Growth

Fee for service model a long way off

By Staff Reporter•Friday, 28 Oct 2011•4 minute read

A uniform move towards fee for service is not even on the radar, one of Australia's largest aggregation groups has claimed.

Speaking to The Adviser, Vow Financial’s chief executive officer Tim Brown said the mortgage broking channel was unlikely to follow in the footsteps of financial planners.

While Mr Brown believes financial planners are making an industry wide move towards fee for service at the right time, there is no reason for the mortgage industry to follow suit.

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“As long as the banks continue to pay broker commissions at the current levels, I don’t think we will see the industry move towards fee for service,” he said.

“Right now, borrowers can access the same rate from a retail branch as they can from a broker, so there is no competitive benefit to using the third party channel.

“Unlike the financial planning industry, I don’t think the government has any plans of addressing the issue of fee for service in the short term.”

The financial planning industry is slowly making the move towards a fee for advice model, with many companies now boasting a fee only business model.

According to government indications, the entire industry will make the move towards fee for advice within the next 12 months.

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Rose Friday, 28 October 2011

I agree with Rachel and most of the contributors in regards to being able to and expected to charge a fee. What I take exception to is the mention of "fee for service". Our company has a "Professional Advice Fee" policy. We are paid by the lender for the transaction/service. Our Credit Advice has additional value and should therefore be part of our offering to the client.

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Andre Friday, 28 October 2011

Fee for service is coming and it is for a providing professional "service" that clients demand, not just getting the "best price". If [people like] Tim Brown don't see it, then how does he justify his position with Vow.

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Loan adviser Friday, 28 October 2011

I'm encouraged to read all comments in favour of some kind of Fee for Value model. I've done so for 17 years. Irrespective of the current, and rising, costs of operating a professional practice - as real as they are - clients actually don't care about that. Any fee model should first be about delivering client value. If done well, and charged appropriately, increased profit and sustainability will follow. So, what's with 'a uniform move' anyway Tim? The nature of a free and open market is that different brokers will provide a different service and value offering to different clients on a timetable that suits them - so a uniform move is patently ridiculous. To suggest otherwise smacks of collusion, fear and/ laziness. I sincerely hope you're not waiting for more legislation to do your work for you? There is no impediment to instituting a fee model now so why be a follower when you can be a leader? If I was a Vow or AFG member I'd be very worried by this lack of gumption and/ or vision.

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Rachel Friday, 28 October 2011

My clients have an expectation that I will charge a fee and after they have made an appointment, ask me to confirm the fee so they can be prepared. I have never marketed a fee in my discussions, it is their expectation. I, for the life of me, cannot understand how every other industry gets CPI adjustments or "income reviews" for productivity and our industry does not. Get a grip industry! With more compliance and more info required from clients and more expectation from the lenders for cross sells, there has to be some avenue to increase our income per client or else the industry will cease. My advice is worth something to the clients and the will not get the same service by going into a branch!

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Keith Bridges Friday, 28 October 2011

It never ceases to amaze me that someone sitting in the comfort of a salaried position, can make statements such as this. The reality with reduced commissions, increased compliance, the reliance on commission only no longer provides a viable financial return for effort to risk. Still you head in Brown your remarks are well out of order

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Tony Friday, 28 October 2011

What are you waiting for? The "not yet" mindset will lead to failure. Its guaranteed that commissions will reduce again in the future. Can you take another 40% cut in commissions? Get with the times, every other industry invoices their clients, we have for years and no resistance - why are you so scared to re-educate clients about paying for expertise, and type up a Quote. MFAA should teach consumers through TV, radio, slogans, to pay fees and have every broker charge by 1/7/2012. Stop treading water like a frog in a boiling pot and make the jump.

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Mark C Friday, 28 October 2011

So Tim see's no advantage to using a broker. If it isnt cheaper why would you pay? The fee is for service not for getting the lowest interest rate. Like it or not its coming, we need to start to adjust our thinking because if it comes all of a sudden then the quick change will be hard for some.

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Coastbroker Friday, 28 October 2011

The only reason Tim Brown is saying this is the same as AFG they do not want their members charging a fee for service because it means the Aggregator cannot get their hands on a share of an upfront fee

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Fee for service model a long way off

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