Are you willing to pay a broker 1% +GST of the loan amount to secure you a loan/mortgage?

Automation of the application won't replace a broker's knowledge of lender policies. Of Course innovation will come, it already has, not long ago it was paper based application process. Brokers are here to stay make no mistake about it, the landscape is changing but the service being provided by good brokers will always have value.

 

i am probably wrong,
at
0.15% x 600k loan value = $900
if you only do 10 a year,
Thats $9k a month = 108k a year, for 30 years
2nd year would be 216k. (without adjusting for paying down loan but it wont be that much after 1 year)
This is excluding the upfront commission.
is my calculation wrong ??
work up to that and retire ?

2 months ago i secure a conditional offer from a bank,

My broker email me a document of her commission breakdown.

i think she gonna bank around $6000 comms over the lifetime of the loan.

Loan amount was $1m

imho if the amount i was to pay her is similar/same amount and its tax deductable/taken off the loan amount as now we pay not the bank pay.. im cool with that.

 

Broker land is in big trouble yes, but I would say the consumer is in bigger trouble

 

Calcs wrong obviously or everyone would be a broker
That's $9K per YEAR not month You also don't account for the fact that trail is based on the outstanding balance, loans get paid down over 30 years so trail diminishes each month

 

I disagree. Spending 30mins thinking about this, I can already think of a few possible business ideas to drive down the price of Broking.

In fact, I might do some more research and look at commercializing those ideas

 

The average life of a loan is around 4 years, people sell houses, refinance, die, default etc. So In your example, you would build up a trail book of ~$36k per year and then would hit the wall.

Believe it or not, having a branch and staff with salary, annual leave, sick leave, long service leave, super, rent, redundancies, computers, manager, executives etc. is very expensive. It's not a situation where is 'pay a commission' or pay nothing.

For most smaller banks it's not even financially viable to have a branch network, and some only go through brokers.

 

Its not all cents and dollars for @Simon Hampel
As we all know a PC 'like' is worth its weight in gold,
we can all pay Simon in 'likes'

 

likes don't result in income though.

 

Much more to do with policy than servicing. For eg - some banks take allowances at a %, others will take the full amount. This isn't advertised by the bank, but brokers will know.
SE clients won't know the lenders who will look at their financials the most favourably.
First home buyers won't know which lenders are okay with small defaults, or super high LVR.

 

$9k/yr, not month.

 

Some lenders already advertise in that way - Specialist Lending
Wouldn't be surprised to see more of it.

 

I think you've got it partially backwards. There's quite a few changes coming over the next 12 months which won't quite be automation, rather increased efficiencies. [And thank goodness, because brokers do a lot more work today than we did a few years ago. I'd be delighted to only apply 10 hours work to a loan, it's usually about double that.]

Comprehensive credit reporting will mean a lot of the data is out there to be collected automatically. I'm hoping we'll be able to do away with a lot of the bank statement requirements for existing loans. There's already some automation of living expenses occurring. Clients should be able to drop and drag appropriate documents (payslips, etc) securely rather than send them via email. Once the data and documents are loaded, a few clicks select the lender and product, automate most of the compliance disclosures and submit the loan.

The work the broker does will be where the real value is. Having a deeper understanding of goals and objectives. Formulation of lending strategies. Understanding how the right lender and product at the right time and place can make a difference to the longer term outcomes.

This stuff is gold and can be worth every penny the broker gets paid. People have said they'd expect a better rate to justify a brokers income but what if that value was in being able to buy another investment property due to good advice? That's worth a lot more than a 0.2% rate reduction (but hopefully that can also be delivered).

Even if this does come to pass, I don't expect consumers will behave any differently. They still won't want to pay brokers directly.

 

You're still looking at revenue as profit, assuming trail would remain and that we would get 1%.

Halve that and halve it again. Ever run a business?

 

go for it

 

As already mentioned, the reality is part of the reason the broker proposition is so popular is that there is no direct fee to the consumer.

It is a tall order to change a consumers mindset to go from paying nothing for a service to paying a few thousand upfront. I'm sure over time there would be a niche for specialised brokers but I feel that it would take a number of years and lot of declines/poor customer experiences before this gained traction. For that reason I'd expect the majority of brokers to be out of the industry within a few years if an upfront fee model was introduced.

 

I agree 100% with your comments regarding a broker can add value. The thread was regarding a broker charging 1% of the loan, and whether the consumer would be happy to pay that. Some, sure. Particularly investors and those trying to build a property portfolio. Those buying/refinancing a PPOR I imagine will be less inclined to fork out the cash.

 

It is a tall order to change a consumers mindset to go from having no idea what total they are actually paying for a service to paying a few thousand upfront and knowing exactly how much they pay.

 

Surely you can't be so naive to think you are the first to think that you can disrupt the broker model? There are numerous fintechs that have/are attempting to replace brokers. So far the only success stories I've seen are tools which make existing brokers more efficient which in my opinion is a great thing. That's not to say brokers won't be replaced in the future but based on current tech it's a long way off unless it's a vanilla deal.

 

you are underestimating the high one gets from ego boost a 'PC like' brings