Should brokers charge – yes or no?

Brokers debate whether a charging model is right for the industry

Should brokers charge – yes or no?

Knowing your value as a broker is key in the mortgage business, but how do you judge this? For many, it can as simple as the decision whether or not to charge for their services.  Some do and some don’t – it remains a very personal choice for advisers throughout the industry, unless of course they work for a brokerage that has its own policy on whether it charges.

Chris Wade (pictured left), a mortgage and protection adviser with Helen Ferneyhough Associates recounts on LinkedIn being asked recently by a potential client whether he provided fee-free advice. He replied that he didn’t – and didn’t hear anything more. The enquirer went elsewhere. “That’s ok,” Wade commented. “Firstly, treating customers fairly dictates I can’t just waive the fee for one person then charge the next. However more to the point, I’ve got better things to be doing with my time than working for nothing - walking the dogs and spending time with the family.”

Answering those clients who might pushback, by pointing out that their previous broker didn’t charge, and questioning that a broker gets a commission, Wade said: “They’ve probably gone bust! Let’s be clear, that’s a bonus, not a business model and not sustainable.  I always compare it to trade work. Would you ask an electrician to rewire your house for free? No, didn’t think so. The fee is for the work and the time. The commission? That’s the equivalent of the mark-up on trade prices for your cables and sockets. Let’s stop pretending financial advice should be free, especially if you value experience, transparency and a job done right.”

Self-employed mortgage and protection expert, Katy Lehman (pictured second from left) does charge a fee for a service. “There are, of course, instances where I have not but that is pure discretion,” she said, and highlighted concerns about the approach of trying to sell protection, almost as a trade-off with a borrower. “I don’t agree with not charging a fee but asking the client to, ‘Please take out a life insurance policy’ and I won’t charge a fee. I feel it does a huge disservice for the insurance itself and the emotional attachment the clients have to it too.”

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The advantage of taking a small book

Louis Levine (pictured second from right), a senior broker with Orton Financial, believes that a fee-based system enables an adviser to properly focus on a client’s case. “Ultimately, charging allows a broker to take a smaller book and actually give the required time,” Levine said, “Those firms that don't charge broker fees are typically hard selling protection policies or solicitor referrals. For example we have a system we use to source solicitors that does allow us to charge a referral fee but we specifically don't. We are always best advice for the client first, not sales.”

Mortgage and protection adviser Laura Jones (pictured right), director of Nest Mortgage Advice, concurs that a charging model enables her to properly serve her client base - with a more bespoke approach. “I personally charge a fee, as it allows me to dedicate more time to each client and offer a more tailored service, rather than needing to work on a higher volume of clients,” she explained. “For me, it’s about providing the right level of support throughout what can be a really important and personal journey.”

Broker David Brown (pictured inset above), director of Curzon Financial, is unequivocal on where he stands about charging. “I think it's fundamental, personally,” Brown said. “We only charge £495 for a mortgage. I've charged that since the company was set up nearly seven years ago. I'm sure there are some really good firms out there charging nothing and I'm sure there's some really good brokers out there charging ridiculous figures, possibly up front, and then their service just drops off at the back end.”

He continued: “Ours is payable on completion, so we could do a ton of work all the way through – application, underwriting, offer, chasing solicitors, because that's what we do. If it all goes belly up at the last minute, we've earned nothing. But that's the business model that I've chosen to use. But when you're in a competitive market, it could be the difference between winning a deal or not. It really depends where the client comes from as well. If someone's recommended to us, they know that we deliver, they've been recommended to us because we're good.”

Regarding the procuration fees which brokers receive from lenders for overseeing a mortgage product, Stuart Gregory (pictured inset, above), director of Lentune Mortgage Consultancy, commented: “Commission paid has barely moved since 2008, despite workloads increasing year on year and regulatory costs. It's a wonder that there's as many brokers left as there are. 'Free' should never be seen as a selling point, it's certainly not a USP.”