It’s wrongheaded and it has to stop, cautions one brokerage owner, calling on principal brokers across the country to abandon the practice of holding onto the trailer fees of departing agents.
“Retaining those trailer fees is like using a stick instead of a carrot to keep agents from leaving you,” Chad Robinson, of Verico Best Interest Mortgages in Ottawa, told MortgageBrokerNews.ca. “It’s a short-sighted approach that is doing nothing to encourage the maturation of the industry and to help protect the future revenue of mortgage professionals.”
The comment challenges status quo at most brokerages across the country, where principal brokers routinely hang onto all of the trailer fees earned by an agent once he or she leaves the firm. For the agents' part, many simply don't know about that particular clause in their contracts with brokerages, argued Robinson.
The practice effectively denies those agents years of residual income at the same time it encourages needless switching of clients in order to make back that money. Robinson is also concerned that it undermines retirement planning for those most commited to the industry.
Robinson is one of a growing number of broker-owners who have developed formal sharing agreements with departing agents that use funded volume numbers to determine exact splits.
They range from 50/50 to 85/15, and guarantee agents a minimum 50 per cent cut of those fee after leaving the brokerage.
Brokers have argued against that kind of arrangement, fearful it will encourage defections.
That just hasn’t been the case at Best Interest, said Robinson, pointing to his team of eight mortgage professionals and relatively high retention levels.
Ensuring agents have access to an uninterrupted cut of their trailer fees also promises to reduce mortgage fraud by fostering greater due diligence on their part, argues Robinson. But more than that, the sharing agreement just seems fair.
“My interpretation is if the agent hadn’t opted for that trailer fee in the first place, the brokerage wouldn’t have any of that income to draw on,” he told MortgageBrokerNews.ca. “And as for that stick, I think the relationship between agents and brokers should always be under constant review by both sides.”