New brokers are being ripped off by so-called ‘mentors’ charging exorbitant fees but delivering little, claims the head of a professional association.
Finance Brokers Association of Australia
CEO Peter White
is concerned new brokers – who do not yet have an income – are being charged thousands of dollars in set fees and trail income to be guided by supposed ‘certified mentors’.
White tells Australian Broker
the FBAA is becoming increasingly worried the practice is hurting new entrants’ financial stability and view of the industry.
“Over a bit of time we have been collating evidence and supporting documentation to ensure this wasn’t a ‘one off’ from when first it came to our attention, and then it has grown – unfortunately – from there… the reports we have been hearing are so concerning we have an obligation to the industry to speak up,” he says.
“The practice is scandalous and will end up hurting the industry’s reputation and dissuade new brokers from entering the industry.”
Many organisations run courses for people wanting to learn how to mentor, from registered training organisations to the Mortgage and Finance Association of Australia, although FBAA does not.
White stresses it is not the mentor course which is the problem, or the qualified mentors who are charging fair rates.
However, FBAA has been told of mentees being charged up to $38,000 value to be mentored, with many mentors charging an initial large fee, plus a percentage of the mentee’s upfront and trail, and then a quarter of the trail for the life of a loan even after they stop mentoring, according to White.
Some new brokers are led to believe that they have no choice but to pay these exorbitant fees, yet there are many alternatives, says White.
“Some have borrowed from their parents to pay these high up-front costs, and they haven’t even started earning an income yet.
“We’re on the side of industry and its future and we don’t want to see it trashed like this. Mentoring new brokers should not be seen as cash grab for established brokers and industry associations, but as an opportunity to develop new brokers, promote professional conduct and practice and enhance the industry.”
FBAA recommends new brokers go through RTOs – which can be accessed through HECS so there are no upfront fees – that offer long-term, appropriate mentoring by skilled brokers.
Mentors understandably look to cover the cost of their training plus their time spent mentoring.
The MFAA course for would-be mentors costs $1650 and covers the prospective mentor’s intensive three-day training programme, teaching materials, a two-year mentor master-plan, and 24 fully-documented ‘how to’ lesson plans for each month of the two-year programme.
Once a broker is a MFAA Certified Mentor he or she can access all existing intellectual property the association has on the topic, at a cost per mentee of $2800.
Last month Australian Broker
spoke with a new broker, Edwena Dixon, who pays a flat fee of $550 a month to be mentored by a broker who had completed the MFAA programme.
Dixon says she prefers paying a set cost to having a cut of her profit taken each month as other mentor programmes do.
MFAA CEO Phil Naylor says the instruction and materials provided by MFAA to would-be mentors are high quality and the costs reflect that, but the association cannot influence what a mentor can charge a mentee.
“MFAA does not and cannot, at law, control what mentors charge mentees, but our view is the market will sort that out – we are gradually increasing the number of certified mentors and have encouraged a number of aggregator groups to have their mentor programs recognised by MFAA as certified.
“This means there is plenty of competition in the certified mentoring market so if there are any attempts to overcharge, competition will ensure there are other options for would be mentees.”
MFAA has seen no evidence that the mentoring costs have deterred new brokers from entering the market, as its membership is growing at the rate of over 100 new members each month, Naylor says.
Over 70 MFAA members have completed the Certified Mentor training over the past five months.