apfront payments to a mortgage broker/adviser

homer_j_3

Wardlaw, so you think I am not very ethical?

Would I be right to say that all brokers that do not charge a fee up front are not treating their customers fairly because they need to see so many people each week, they do not dedicate sufficient time to their clients? No of course not - there are many fee free brokers that do their job brilliantly - including myself ultimately. Just because I have taken a stance against timewasters, it doesn't make me unethical.

As the OP has indicated, the consumer is becoming more sophisticated and will shop around and will try and do a bit of research themselves. What consumers have to realise is

- Every broker will work differently in the way they get the information from the client

- Every broker will not always draw the same information from the client and as the consumer has moved around brokers, they could have a changed perception of what they actually want.

Therefore the upshot of shopping around will result in a selection of different recommendations that brings a selections of different products and lenders.

So what happens from here for the client?

They will try and make a decision on which product is right for them which if you think about it, makes it an absolute waste of time for everybody involved because the main reason for using a broker is for them to recommend to you the best deal - not for the client to try and wade through 4 or 5 different KFI's and make a choice.

You also have to realise that the reality of the situation is that you go to the first broker and they get a competitive deal, the next broker cottons on to this and then will use their processes and sales skills to redirect the consumer into choosing a slightly different product that may not have much in it and this repeats every time.

If any clients want to do their own research, then they are free to do so. As a WOM adviser, I can still only provide advice on the lenders that I have access to and will get the best deal from these lenders and clients will understand this before I do any work.

Rick62

Wardlaw, what is unprofessional about charging fees upfront? What a ridiculous statement. Most other professionals (accountants, lawyers etc) charge from the start, their fees are not dependant on you taking their advice.

I work fees free, but if I were to introduce a fee I would want it to be upfront for doing the initial fact find and setting up the client. Once the client actually takes a product (i.e. motgage) I don't need to charge a fee as I receive commission.

homer_j_3

justme111 wrote: »

you do not need to try to justify this replying to me - I perfectly understand your reasons. You do not seem to understand what I was asking. What if a client of yours found a better deal elswhere? What if a broker offers no good deals? I'd feel bad I have paid for a service already. Any suggestions how to avoid this situation?

The nominal fee that I charge is to cover the following :

- Time it takes me to complete the fact find
- Time to research the market
- The cost of telephone calls
- The cost of use of my tools to help research
- The cost of stationary
- The cost of professional insurances

Even with a relatively straight forward case these days, you are talking a minimum of 3 or 4 hours of work but can be anything upto 6 or 7.

If my client indicates that they are looking at products themselves, I will warn them that this fee is payable for the above kind of things. Its classed as an administration fee, not an advice fee. If you take the advice, then you get the money back as the lenders will sufficient compensate me for my time.

I hope this answers your question.

justme111

Thank you very much for replies, I see if opting for fee-paying broker there is no way to protect myself from the one who are not very effective to say it gently. On another hand, it is like in many other cases - if I do emergency call-out for a plumber I'd have to pay the callout fee no matter if he is good or bad and your replies helped me to realise this.
While thinking on all the brokarage stuff ( the one should not read stickies on MSE board before going to bed:D ) another question came to my mind ( no, it did not just come, it strike me as a lightening:D )

WHY or WHY do banks pay commission to brokers? For offering their products will say you. Burt would not a particular product be offered anyway if it is believed to be the best for the customer? conclusion is : banks would not be able to profit from offering a commission if brokers were ethical so the very fact that commission is paid proves they are not.
Is my logic correct?
Please do not be offended, dear brokers, I'm theoretising and do not take it personally. After all your replies to my previous question were heard and I think different about it now, so it is a proof I ask with no intention to offend. Hope not to receive indignated replies in a stile "How you dare"

Dan_Collins_2

justme111 wrote: »

Thank you very much for replies, I see if opting for fee-paying broker there is no way to protect myself from the one who are not very effective to say it gently. On another hand, it is like in many other cases - if I do emergency call-out for a plumber I'd have to pay the callout fee no matter if he is good or bad and your replies helped me to realise this.
While thinking on all the brokarage stuff ( the one should not read stickies on MSE board before going to bed:D ) another question came to my mind ( no, it did not just come, it strike me as a lightening:D )

WHY or WHY do banks pay commission to brokers? For offering their products will say you. Burt would not a particular product be offered anyway if it is believed to be the best for the customer? conclusion is : banks would not be able to profit from offering a commission if brokers were ethical so the very fact that commission is paid proves they are not.
Is my logic correct?
Please do not be offended, dear brokers, I'm theoretising and do not take it personally. After all your replies to my previous question were heard and I think different about it now, so it is a proof I ask with no intention to offend. Hope not to receive indignated replies in a stile "How you dare"

Some lenders ge over 50% of business from the intermediary market, so they pay commission for finding the client. Just think, if they can take our commission out of the profit they make from each client, how much profit they must be making?!

homer_j_3

There actually was a piece of european legislation that was stopped at the last hour which would have meant that brokers could not have been paid this way. That would have been interesting to see how that would have impacted.

I personally would love to work the independent way - charging a fee and refunding all commission as it does promote the fact that you are not biased by commission. However, most people do not want to know.

With regards to the commission, the lender has less cost to them for business introduced through the broker channel as they have no responsibility for the advice nor do they have to pay someone to do the pre and post sale work.

Dan_Collins_2

homer_j wrote: »

There actually was a piece of european legislation that was stopped at the last hour which would have meant that brokers could not have been paid this way. That would have been interesting to see how that would have impacted.

I personally would love to work the independent way - charging a fee and refunding all commission as it does promote the fact that you are not biased by commission. However, most people do not want to know.

With regards to the commission, the lender has less cost to them for business introduced through the broker channel as they have no responsibility for the advice nor do they have to pay someone to do the pre and post sale work.

Very good point. Imagine if that had passed, ourpublic would not have gone with the fee thing, well most of then anyway. Thousands of people without a job over night! Government would not help as we dont work in the car industry!!

Retired_I.F.A.

"Some lenders get over 50% of business from the intermediary market"

That's as maybe now but dont bank on it in the future.
imo lenders will reduce theur high street presence saving themselves millions and become more internet based. combine that with the "Direct line" approach which will cut out brokers almost completely the lenders will be selling their wares on the same pemise "we give you the client a better deal instead of paying commission to a broker". Brokers will still exist but they'll be more internet based too like "compare the market.com" and others and return to what they have always done in the past, placing mortgages most lenders wont touch for either a fee or a cut of the loaded rate.

It's happened with buildings and contents, motor, and life insurance and IFA's, even the post office to some extent and it'll happen again.

Mikeyorks

dunstonh wrote: »

.. many clients bake you cakes or biscuits when you go see them and you get runner beans, tomatoes, jam or honey etc given to you when you leave.

How fortunate. In my (unspecified ) line of business, many years ago, I used to get the odd few eggs but mainly offers of manure ....... fortunately in bags! That was in deepest darkest Derbyshire ..... should obviously have gone to Norfolk.

homer_j_3

I think you are right in a sense. I do believe that there will be more people prepared to do their mortgages over the phone and through the internet. We are seeing this now.

However, with the complexity of the mortgage market, I think we are a long long way off getting to the stage where a broker isn't needed. General Insurance and straight forward life cover is a complete different story but that said, its not without risk.

That said, its not if but more when with the european legislation, they did it with the the need for energy ratings on properties which led to HIPS.