A Perth-based brokerage says that the Productivity Commission has failed to recognise that brokers educate their clients, improve their financial literacy and are not guaranteed payment for it.
In its submission to the Productivity Commission’s draft report, WA-based Habitat Finance explained how its brokers spend hours educating clients and understanding their needs so they can make an informed decision, which does not always end in a sale.
“I believe there are several aspects of service a mortgage/finance broker provides which are being overlooked,” Habitat Finance and Insurance owner Rory Cowman said. “The first and most important is financial education and literacy.
“Before our customers can make an educated decision about their plans, they first must be educated/informed. In most cases, our customers come to us, as we provide this education, obligation-free. Meaning, we may spend several hours understanding their needs and empowering them with education so they can make an informed decision.”
Mr Cowman said that, in many cases, this decision does not lead to a sale for his business, as it is not in the customer’s best interest to move forward.
“To simplify our proposition purely down to a ‘a lowest interest rate option’ is to not understand what it is we do,” the owner said.
The Productivity Commission’s draft report, released last month, used a UBS report to suggest that brokers are paid an average of $4,623 per loan. However, one Sydney-based broker pointed out that the commission failed to understand the work that goes into running a mortgage broking business, and that brokers only get paid if a loan settles.
According to simplyaskit founder Paul Ryan, on average, between 70 per cent and 72 per cent of deals settle, which means that brokers receive no payment for up to 30 per cent of their work.
“When you consider that to submit a loan you have to win the trust of the consumer, you’ve got to put an application together, electronically lodge that application, follow up on all the details of the application, arrange settlement and then you have three years of after-sales service. That could add up to anywhere from 15 to 30 hours work on one particular loan,” Mr Ryan said.
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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