“I think, in part, it holds back the industry because you have a very transactional-based business model as opposed to long-term residual income for brokers,” says Isis Jimenez, a mortgage broker with Mortgage Alliance
. “The less agents and brokers are willing to adapt to new models, (fewer lenders) are going to be willing to transfer to a trailer fee.”
Street Capital, the third largest lender by market share, announced earlier this month its decision to end its trailer fee program, suggesting it did little to impact client retention.
Jimenez says many brokers are still struggling to accept the change to the trailer fee model, which, she argues, are more customer-centric, providing agents and brokers the opportunity to develop a stronger relationship with the client.
“It’s difficult for most mortgage agents who are accustomed to a certain way (of being compensated), she says. “When you have agents and brokers who have been used to a certain business model, in order to transition there has to be a certain amount of education from the lender.”
Indeed, Rob Regan-Pollock, a broker with Invis, agrees, adding that applying the trailer model to the wrong type of client could also be behind its inability to catch on among brokers.
“I don’t know whether it’s a question of education or product suitability,” he tells MortgageBrokerNews.ca. “I haven’t heard this directly but I believe that part of the issue is that the run on the book is the same whether it’s trailer fee or stand-alone product.
“People (who were) put into the trailer fee model were upwardly mobile, so the suitability of putting them in a trailer model is questionable.”
Regardless, Jimenez and Regan-Pollock agree that acceptance of the program really comes down to that crucial education.
“I think it’s really to do with the lack of education,” Jimenez says. “I don’t think a lot of them truly understand the trailer fee model.”
Regan-Pollock adds it’s important for knowledgeable brokers to explain the pros and cons to clients, too.
“I think brokers, including myself, like to believe in the model, but it depends on where people are in the lifecycle of property,” he says. “If they’re young, we know their needs are going to change over time.”
Another lender’s move to axe trailer fees is an indication brokers remain locked in the eat-what-you-hunt mentality, say industry veterans, suggesting that’s stunting the industry’s growth.