Commission splits challenging industry's future

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Brokers with decades of experience at both large and small networks are sounding the alarm about an industry shift in commission splits – a trend with short-term benefits for some individuals, but long-term consequences for the profession.

“I’m offering a cautionary note on the loss of the value-add brokers bring to the industry,” said John Bargis of Mortgage Edge. “What we’re doing is eroding the tools that we have at our disposal to strengthen the industry at a critical time when we are facing plenty of competition.

"This is a time to work together and not be divided.”

The comments come as several broker networks move to sweeten the pot for the high-flying of their mortgage brokerages, offering commission splits as high as 100 per cent for those teams.

Those offers are usually directed at the highest volume brokerages, while small and new teams continue to share as much as 15 per cent of their takings.

The overall trend has raised questions about the viability of broker networks and whether they can and will continue to provide the same level of educational and promotional support for members and the industry, as a whole.

Bargis is one of several industry veterans concerned that the change-up in commission structures could compromise the ability of broker networks to perform those core duties and so help move the industry on to maturation. It would also take them down the road of real estate brokerages now struggling with increasingly narrow commission splits in order to hold onto agents.

Broker networks are already under increased pressure to compete for brokers as the number of mortgage professionals in Canada’s largest market take a hit.

While Ontario’s regulator, FSCO, hasn’t yet released final numbers, as little as 72 per cent of some 9,700 agents in the province had relicensed a day before the deadline.

Many were discouraged by a lack of the same training broker networks traditionally provide. The growing focus on maximizing compensation splits could exacerbate the losses, although brokers focused solely on those ratios aren’t necessarily getting the deal they bargained for, said Bargis.

“No matter who one works with,” he told, “nothing is free."

  • Gord McCallum on 2012-04-19 3:04:18 AM

    This has been a growing problem for a long time and it should come as no surprise to anyone who owns a business in this environment. We only have to look at other models of sustainable financial services to see that none of them pay even close to 85% commission splits. The biggest mistake our industry made was copying Realtors.

    You simply cannot build a sustainable business on a 15% gross margin. This to me is the biggest issue preventing brokerages from truly capturing more market share - there are large brokerages with none of the economies of scale that they should have.

  • Chad on 2012-04-19 3:17:14 AM

    Good training + Good tools requires a company to earn a profit. Just as if you a agent only earned $100 per file they won't work hard neither will broker houses. It costs a lot of money to run a firm and have the liability. The record keeping alone.. 7 years past the renewal date. For a 10 year mortgage that is 17 years!!!

    Invest in your broker house and they will invest in you.

  • Robert Stanfield on 2012-04-19 3:36:18 AM

    But here is the big question, does your broker or broker network offer value for the split? If there is no value, then the agent should be getting 90% or 95% because you are only paying to have access to the lenders. I switched brokers a little over 2 years ago and every broker I talked to, only wanted to know my volume and brag about their brokerages volume. None of them put any value on the table other than access to the lenders. When they did put value on the table, there was a charge for it. If broker owners want to change the splits, put some value on the table that is not an additional charge on top of the split. Everyone preaches training and value for split, but in the end, agents very seldom see it, especially new agents.

  • Zoltan M. Padar on 2012-04-19 3:47:45 AM

    We will train our Associates, new or advanced in lead generating and being a MorgagePRO and we take 20% Everybody welcome! Must be a team player and willing to work hard, otherwise please do not contact us!

  • Ron Butler on 2012-04-19 3:57:38 AM

    The truth is that every individual in the industry will find his or her correct split.

    The superstars will get 100% and the others will get something less.

    I don't think it is the individual broker or agent's job to worry about a brokerage's profitablity. Let each person study their contract carefully, independently check out the satisfaction of other brokers and agents with a given brokerage and make the best deal they can after careful study.

    None of us who own brokerages should be critical about another company's commission splits. It's really none of our business.

  • Jim T.....Advent Mortgage on 2012-04-19 5:40:40 AM

    This is what happens to industries that reach the maturation stage of the life cycle - margins get tighter and profits drop. The strong will survive while the rest won't. It is a natural course for businesses. Things will get tougher for all, not just brokerages. Agents will have a tougher time getting deals approved (bfs) and keeping deals away from the big banks. It will be interesting to see how our industry fares in the next 2-3 urs.

  • Nolan Matthias on 2012-04-19 7:20:05 AM

    100% commissions make complete and perfect sense when they are being subsidized by a lender that has the potential to make greater profits.

  • Paul Mangion on 2012-04-19 11:28:59 AM

    The high commission splits are usually demanded by the meteocre or poor agents. The big producers don't my paying because they understand value and focus on more important tasks like generating more leads. The old saying you get what you pay for is true in everything we do. Besides an agent that demands more money and threatens to leave is really telling you your experience and expertise is of no value. They have become a cancer for the office and all cancers need to be removed before they spread or you risk killing the office. Send them packing to those brokers and help put them out of there misery sooner!

  • Ajit on 2012-05-08 11:51:56 PM

    A few years ago IMBA offered a 14 week corsue for 3 hours / week. My husband ( an project manger engineer with OPG) took the corsue simply to learn more about my job and the industry (very supportive). This corsue is no longer offered. You can now learn on line or over a weekend or if you want to put in a little more effort, then over a week. Personally I like the idea of having to dedicate more time to learning. One will certainly get much more knowledge and understanding by participating in a classroom environment over a 10 to 14 weeks then what is currently being offered in Ontario.Once the corsue is done this is an industry where you are learning something new almost everyday. Unless you are on a team or have a broker available to provide a significant amount of support it is will be a tough go.

  • Jay on 2013-05-01 1:55:40 PM

    I truly believe a brokerage should get around at least 20% provided that they allow ongoing training, and support to agents to become qualified and mortgage professionals.
    We all need to look at the big picture and not just the $ and build business model that creates opportunity, and a culture that will make our industry more acceptable over banks. The prime goal of the the industry ( Brokers/Agents) We be to capture beyond the 30% market share, and not fight about splits. More power to all of us. cheers,

  • Jay on 2013-05-01 1:56:11 PM

    I truly believe a brokerage should get around at least 20% provided that they allow ongoing training, and support to agents to become qualified and mortgage professionals.
    We all need to look at the big picture and not just the $ and build business model that creates opportunity, and a culture that will make our industry more acceptable over banks. The prime goal of the the industry ( Brokers/Agents) We be to capture beyond the 30% market share, and not fight about splits. More power to all of us. cheers,

  • Z.M. Padar MortgagePRO on 2013-05-01 2:31:03 PM

    Only business minded entrepreneurs will understand the position of a brokerage with commission split. As a mortgage associate, you must make sure, you will join a firm, where you have given not only strong support from the office, but you are given guidelines of how to generate leads, take you message to potential clients and training to be able to be the best with creative thinking. Mortgage associates are dime a dozen, but mortgage professional far few between. Do not settle for just to be a number, get the needed knowledge to be able to handle not only easy deals, get trained for commercial, first and second mortgages as well as private mortgages. We do them all and we only let you on your own, when you are fully trained.

  • AMP Broker on 2012-04-20 6:01:54 AM

    As a broker owner I agree with all the comments. The aggregator I'm franchised under makes way more than I do out of the business. I essentially manage for free. The frightening thing is my liabilities have grown exponentially since the Supreme Court of BC said that independent contractors can be treated as employees and my company can be held responsible for the actions of the brokers.

  • Shawn Allen on 2012-04-19 2:00:20 PM

    Matrix Mortgage Global offers 100% commission. We treat all our agents and brokers as Independent Franchise Owners and take a small transaction fee per deal...NO Monthly Fees...No Splits...No Hog Wash....Our added value to you is that we are very big with online and email marketing.. we give you $100 credit towards your online marketing campaign. Our marketing simply works and we have the numbers to prove it.

  • Jim T...... Advent Mortgage on 2012-04-20 11:19:21 AM

    The industry is now In a place where it no longer makes sense to have agents under you. Who needs the headaches and the baby sitting that goes with having agents, not to mention the liability that these agents bring to your brokerage firm. The 10% you earn from agents is just not with it. My firm has no agents ( just me and 3 underwriters that work on my deals) and we are doing fine. True North also has no agents and Dan is also doing great. My advice is spend your time generating business rather than baby sitting agents. It is just not worth it.

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