Are brokers equal to financial advisors?

Are brokers equal to financial advisors?

Are brokers equal to financial advisors? Do brokers provide the same value to customers as financial advisors – and should they be encouraged to charge similar consulting fees? Two brokers go head-to-head on the issue.
 
“An investment advisor has to master a huge universe of products and become a tax guru to serve their clients in a meaningful way; most don't but the great ones have a daunting learning curve and relentless study,” Ron Butler of Verico Butler Mortgage wrote on MortgageBrokerNews.ca. “There is no comparison in depth of complexity a good investment advisor has to master compared to a mortgage broker and guess what; the public don't want to pay investment advisors a fee either.”
 
Butler does, however, admit that certain mortgage deals – especially those on the Alt-A side – require a level of knowledge and expertise.
 
On the other side of the conversation, brokers argue the value they add is in exposing the consumer to hidden product pitfalls – the sort of information no one else in the industry willingly provides.
 
“Please do not make light of that fact that we explain the vast difference between fixed and variable if rates rise, the dangers of a collateral mortgage, and high penalties from some banks,” Don Johnstone of Real Mortgage Associates said. “It may not seem like much but you know what? We are the only ones telling them.”
 
The conversation stemmed from one industry player’s argument that the broker industry will eventually shift to a fee-based model, not unlike the practice preferred by a growing number of advisors. They’re moving themselves to a fee-based compensation model ahead of full implementation of sweeping regulatory reform focused on increasing commission transparency.
 
“There is no doubt about the value good and consistent advice provides -- but unless we normalize and enforce a commission structure that various lenders provide us, the unbiased fiduciary value of our professional advice will suffer,” Aaron Vaillancourt of Mortgage Architects wrote on MortgageBrokerNews.ca earlier this week. “This likely won't happen because aligning broker sentiment and behaviour is worse than herding cats. And so, the fee-only model is coming, as it should.”
 
34 Comments
  • Guy Lew 2015-04-16 11:47:20 AM
    Currently as a mortgage agent, I use to be a Financial Advisor (FA). I got out because I did not believe in the products that were sold. The more aggressive advisors with large portfolio's do need to understand how to grow personal wealth but they are restricted to selling the company products no different than selling a mortgage product. As an advisor they face annual bitchfest from clients on why their stock tanked, mutual fundd only earning 3%; while a mortgage agent that understand real estate investments can help their client earn 20% or higher on Real Estate. The FA's are more regulated on investments than mortgage agents and the sole purpose of me switching. Now my clients that invest in lease purchases (rent to own investments) earn a minimum of 25% return per year and secured by real estate and not just a piece of paper. I even have FA's referring clients to us to invest.
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  • Jerry Quigley 2015-04-16 12:03:16 PM
    You can't really be serious, Guy Lew.....! Just trying to get a rise out of us, eh!
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  • Jesse D 2015-04-16 12:04:48 PM
    FA's are just as important as Mortgage Agents who are just as important as Realtors, etc. Clients can go get biased advice from the banks and FSBO firms but they are rarely steered in the right direction. We all serve a purpose and as long as we do what is best for the client offering solid, educated advise, our worth is equal just in different areas.
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