Debate continues over developer kickbacks

Yesterday, The Adviser ran a story that asked whether or not it was ethical for brokers to accept a fee from property developers after a straw poll found brokers were evenly split on the matter.

The Adviser was subsequently inundated with comments from brokers who argued both for and against referral fees from property developers.

Simon Pressley from 6 Point Property said he was “disgusted” by anyone operating in the professional services industry who receives any form of remuneration from property transactions as a "middle-man".

According to Mr Pressley, accepting kickbacks from property developers could ultimately turn into another Storm Financial fiasco.

“There is already an official term for being paid to sell property – ‘real estate agent’ - they are required to be licensed and then get paid by vendors (not buyers),” he said.

“Brokers are no more qualified to know property than they are about shares. Aggregators need to step in here. Governments need to intervene too. This practice of brokers filling their pockets as ‘property distributors’ has the potential to become Storm Financial Mark II.”

Mr Pressley’s comments were echoed by a number of other brokers including one who wished to go by the name of ‘ethical broker’.

“How can you be giving ‘advice’ about property and getting a kickback from one developer only? How is that independent? Brokers will end up with a worse reputation than financial planners,” the ethical broker argued.

But while some obviously believe it is “unethical” to receive a kickback from a property developer, others do not believe this is the case.

One broker, who went by the name of Mitch, said he did not understand why it would be considered unethical to take a referral payment from a developer so long as the fee is properly disclosed to the client.

“We pay referral fees to real estate agents, accountants, and solicitors for introducing clients to us,” he said.

“Referring doesn't mean you are offering investment advice either. If a client asks about investment opportunities in real estate and you are able to refer them to someone you believe is on the ball, then you are providing an extra service. Whether the investment succeeds or fails falls on the head of the developer not the referrer. If you think it’s unethical to refer to a developer then maybe you shouldn't obtain the finance for your client for investment purposes.”

And he wasn’t alone. Another broker, who went by the name of Terry said it was silly that mortgage broking was the only industry where it is a sin to “earn an income”.

“If the fee is disclosed, what’s the problem? I don’t see car salesmen disclosing how much commission they make when selling you a car.

“Are we really the only industry where it is a crime to receive payment for our knowledge, experience and professionalism?”