Commission splits challenging industry's future

Commission splits challenging industry's future

Commission splits challenging industry

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 MortgageBrokerNews.ca, “nothing is free."
 

15 Comments
  • Gord McCallum 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.
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  • Chad 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.
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  • Robert Stanfield 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.
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