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The broker proposition has evolved dramatically over the past decade
Traditionally, brokers were expected to find their clients a suitable mortgage solution; they offered choice of product and a free service.
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Today, they are expected to do a lot more.
The National Consumer Credit Protection Act has changed fundamentally the way brokers do business.
While a majority of brokers has always considered their client’s overall financial position, and completed a detailed analysis, this is now a legal requirement.
Greater focus on overall needs has opened up the scope for a more diversified product offering – and the chance for broader revenue streams.
It seems the days of transactional broking are long behind us. Borrowers no longer come to a broker for a mortgage, they come for advice.
At the Australasian Real Estate Conference last week, a senior industry figure told me good real estate agents don’t sell houses, they sell trust.
The same can be said of brokers.
The business these days is much less about offering a client a selection of home loans from which they can pick the one they fancy; it is about offering advice about the different products to help the client make an informed decision.
With greater responsibility, a higher level of service and compliance requirements, some brokers now question why they are not charging a fee for their services.
This debate has rumbled on for some time, and the industry is clearly divided.
This is a time of considerable change for the financial services industry and commissions have come under scrutiny in other sectors. But it is interesting to note it is not the financial institutions that have done away with commissions, it is the government.
New legislation has scrapped payments from financial institutions to financial planners and there are indications insurance brokers could be next in the firing line.
So, what are the ramifications for brokers when it comes to charging a client fee? Are brokers ready to say goodbye to their commissions in return for a client-paid fee for service?
This month, The Adviser surveys brokers to reveal the true broker perception of fee for service (see p26). This is the first survey of its kind and the results are interesting to say the least.
Nearly 400 brokers participated in the report and it is clear this is an issue that has polarised the industry.
Whether or not the fundamental structure of broker remuneration will change in the future remains to be seen. For now the debate looks set to intensify.
