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

True and if you look at the top earners in many industries and they'd be over $1mil pa. Bet the local fruit shop does that.

 

According to the grapevine, one of the big 4 retail home lending specialists in Sydney CBD roughly $150mill p.a. had their remuneration completely change recently. They were a high performer, got paid a large % of previous income based on variable volume based bonuses. Now they're on a more flat comp of $300k. This would be an all star banker & one of their best volume generators in the country.

 

What would an estimated income be for someone writing this volume prior to the change in bonus structure?

Depending on the outcome of the royal commission there might be even more bankers turn to broking.

 

Are we going to see a 0.15% reduction in the going rate since we are no longer funding the trailing commission?

 

Why not fixed price fees for amount of work involved?
different prices for PAYG easy loans, different fee for Self employed/tricky and another add on fee for structuring messy set ups etc

 

Does anyone really believe the banks would do that given their track record? I can't imagine any bank saying, "The broker channel now costs 0.15% less than the branches, so all broker loans are going to be 0.15% cheaper than branches."

Also don't ignore all the work that brokers do after settlement. The UK dropped trail commissions. Today their brokers predominately do the following:
1. Almost all loans have a 2 year fixed component - this almost eliminates the risk of a claw back on the upfront commission.
2. The brokers also provide mortgage protection. An insurance product for which they're well paid, but it's a product that rarely gets paid out (the CBA was actually questioned about the legitimacy of this type of product on Monday).
3. After 2 years, the brokers strongly encourage borrowers to refinance to a new lender, so they get paid again.

Trail commissions do work to the benefit of the consumer.

A couple of reasons.
1. So far 92% of respondents to the poll have said they wouldn't pay a fee.
2. Of those few who would pay, nobody has indicated they'd be willing to pay anywhere close enough to cover the brokers costs, let alone earn a decent living.
3. Not all PAYG loans are easy and not all Self Employed deals are tricky. You also can't judge how easy a loan is based on its size.

 

1% of the loan amount is an easy amount to calculate and see what loan is costing you.

I bet many would be shocked what 0.5%? up front plus 0.15%? trailing over term of loan actually amounts too.

If it takes 20 hours work to find a loan like mentioned above. 1% seems like a very high hourly rate.

If I used a broker I would want to pay a one off fee or given an option too. Like the painting analogy earlier if I don't like the quote for work offered I will do it myself.

Having done vocation training. Certificate 4 are a worthless piece of paper imho.

I work hard to make a "decent" living too. 1% of a loan is a lot of work for me to earn that money.

 

Some very interesting comments through this thread.

Trying to be unbiased and put back my regulator hat on:

It is a worry for brokers the sentiment laid out here and the broader public. In general, PC community would have a higher broker % rate than market (55+) I think, and it’s notable that forumites think payment of 1% is too high.

If customers don't think brokers are worth their remuneration, than it's quite likely in this regulatory and political environment, this will be picked on by the RC & other powers at be.

Comyn and the CBA team are intelligent people. They know this. They’re stoking it and bringing it to the fore. Suggestions that brokers get paid more than surgeons is fanciful, but it is what the mass media report and fuels anger and frustration at the broking community. This is advocacy 101 (get public to agree).

Also dangerously, it’s not difficult to sell a better customer outcome from a flat lender paid fee for service model. The price of their loan should theoritically be lower (if broker compensation fell dramatically but remained viable). This in turn may mean a better customer outcome. The price would be lower because banks would save a lot of money and part of this would be passed onto the customer. I doubt it would be all, part of it will go to shareholders too.

Overall, the sky’s are only getting greyer for broking remuneration outcomes.

 

Are they though?? And that's the problem.

Im not sure I got a better deal the last 2 times I used a mortgage broker. I know that banks would have made less (eg they paid for the broker) but I didn't get anything I couldn't have directly.

 

CertIVs are laughable and so are most diplomas for that matter. I have a diploma in management which I got through my current employer which taught me very little. I then got a diploma of business via my footy club! It was laughable at best. I put it on my resume ONLY to show I go the extra distance to educate myself.

The reality though is that even degrees (in a lot of industries) are not equivalent to 3 months in s job. Brokering would be no different.

Agree though, I’m on a PAYG and to earn 1% of a loan would be equivalent to a lot of hours. Hence why no one is going to pay it.

 

No one is saying they don’t think brokers are worth their remuneration under the current model. They are saying they don’t think they are worth thousands of dollars for something that could be done at branch level for free.

OR I can guarantee most would pay if it were equivalent to any other profession. When I see my accountant to do my tax I’m paying for a service and for that I am charged say $250.
That is peoples expectations.

Paying a broker thousands would be unparalleled. No professional I know that is used that often charges that amount for a service. The people who charge that amount of money are ones going into coach giant companies.

 

In most cases you get the same rate through a broker as through a branch.

Paying a broker doesn't mean the bank makes less. Those people in a branch also need to be paid. There's been a recent study that brokers cost the banks about half what origination via a branch does. This would be supported by the fact that many of the second tier lenders that don't have branches and get most business via brokers (for example ING, Macquarie) have cheaper rates than the lenders that have a lot of branches.

 

It costs banks more to originate loans in branches, but those lenders with branch networks are trying to leverage that ‘advantage’.

There’s no money in having staff waiting around to help customers download the banking app, or count coins out of piggy banks.

If they have to have staff in the branch they should be doing high value stuff like home loans, financial planning and selling credit card insurance.

Trouble is they are upset brokers do home loans better in a lot of cases.

 

A few months ago I approached the bank that had an IP mortgage of mine. They had a good record of my savings and savings pattern, with the offset having within about 1% of the mortgage. I was saving for a new PPOR. The IP was sold and I then needed a PPOR P&I mortgage. The bank said to see the broker that obtained the IP mortgage. It is unclear if this was due to bank staff being unable to assist me or if there's a custom that as the broker obtained the IP mortgage he gets the PPOR mortgage business as well. The bank has very few branches, and the loan was approved, good work by the broker.

In the early stages of sourcing a mortgage I made an appointment with another bank to speak to a person versed in mortgage matters. I was shocked to see a video link. There is no way that I'm going to discuss sensitive information online in this manner, and I walked. The bank security is most probably good, but that is not the point. I deal with people in person.

 

Currently fixing 2 year ppor loan with comm bank. Directly calling they wouldn’t negotiate on the rate, broker can with the same bank.

Maybe I didn’t try hard enough?

 

I believe in the past that some banks had an arrangement where the branch/banker received a larger bonus the higher interest rate you pay, kind of like a profit split agreement. I assume this is gone/will go in the near future. Might have been the cause of the difference?

 

I believe clients DO think brokers are worth what they're paid currently - as long as they do not have to pay for it out of their own pocket. Current model works and leads to better consumer outcomes than upfront fee for service.
To think the banks will lower their rates to pass on the savings (of not having to pay brokers) to the consumer is fanciful IMO

 

Anyone can send a request to the pricing team. The decision can be different day by day. But the result would/should be the same broker/banker. And also depends on the data entered into the pricing tool.

 

Calling them now, seeing if they can beat their fixed rate amount as indicated. Last time they said they can't on fixed rates. See what happens

 

I’ve ticked No in the survey but there are many arguments for and against.

On one hand a skilled and switched on broker is certainly worth some good money. The most valuable part of their work isn’t just to get you loans but to give you advice (or hints for you to get advice from the correct people) about strategy, structuring and planning, especially if your case is marginal. This is an area where bank staff are too ignorant or biased to provide assistance. I can say without a doubt that without my broker’s help over many years I’d never have achieved what I have.

But how much is that worth? Let’s compare with other professionals:

• 5.5K would probably be the amount you’d pay for an accountant to do full tax returns and financial statements for a medium complexity client involving 2 persons, trust, SMSF and IPs
• or a lawyer to prepare a medium complexity will, complete with BDBN’s, POA’s, advance care directives etc...
• or a financial advisor to manage a $500K portfolio for a year
• or a LIC to manage $3.6M worth of shares for a year
• or a PM to manage a medium portfolio of 2-3 IPs for a year.

My feeling is that a 5.5K brokerage fee for one 500K loan is a bit on the high side.