With increased competition among banks and credit unions, one professional believes the move to a fee-only model could be the key to keeping brokers on top.
Aaron Vaillancourt of Mortgage Architects
is adding his voice to a chorus of brokers suggesting lenders would be more likely to make all of their products available through the channel if brokers were willing to take their compensation through fees charged directly to the borrower. The B.C. broker uses Meridian – that currently has cut brokers out of its promotional 1.49 per cent rate
– as an example.
“There is no doubt about the value good and consistent advice provides -- but unless we normalize and enforce a commission structure that various lenders provide us, the unbiased fiduciary value of our professional advice will suffer,” Vaillancourt wrote on MortgageBrokerNews.ca. “This likely won't happen because aligning broker sentiment and behaviour is worse than herding cats. And so, the fee-only model is coming, as it should.”
Brokers are permitted to charge fees under the MBLAA, as long as they are properly disclosed to clients.
However, it remains to be seen whether or not the regulators would step in to change the stipulations surrounding fees, if they were to become more prominent.
Changes to fee guidelines have already been suggested.
According to the latest MBLAA review, published in January 2014: Under the regulations, if the principal amount of a mortgage is $300,000 or less, a brokerage cannot require a borrower to pay an upfront fee for services to be rendered. Mortgage brokerages are allowed to charge fees, but if the mortgage is below this threshold, they can only do so after the mortgage has been secured. During the course of the consultation, it was suggested that the threshold for the prohibition against collecting advanced fees for mortgages less than $300,000 be raised to $500,000 to better reflect current, average mortgage amounts and increase consumer protection.
However, such a change to the broker model could erode competitive advantages.
“If someone is going to save $3,000 in interest payments and they also have to pay a one per cent finder’s fee to brokers to get it, when you offset the additional cost on the fee model, they’re not really going to be saving any money,” Matt McKillen of Mortgage Architects
told MortgageBrokerNews.ca. “That’s one of the benefits of going through a broker is having access to all the lending sources and auxiliary products at no extra cost; if customers have to start paying brokers it will dilute our brand and the benefit we give our clients overall.”