Fees do not ‘legitimise’ brokers

by Caroline Dann11 Oct 2012

Loan Market’s director of sales Mark de Martino hit back at comments made yesterday regarding a fee-for-service model, calling it an “insult to brokers” and not a way to legitimise the industry.

 
Yesterday, analyst Max Franchitto claimed brokers should consider charging a fee, or risk looking like “mere sales reps for their favourite banks.”
 
In response, De Martino told Australian Broker Online the comments were unfounded, and that good service underpins the brokers’ ethos.
 
“It almost reads that we have to create legitimacy in our industry, in our business, by charging a fee for service. Now I think the industry has a hell of a lot more legitimacy than that,” he said.
 
“If you look like a sales rep for a bank, it’s because you’re not providing great customer service. It’s because you’re not being impartial.” 
 
“Great brokers will provide great service, no matter whether they’re charging a fee or not. That’s playing out in the figures, in the market share, that the broker figures are going up.”
 
He admitted there were occasions when charging a fee was appropriate, including during commercial deals, or when the banks were not offering any commission.
 
“Sometimes it’s as simple as the broker’s costs not being covered, and customers are happy to wear that. Customers are reasonable people,” he said.
 
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COMMENTS

  • by BJ 11/10/2012 11:03:53 AM

    For Mark to suggest "it is an insult to the industry" reflects a very narrow and paternalistic view.

    Several issues arise from the fee for service debate which extend to a brokers ability to transfer his/her book (independence of ownership), the quality of advice, lender volume requirements.

    The industry attempts, but fails to compare the role of the broker to that of a professional advisor. We are some distance from being regarded as professional advisors, because put bluntly, consumers do not see brokers as professional advisors but rather as sales people. Hard to accept but true.
    We stand behind the gross statement that we can offer loans from every lender when in reality the Joe average broker has, what, about 6 accreditations. This is not a professional industry when approaching 50% of brokers are part time, akin to Amway and party planners.

    So yes Mark, on these statistics it would be very difficult to justify a fee for service. Particulary more difficult for the aggregator to control revenue and justify their place in the market under a fee for service model.

    Professional full time brokers can and will prosper under a genuine fee for service model, however the business model to work will be quite different from the existing broker aggregator approach.

  • by Sydney Broker 11/10/2012 12:18:48 PM

    The banks will love the fee for service model as it will enable them to drop or stop paying commissions.

    BJ - did you make up that statistic? There is no way that 50% of brokers are part time, since licencing came in.

  • by Paul 11/10/2012 12:31:28 PM

    The point Mark is trying to make is fairly simple - you don't achieve legitimacy just through charging a fee for your service. Anyone who claims they're a superior broker to another just based on the fact that they charge for their service needs to take a closer look at how they market themselves.