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Industry leaders rubbish fee-for-service claims

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Australian Broker | 08 Sep 2014, 08:22 AM Agree 0
​Two industry leaders have poured cold water on the recently refuelled commission versus fee-for-service debate
  • Xavier Quenon | 08 Sep 2014, 09:02 AM Agree 0
    It is good to see some sense in this discussion that should not be in the first place. A fee for service in the long term (and commission abolished as this is the real debate right?) will only promote more 'direct' business to the banks and by the same token and lower level of expertise and advice across the board - with by the way no financial benefit to the customer
  • Denise Brailey BFCSA (Inc) | 08 Sep 2014, 09:21 AM Agree 0
    Commissions cause conflict of interest. Its time to look at why the high turnover of staff int his industry. Its because of uncertainty of income and claw-backs for sellers. Its only the high flyers and industry captains that disagree - and Lenders who pay commissions and want to keep it that way. The old Truck Act said clearly in 1896 for almost a century: "A man shall be paid for work done." Time for this industry to get its house in order and do whats best for customers don't you think? Ask the rank and file and look at monthly recruitment drives to replace last year's people.
  • SIDBROKER | 08 Sep 2014, 09:36 AM Agree 0
    No way will most consumers pay a high fee for service. Why would they. It will be the end of most brokers as they simply won`t survive. The banks would have a field day with this one. They will have no competition as they won`t be charging a fee for service. Soon afterwards there will be a weak broker presence in the market and the next step will be for banks to increase their profit margin and who will pay for that the consumer off course. People who think that fee for service is the way to go need a change of industry before they destroy this one.
  • Robert Lorenzato | 08 Sep 2014, 09:43 AM Agree 0
    EY should start with transparency and non conflict by looking at their own business model and that of their cosy world wide oligopoly.
    Auditors should be rotated every 3 years so that management and the auditors don't get too friendly so that misleading and deceptive accounts can be given the nod and wick and passed through. The lure of the big audit fee in perpetuity is a large incentive for these firms to turn a blind eye. If the company had to rotate it's auditor the auditor would be more inclined to do their job as their reputation maybe worth more than the next year or two audit fee.
    Then as for conflict of interest how can an auditor be free of conflict when they are doing the tax advice or management consulting for the same firm they are auditing.
    The financial planning industry and mortgage industry are completely different. The financial planning industry is taking consumers money and hence they are dealing with life savings. Loss here can have disastrous consequences for consumers whether this be through fraud or through excessive fees charged by not only financial planners but by fund managers. That is why consumers are turning to self managed superfunds and index funds. The fees charged by fund managers to get benchmark results are legal robbery - but they would be the clients of EY and hence they stay away from that debate. The mortgage industry is involved in assisting consumers in assessing credit usually for a home and the parameters are clearly established by the banks. Basically the fees paid by the financiers to brokers are pretty standard and consumers are fairly well informed as to interest rates - just turn on the TV or listen to the radio or go to a comparison web site or walk into a bank branch. A broker not doing the best for the client is easily exposed. Whereas the future returns and all the smoke and mirrors of financial planning is immoral and my aim is not directed to financial planners but the bigger end of town.
    EY take a look in a mirror!
  • Bottom Line | 08 Sep 2014, 10:00 AM Agree 0
    Only 20% of the Brokers would stay in the market with fee-for-service - and I'm not one of them. If they want to kill the industry & go back to a 4 pillar banking system - with the higher rates it would attract for consumers due to lack of competition - then this would do it.
  • Melbbroker | 08 Sep 2014, 12:13 PM Agree 0
    The point is that, if lenders no longer have to pay us commissions, our clients should be provided lower than the rates available via branches. It's the old 'cost of funds' argument in reverse. However, to my knowledge, none of the banks have the ability to dial up and down their rates in this way, nor would they want to. I would be thrilled to charge my clients a fee for getting them a better, cheaper loan than they can get direct from a lender. And I am sure clients would also be very happy as it would be a completely transparent methodology. The investment in IT required to make it happen would be enormous and I can't see that happening in the near future.
  • Tim H | 09 Sep 2014, 01:29 PM Agree 0
    Denise Brailey claims commissions cause a conflict of interest. Not sure how when one looks at this from a long term business sense. I want to keep my clients long term so will look for the best and most appropriate loan for the client. Why? Because I don't want them coming back to me three months down the track saying you didn't do the right thing by me. I'm going to another lender and I'm going to tell all my fiends how you did the wrong thing by me.
    I want them telling all and sundry how I got them a great deal and I want them saying that not just for three months but for three years or thirteen years as some still do.
    The high turn over of staff in mortgage broking is quite simply because it is an industry that is hard to get established in and many find this an issue. Long hours taken marketing, analysing client circumstances, comparing lenders products, chasing up lenders and answering client queries are quite challenging.
    Yes Denise "A man shall be paid for work done" and finance brokers do heaps to ensure they not only look after their client's interests but their own only not in the insidious nasty way you continually claim.
    PS: I have operated a one man mortgage broking business for 15 years so cannot be called a high flyer or industry captain.
  • SEQ BRoker | 09 Sep 2014, 03:41 PM Agree 0
    Fee for service, well.. I would have to let the office go. The PA will have to go,... I will just be a back yard cowboy so I can compete. Worse, as if I can afford compliance!
    I don't see fee for service as a win for the consumer. They will get advice based solely on dollar outcome for brokers or worse, they will be defrauded, at least until there are no brokers left. Then they will be legally gouged.
  • Old Broker | 09 Sep 2014, 05:16 PM Agree 0
    Lets bring some history into this discussion trend setters. Let me explain , in the late 80's early 90's there was a rife practice in Finance Brokers that were charging fees and not coming up with the funds. Now under a fee model this would be rife again. Finance Broker charges a fee for service the client is declined the funds are not materialised and we have a ripped off customer and wealthier broker. The Broker can argue the work was done and there we have it. Now for the comparison with FP, FP is the flow of funds , you dont need to qualify and its a different relationship , you have $100k you place it in a fund, No approval needed just a statement of advice and presto you have possibly a loss of cash. With Mortgage Broking a client can have a not suitable product and change it with little costs in most cases ( go easy here I am trying to form an argument). If you really want to ride a debate with me lets see Investment Property become a financial product. See if you are fair dinkum that is a change thats needed not fee for service. it wont happen and also brokers are here to stay.
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