Broker: Fee-based commissions may burn associates

Broker: Fee-based commissions may burn associates

Broker: Fee-based commissions may burn associates Brokers continue to put forth arguments against moving to a trailer fee-based commission structure, with one broker pointing to the potential for dishonest brokers to withhold paying associates the proper commission.

“The biggest problem with implementing a trailer model in our industry is the fact that all the ones I've come across pay the broker, not the associate the trails, Daniel Mckay of Alberta Mortgage Centre wrote on MortgageBrokerNews.ca. “ As an associate you have to trust your broker to pay you those trails as they are not paid directly to you.”

McCay says he was once burned as an associate, himself, and refuses to implement such a structure within his own brokerage unless regulatory changes are made to protect broker employees.

“Many brokers use this to hold associates hostage within the brokerage, and do not keep paying the trails to the associate if they leave the brokerage,” McKay said. “I was burned by this as an associate in the first brokerage I worked in, and refuse to implement a trailer model into the brokerage that I now run unless the industry does something to prevent the stealing of trails from associates.”

The discussion was spawned by a call from industry players in Australia – including both brokers and industry regulators – who are considering a shift from up-front commissions to fee-based commissions.

“Experience has shown that commissions paid upfront tend to encourage less rigorous attention to loan application quality,” concludes a recent guideline paper from the Australian Prudential Regulation Authority, the Down Under equivalent of FSCO.

The assertion – brokers are more likely to withhold key client information under the tradition system of remuneration than the trailer model – was echoed by several Australian lenders in August as part of a broad regulatory inquiry process meant to better protect the country’s broker channel.
 
9 Comments
  • Barb 2014-09-05 12:08:14 PM
    There will always be some dishonest brokers for any program. It's not a reason to not include smart trailer commission in your portfolio- it's a reason to move to an honest brokerage!
    Post a reply
  • John Van Driel 2014-09-05 12:16:03 PM
    Even honest brokers can run into problems. Going to this method will kill 90% of agents.
    Just think about it!!
    Post a reply
  • M. Robertson 2014-09-05 12:17:38 PM
    Something that most agents do not consider is this: Your broker of record is the one that take all of the legal liability for business that you do. You ride on their E&O insurance, you are licensed as a sub-broker under their license, and they are ultimately responsible for every single deal that you do. Even long after you have left that brokerage – they are liable for your actions.

    Yes you build your client base, you build your referral network, and yes you are entitled to be paid fairly for the work that you do. You also have choice. You can choose to work with a brokerage that will allow your trailer fees to follow you, or you can choose to work with one that does not. In the end it is your choice.

    Every single agent has an agents agreement, it is how they are designated as independent contractors. The brokerage has the right to choose what their agents agreement states for commissions, policies, etc – and it is the agents choice to agree to those terms and conditions. If, like most consumers, people do not carefully read and ensure that they fully understand and agree to the terms of a contract before they sign it… it is their own fault. No one forces you to join a brokerage – you make that choice. The argument that a brokerage is “stealing” commissions from you… it does not hold water if the contract you entered states that commissions remain with the brokerage after you leave.

    It’s called being accountable for the decisions that you make. If you have a lender that only offers trailer programs… and your existing contract does not cover trailers – it is up to you to have that discussion with your brokerage. You are an INDEPENDENT CONTRACTOR that means that you are responsible for ensuring the contract you are working under fits with your wants and needs. It is not the brokerages responsibility. If you are not satisfied with the policy – then leave the brokerage. It’s rather simple. If you have a solid contract, and the brokerage is not honouring that contract, you have legal recourse. It is the beautiful thing about a contract.

    If you did not take the time to ensure that the contract you entered protected your interests in a way that you wanted, you can hardly later on cry foul and claim theft of commissions.
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