Mortgage brokers who offer a free, commission based service could be costing their clients by recommending loans that pay higher commissions, rather than the loan most suited to their clients, according to a Melbourne broker.
Andrew Larcombe, founder of Melbourne based brokerage Morbanx said that the benefits to consumers far outweigh the cost of paying for professional advice.
“Matching the right loan to meet the client’s needs rather than chasing higher commissions can save clients thousands of dollars,” he said.
“Processing mortgage applications is time consuming and unless brokers charge a fee they need to chase higher commissions to offset the cost of doing business.”
In his experience, Larcombe says clients are happy to pay the fee because they can see the value in a professional service.
According to MPA magazine
’s recent Consumers on Brokers survey, nearly half (41%) of consumers said that they would pay for a broker’s service.
Although, they would be more likely to pay if other services were included, with 42% saying they would pay for a broker’s service if financial advice was included. Only 22% said they would pay for a broker’s service for peace of mind over a cheaper rate, while 24% said they would pay for priority turnaround time.
According to Larcombe, fee based brokers are more concerned with achieving results for their clients.
“I suspect that a lot of fee free mortgage brokers mainly use the major banks as they see it as an easier sell when in fact a better loan solution may be found with either a second tier bank or a non-bank lender,” he said.
Andrew Larcombe has over 30 years’ experience and holds diplomas in both finance and mortgage broking and financial planning. He has been awarded as an Associate of the MFAA and is an MFAA certified mentor.