Broker: Fee-based commissions may burn associates

by |
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 “ 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.
  • Barb on 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!

  • John Van Driel on 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!!

  • M. Robertson on 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.

  • Keith on 2014-09-05 12:22:49 PM

    WELL SAID M.Roberston... as an agent I have always negotiated with my brokerage over the terms of the agreement. That includes trailer fees. I have always been taught that it is MY responsibility to look after my interests. If I do not do that how can I blame someone else? To call brokers dishonest well, people need to get a grip. Read what you sign before you sign it. If you don’t like it don’t sign it.

  • Evan on 2014-09-05 12:27:41 PM

    Given how much agents like to jump from brokerage to brokerage and brand to brand can you really blame brokers? Agents treat their brokerages like crap - always demanding more. More money, more training, more everything and they do not want to pay for anything. We ask our broker of record to take all the risk and then we treat them like crap. We have backed broker owners into a corner and hold them ransom with the threat of leaving for a bigger split. You want your broker to treat you well? You get what you give people.

  • Andrew on 2014-09-05 12:49:06 PM

    Mortgage "professionals" will find just about anything to complain about won't they?

  • Jeremy on 2014-09-05 1:03:45 PM

    I can't believe this is even a topic worthy of conversation, or news for that matter!!

    This is exactly what we have contracts for. Write one up with the brokerage and stop complaining.

  • Ron Butler on 2014-09-05 1:34:23 PM

    Sounds like a bunch of broker owners airing out their own tales of woe.

  • Daniel McKay on 2014-09-05 5:53:23 PM

    I would just like to point out that my brokerage is Global Empire Corporation, not Alberta Mortgage Centre as the author had wrote.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions