Login
ISCOVER
Fee-based broking is back on the agenda – and looks set to stay there.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
According to Smartline director Joe Sirianni, lenders’ changes to broker remuneration structures – an issue which dominated the industry in 2008 – have acted as a trigger for the industry to look at the fee-for-service model in a fresh light, with cuts to commissions estimated to have left brokers out of pocket by around 30 per cent on every deal.
“The push for fee-for-service initially came from the commission cuts, which meant brokers were looking for ways to restore lost revenue,” he says.
Chris Burns, chief executive of Money Advisers, says changes to commission structures have not only hurt brokers’ revenues, but have also left them questioning how stable their income is.
“We’ve now seen the first major round of commission restructuring and I think it’s wise for brokers to consider a new remuneration structure which they have more control over and [which] is not so influenced by a third-party,” he says.
The renewed interest in fee-for-service as a broker remuneration model has also been driven by the growing push towards advice-based broking as well as the desire to change the way in which the broking industry is viewed.
Mortgage brokers have endured their fair share of media bashing in recent years and many in the industry believe a shift towards a fee-based service, in line with accountants or solicitors, may help the industry improve its profile and be seen as a respected profession.
“Beyond the direct revenue benefits [of the fee-for-service model], the real benefit is that if the individual business can charge a client a fee, it means they are providing a service that is of genuine value,” says Mr Sirianni.
“When you pay for something, it creates more value in the client’s mind... which can lead to more repeat business and referrals,” he adds.
But delivering value means providing a quality product, and Mr Sirianni sees fee-based broking fitting in firmly with a more advice-based broker service.
“This solution-based approach is what professionals do and it is not unreasonable for a customer to pay for this professional advice based on a level of experience and training that a broker undertakes,” he says.
Money Advisers is currently trialling fee-for-service in its commercial lending business, which Mr Burns says is working well.
But he has some reservations about how it will work for residential lending, saying brokers will need to work hard to communicate their service offering to customers and differentiate themselves from the banks.
“There are some major hurdles associated with this shift, the biggest being the fact that consumers have been educated to see brokers as a free service,” he says.
This is where advice-based broking plays a role.
“I believe you can do it that much more easily with more professional transactions. Clients seem to accept it,” he says.
