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Fee-for-service could threaten life of broker channel

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Australian Broker | 17 May 2011, 06:00 AM Agree 0
Brokers may not be able to differentiate their service offering from that of the banks enough to justify charging a fee, it has been claimed
  • Keith Bridges | 17 May 2011, 12:11 PM Agree 0
    The writer needs to come off his high horse and look at the value add we as brokers provide, not just more choices of product. We have started a Fee for Service model, because the Bank's are currently driving our business model, which in this environment is simply unprofitable to rely soley on commission paid by the lender.
  • Phil | 17 May 2011, 12:24 PM Agree 0
    Yet again I will ask.... why no wholesale product without commissions? There is already one non bank lender able to do this. The banks will push fee for service for sure, like they have in financial planning. There are no commissions payable in financial planning, but has the cost to the customer changed? ... NO. If they banks will not provide a wholesale commission free product to brokers, then strike them off the broker channel!
  • Xavier Quenon | 17 May 2011, 12:28 PM Agree 0
    I just don't understand why the Borker space should opt for a fee for service model. What I mean by this is that there would be no benefit to the consumer. Indeed when a consumer walks into a Bank today (vs using a Broker) they do not pay any less in either fees or rates. On the other hand it could be argued that Borkers will ensure the right discounts are applied for when the bank could try to 'get away with it' if not requested by the consumer.
    Borkers are there to keep banks honest.. In an environment where competition is already dwindling through mergers and buy-outs it would be another counter productive move to change the current comission system.
  • Kevin Breen | 17 May 2011, 12:41 PM Agree 0
    The way to adopt "fee for service" is to complete Diploma Financial Planning and broaden the services you provide. This sees a model where you continue to receive commission for the sale you make on Mortgages and Life Insurance. Charge a fee for Financial Planning -including budgets, debt reduction, Insurance, Superannuation and Retirement planning.
  • Robert | 17 May 2011, 12:55 PM Agree 0
    At last someone speaking sense
  • Broker | 17 May 2011, 01:03 PM Agree 0
    If this so called fee for service model ever gets a run, which I highly doubt that it ever will, the likes of ING and Macquarie, AMP Citibank will write truckloads of business, as they will continue to pay us commissions ( how else will they ever write loans if they don’t?)

    Not in my wildest dream would I submit a loan to a major if I get zero in return for my efforts, and just how absurd would it be for any major bank to expect that I would embrace this screw- the- broker- at- any -expense business model.

    Lets all get a grip on reality here..
  • sidbroker | 17 May 2011, 01:07 PM Agree 0
    I agree. Charging for service will be the last straw and that will be the end of the broking channel. Brokers are needed for competition.
  • Jeff Mazzini AAMC Training Group | 17 May 2011, 01:23 PM Agree 0
    Until a broker really understands their business model and the costs associated with their business model overall, then to set a value for fee for service will be a difficult proposition. Once the broker places a value on themselves then the selling proposition to the clients will be a simpler process.
    Please also remember no matter what business you are in until you place and advise clients on the value to what you do, the clients will never truly value and appreciate what you do.
    Banks that deliver financial planning services via their advisor networks do already charge a fee for that service. Why would they not also then charge a fee for the credit service they are supplying, as they certainly could not isolate themselves from their most valuable referral source, being the brokers?
    Finance brokers are very skilled and high quality credit advisors so understand your costs look at your service offerings and sing your professionalism from the roof tops. Only then the journey to fee for service will be appreciated and accepted by clients.
    Many other professions are already charging fee for service and advice via other professionals is also a tax deduction, so in the end what is the real cost to the clients.
  • Nick Reilly | 17 May 2011, 02:59 PM Agree 0
    It is the closed minds of people like Max that result in brokers undervalueing their service. Max needs to walk into a branch and try to obtain a home loan and then comment on whether or not brokers will have trouble justifying their fees. Maybe Max needs to be more in tune with Gen Y, in todays busy society people want things done with less fuss and are willing to pay for this.
  • WayneBroker | 17 May 2011, 03:49 PM Agree 0
    I agree entirely. Any move to a fee for service basis plays exactly into the hands of the 4 Majors who would love to cut commissions completely and see the broker supply channel fade away. That way they would have greater control of the flow of information regarding their products, via their marketing efforts.
  • Todd Hunter | 18 May 2011, 09:24 AM Agree 0
    No kidding... we are within 200m of all majors, and the branches in Cronulla are on the ball in securing loans for clients
  • BONED | 18 May 2011, 10:00 AM Agree 0
    Spot on! I think those 'for' a fee for service to need to look at the bigger picture! A high quality client does not need a Broker to get a loan - any Bank would suffice! Like it or not, the psychology is still very much 'every dollar counts' so what makes Brokers think they'll thrive on a 'fee for service' model?! This is what will happen, your 'low' quality Clients will be the only ones that need a Broker, because thay won't be able to get finance without one! Good luck if that's the business you want...
    Aggregators need to stand up and be counted here! If they're allowing their Brokers to charge a fee, i think they need to re-evaluate their agreements with those Brokers!!
  • Elle | 18 May 2011, 10:53 AM Agree 0
    Finally! Someone that gets it! I am so sick of hearing about fee for service in the broking industry, it is simply not feasable, it is exactly as Max sais, "The psychology of the customer is still the psychology of the customer", and in this day in age they are only becoming more savvy, and more fee conscious, and you know what... why should they have to pay? It's the banks who profit most from their business, so why shouldn't they be paying for the referral stream, especially when they make brokers do all the work anyway? I just don't understand these brokers who get on their soapbox about 'service propositions' and 'valuing their service' and all that rubbish... guess how much Joe Bloggs client cares about that? Not enough to hand over their hard earned, let me tell you! And on diversifying into a 'one stop shop' just to survive... why would we want to become 'Jack of all trades, Master of none'? To me, that is devaluing our service more than anything, I can't speak for others, but I am busy enough being a mortgage broker let alone trying to become an insurance sales person and a leasing expert on the side!
  • Renee Kiley | 18 May 2011, 02:15 PM Agree 0
    Our Company implemented "fee for advice" 4 years ago. 70% of our clients are repeat customers or come from word of mouth. Clearly it is not an issue if you are providing superior service. In addition to this, one of my staff members advised me yesterday that a "high nett worth" client of ours who obtained a CBA loan 6 months ago with in excess of $1 million in borrowings, is on an interest rate of 7.81%. It doesnt take a rocket scientist to work out how much interest we will save him over the next 12 months. In fact - he will be so pleased he will more than likely tell 3 of his friends or colleagues about us. Advice Fee and all.
  • Ozboy | 19 May 2011, 07:52 AM Agree 0
    This fee for service debate is getting ridiculous, it's like the "who owns the customer" debate. The bottom line is the customer/client will decide as a business owner it's up to you and no one else. Do what you think is right and stop denigrating others because they do it differently. Move on.
  • osbroker | 20 May 2011, 03:27 PM Agree 0
    If you don't see yourself as adding value to the consumer experience, don't charge a fee. We've been charging for years and are busier than ever because of the QUALITY of service. Clients are more than happy to part with a few hundred dollars for quality service and advice. Those that aren't are not the clients we want.
  • SteveMc | 24 May 2011, 12:51 AM Agree 0
    Elle, spot on. The greatest benefactor of your specialisation is no doubt your clients. Sadly, too many brokers neglect that most important duty of care, by being a mediocre provider of services well outside their knowledge and skills.
  • Andrew Hetherington | 16 Jun 2011, 03:18 PM Agree 0
    Ozboy and Osbroker, great comments. I would be keen to have a chat to you Osbroker -
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