Two brokers are articulating a very dollars-and-cents argument for why mortgage professionals continue to represent real cost savings for big banks – that despite Scotia’s take-it-leave-it approach to commission cuts.
“Brokers have a much higher closing rate than the branches,” said Dustan Woodhouse, a high-volume broker with Dominion Lending Centres Canadian Mortgage Experts on B.C.’s Lower Mainland. “It’s just not feasible for banks to entirely do away with the channel because they would end up spending more money to hire more staff and still have a lower funding ratio, so they would have to hire even more just to fund the same number of deals.”
The assessment flies in the face of what brokers believe is the prevalent thinking among big banks. As evidence, they point to Scotia's arbitrary move to lower compensation on five-year deals. The move, say critics, suggests the bank thinks brokers need it much more than it needs them.
However, Woodhouse suggests that it might actually cost banks more to rely heavily on branch originations, especially considering that brokers bring in new clients rather than appeal to those the branches already service.
Another broker is echoing that point.
“Branch staff represent a fixed cost, banks pay to maintain them whether or not they bring in business,” said Gord McCallum, president and broker at First Foundation Residential Mortgages. “Brokers are a variable cost we’re paid by banks only when we close a deal.”
Even when finder’s fees and volume bonuses are taken into account, brokers still cost less for banks than maintaining road reps, he said.
Brokers also have a wide reach compared to banks representatives according to Lisette Amalfi, broker with Mortgage Alliance.
“Brokers typically cover a wider area compared to bank reps and have access to a larger client base,” she said. “If a bank’s product is good for our client we can represent them better since consumers come to us because they trust us to provide unbiased advice.”