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'Brokers are not commission-earning machines'

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Australian Broker | 27 Nov 2012, 06:00 AM Agree 0
The mortgage industry has bitten back at journalist Jessica Irvine's comparison of mortgage brokers to washing-machine-salespeople
  • Country Broker | 27 Nov 2012, 09:42 AM Agree 0
    Tghe best thging we can do as i said yesterday is let the MFAA do wejat it does best AND if you are a CHOICE MEMBER cancel your membership and tell them clearly why you are doing it!
  • Paul Raad | 27 Nov 2012, 10:12 AM Agree 0
    This was something that Choice: The Peoples Watchdog’s Matt Levey agreed with, reminding readers in Irvine’s column that mortgage brokers are salespeople who shouldn’t be relied upon to offer unbiased or comprehensive financial advice.

    Is this not the same Mob that brought us the big flop.. "The Big Switch" which they stood to earn millions in Commission on. Hard to take anything reporters say seriously when they don't even research the people they get quotes from let alone the information they get given.
  • Tony Smith | 27 Nov 2012, 10:29 AM Agree 0
    Wow ! .... she is a journalist and an economist, now they are two really credible career choices. She must know what she is talking about. Just ask Rupert Murcdoch or Rebecca Brooks about credible reporting and trust... just dont let the facts get in the way of a good story. As for economists, I would say at best they do guess work based on historical data, and also a good dose of follow the leader in predicting outcomes.
    Really poorly researched and insulting story. She may be really annoyed as a broker probably told her she could not afford a home loan.Still she achieved all that matters, we now know her name !!!
  • BJ | 27 Nov 2012, 10:32 AM Agree 0
    Rather than going on the defensive over Jessica Irvine’s comments the industry should attempt to engage and educate. But it appears, we the industry, continue to move to the fall back position of “the home loan process is complicated”, “a broker needs to be paid for his expertise” and “with the myriad of home loans out there, you need a broker”.

    Consumers read these posts and I just loved the comment last year in one posting and I quote “home loans are pretty much the same”. So how can we criticise when we contribute to the debate with a less than well thought out argument.

    The so called free service argument is weak in my opinion. A free service equates to “ZERO COMMISSION” but a far more competitively priced product i.e. rate! Using a basic calculation (results presented as estimates) because the lender's rate may not be based on simple interest and assuming a commission of say 60 bps upfront and 18 bps trail, produces an interest rate of circa 5.38% over 5 years with a starting rate of around 6.10%. Sure I could be a little more accurate but I am not building a spread sheet to argue the math, but to demonstrate we do not provide a free service.

    Our brokers are paid for quality advice and delivery. If they do not deliver no one is paid! Breaking down commission into bite size costs i.e. % for marketing, % for fixed over heads, % for variable and if we run a good business a % for the dirty word PROFIT!

    As brokers we should promote our business, our industry, as a profession and educate the wider public and commentators like Jessica Irvine. I doubt Ms Irvine has ever sat with a professional broker and considered fully the process and the service we provide. Our service is value and most professionals are paid an hourly rate. Educate her so that she understands precisely what it is that we do and quantify the value we add. Naylor and his team, Moffatt and others should learn to engage rather than react.
  • Gary Perth | 27 Nov 2012, 10:46 AM Agree 0
    Disappointing that the media in Australia is following the world wide trend of sensationalism.
    For Choice magazine, shame, your foray into the commercial world was a failure, you have lost sight of the goals set 50 odd years ago. Lack of research, truth and real effort by Ms. Irvine has put journalisim one step closer to the coffin. The head stone is already written 'Having a Lend"
  • BJ | 27 Nov 2012, 11:02 AM Agree 0
    Good God

    When you joined the industry, was part of our kit a shovel??? Just how deep do you want to keep digging?

    If we can’t contribute with some sensible comment and debate we should stay off the posts.
  • Positive Broker | 27 Nov 2012, 01:02 PM Agree 0
    Totally agree BJ. I too am disappointed at Irvine's comments but our best response is to get our view across in the press. The fact that the article got written in the first place tells me we have an image problem. We need to address that rather than engaging in a slanging match.
  • Greg Reid | 28 Nov 2012, 09:43 AM Agree 0
    It was a poorly written article confusing two issues, one is the cost to the client of a loan and the other is the issue of commissions. Unless a loan is a white labeled product where a broker can set their own commissions, the commission paid by lenders is simply a cost to them that they absorb to run another sales channel. What they offer to brokers is based on their own marketing position, cost of funds and profit requirements. It is not an additional cost to the client. This is the point that was missed in the article.
    The client gets the same interest rate as they would if they went to a branch themselves - presuming they knew to ask for discounts based on LVR and/or loan size or to match against other lenders.

    If we are recommending lowest cost of loan over its life or a choice of lenders (or whatever period agreed upon and as long as it is suitable and appropriate) then the commission is irrelevant to the client as it is not a direct cost to them.

    You would have to be an ostrich if you thought some brokers did not recommend certain lenders above others based on personal benefits, whether they be commissions, meeting volume targets or even ease of processing, it happens. However under NCCP rules commissions should be disclosed. What I do not like is that we no longer disclose all lender commissions as I did under the older finance broker agreement. The aggregator CRM spits out a client disclosure proposal for commissions to be paid but only for that lender.

    I agree with Positive Broker, we need to address what we do as brokers and what we offer over and above what any bank staff can do for a client.
  • Jim S | 04 Dec 2012, 11:48 AM Agree 0
    My aggregator does disclose all lender commissions..
  • KT | 04 Dec 2012, 05:21 PM Agree 0
    I agree that MFAA needs to do a better job of explaining how brokers offer better and more advice than staff at a bank branch.

    For instance, I've had several clients in recent memory where the client saw the bank branch staff prior to seeing me, and they tell that the bank staff explained to them that the offset account and loan redraw facility are the same thing!.......what rubbish

    Being also a licenced Tax Agent, the tax implications of using a redraw facility over an offset account is very obvious to me and I need to explain this to my clients who want investment home loans.
  • Kaori | 12 Jan 2013, 06:58 PM Agree 0
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  • Jackson | 24 Mar 2014, 09:31 PM Agree 0
    Really, "Country Broker" ? What exactly do the following words mean: Tghe,wejat - not a great recommendation. You must confuse your clients enormously.
  • Kerry Neville | 24 Nov 2015, 12:40 AM Agree 0
    The lender doesn't pay the broker commission, the borrower does.

    Also brokers do not seem to know or pretend to not know anything at all about the role of loan account servicers.
  • Broker | 24 Nov 2015, 10:17 AM Agree 0
    Sorry Kerry, but that is utter BS.

    Are you suggesting that all lenders offer better rates by going direct, well that is just not correct.
  • Regional Broker | 24 Nov 2015, 11:52 AM Agree 0
    Really Kerry, the comment is just plainly wrong, our up front and trails are paid by the banks. If the client paid us we would not have "clawbacks".
  • South Coast Broker | 24 Nov 2015, 01:14 PM Agree 0
    So Kerry, using your analogy, does the borrower (not the lender) also pay for branch staff wages, training costs, premises costs, operating expenses, etc.?
  • SEQ broker | 01 Apr 2016, 10:59 AM Agree 0
    Kerry, given that the cost to run a massive business like a bank is far, far more than the cost to run a brokerage, according to you then the big banks must be ripping us off? Surely it is cheaper to have a broker write the loan which the banks only pay a measly 0.65 upfront, 0.2 trail (ish) on than go direct for a borrower. Where is the interest rate discount for our client based on the lower cost of sales to a lender for using broker channel?
    Out of interest which one of the big 4 do you work for?
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