A Perth-based mortgage broker has explained why he would be comfortable charging a fee-for-service as the broking industry evolves, given the additional services he offers his clients.
Few Australian mortgage brokers currently charge a fee-for-service, but the contentious remuneration model has been under the spotlight following ASIC’s review of broker commissions.
In its report, ASIC noted that UK mortgage brokers are paid by either an upfront commission by the lender or a fee for service from the consumer, or a combination of both.
“Fees for service paid by the consumer of between £200–500 have become more common, often together with an upfront commission paid by the lender,” ASIC said.
Broker commissions were banned in the Netherlands in 2013, forcing Dutch broker to trial different remuneration arrangements such as charging hourly fees.
Perth-based broker Glenn Biggins of Focus Property Wealth says he has already considered different remuneration models, particularly in light of ASIC’s report.
“When they start talking about it, that’s the first step towards potential remuneration changes in the future, whether that’s now or in 10 years,” Mr Biggins told The Adviser. “That’s something to consider. As a broker, I’d be happy to take a fee-for-service model when the industry is ready for it.
“The problem with a fee-for-service model now is that we are competing with the banks direct, more so than ever at the moment, so it is pretty hard to charge a fee when the banks aren’t.”
A former engineer and avid property investor, Mr Biggins started his career in broking 10 years ago and now provides property advice to his clients for a fee.
After completing the Property Investment Professionals of Australia (PIPA) course, the WA-based broker became a Qualified Property Investment Adviser (QPIA) and now provides full property planning services to his clients.
Like a financial planner, a qualified property adviser engages with their client over a series of meetings to understand their specific requirments before agreeing on a comprehensive plan. A fee is charged for this service and the plan is reviewed annually.
“Helping people with property was my main driver to become a broker,” Mr Biggins said. “The focus has always been on the property advice part and helping people plan for the future. Every conversation I have with a client is about their needs,” he said.
“The PIPA course teaches you to go through a client’s needs initially and that guides you where to go with the loan and the property purchase. It sets your clients up far better for the future and can help avoid making some impulse decisions with the properties they buy.”
In addition to generating revenue, Mr Biggins says that providing property advice is a major lead generator for his business.
“About 80 to 90 per cent of our business comes through client referrals,” he said. “When a prospective client calls after being referred by an existing client, the trust is already there. We can focus on their requirements straight away, rather than having to sell ourselves and our service.”
[Related: Brokers look to property investment advice]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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