s not a huge amount, so generally people don’t mind… they are more likely to fulfil the loan application.”
Mr Alabakov said the fee was particularly useful for clients seeking pre-approval, because when they eventually purchase their home, they already “feel engaged with you and will come back to you”.
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[Related: Mortgage Choice stands firm on current commission model]
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