Meet the broker who agrees with FICOM

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He has his issues with the proposal, but on a fundamental level this broker agrees increased disclosure is a good thing.

“I’m like the only guy in Canada who agrees with FICOM,” Ron Butler, broker with Verico Butler Mortgage, told “And it will come to pass, sooner or later. It will come to pass in every province eventually.”

Never one to mince words.

However, Butler does have his issue with the proposed interpretation change to FICOM’s Form 10, which would require mortgage documents to explicitly state how much brokers are compensated.

“I only have one problem with FICOM and I’ve said it openly on a number of occasions: The only difficulty I have is it’s very difficult to give a perfect answer (about commission earnings),” Butler said. “The difficulty I have is I don’t really know at the time; I probably know 95% of the income but I probably don’t know 100. Because some of that stuff is at the end of the year – I don’t know what I’m going to get until then.”

Butler said he doesn’t want to be held under a microscope but that he thinks full disclosure of the total gross income of a file is fair.

He also disagrees with one main argument that has been put forth by many mortgage brokers.

“Because in other businesses people have to disclose what they make. I know broker like to say, ‘well, they have to disclose because they’re actually charging the client for (their services), so of course they have to disclose. Our clients aren’t giving us any money, so we shouldn’t have to disclose that,’ Butler said.

“Well, wait a second. Shouldn’t you have to disclose what influenced you to go where?” he continued. “If lender A pays you $5,000 and lender B pays you $7,000 for a small rate difference, shouldn’t I be able to see the basics of that?”
  • Walid Hammami on 2016-02-01 10:44:15 AM

    Here is a fact, Ron cuts about 20bps on a 5 year deal.

    Using a rate buy down calculator for a 5 years fixed you will see that he makes 0$ commission.

    His earnings are coming from just the bonus volume and other small perks . So for him showing the real commission as 0$ is certainly not a bad idea at all. He will take on more business because to the client it is a fair deal.

    Now for a mortgage agent that has to pay his agency 15-20% of his total compensation, there is no way he can compete against Ron or any online discount broker or any agency/brokerage owner that brokerage deals himself.

    Ron Tricked mortgagebrokernews into doing his bidding.

  • Neil Wilson on 2016-02-01 10:51:09 AM

    The last paragraph would be a protection to the 'client' but it won't happen even under FICOM. You will have to disclose how much you made not how much YOU COULD HAVE MADE. ie no comparison of lender A to lender B. What a mess that would be to put down all the possible choices you had but didn't take. This disclosure will be like the APR - what does that mean to the average client?

  • Broker A on 2016-02-01 10:52:22 AM

    Ron Ron Ron..... You are all by yourself in this one... You just don't get it!!

  • John Ribalkin on 2016-02-01 10:57:29 AM

    Reply to Ron

    In the above you stated "because in other businesses people have to disclose what they make".

    It would be fair if all had to disclose their full commissions but (to name a few but not limited to the following) bank mortgage reps,general insurance agents, life insurance agents, travel agents, car salesmen, financial agents at auto dealers , etc., etc., full disclosure by them are not required by law currently in British Columbia.
    If you impose this disclosure requirement of total compensation on Mortgage Brokers then at the same time impose it on all others as well. Then and only then it would be a full and level playing field for all.

  • Dan Zorgel on 2016-02-01 11:00:37 AM

    Disclosing your commission does not disclose why you chose the lender, nor does it disclose what other possible commissions you could have made elsewhere. His arguments do not make sense.

  • KBowles on 2016-02-01 11:44:17 AM

    Ron, no offense but of course you would agree. You are already taking out ads in regards to this saying you give lower rates because your staff is on salary not commission. You have been a discount broker since the beginning , you have never worked off full commission to live just to buy down rates. You dont represent the majority in your business structure of working for bottom dollar and buying down every deal. Just my opinion. And not criticizing just making a statement.

  • BW on 2016-02-01 11:45:42 AM

    If the proposal is to show how much you make on a deal why would you also show how much you could have made on a deal with other lenders? The clients would never see that comparison. Showing your commission isn't going to show what 'influenced' your decision. The client is responsible to do their own comparisons or home work which they typically do to get the best rate. If they decide to go with you what difference does it make to show how much the broker made on that deal? This argument makes no sense. Just cause this Ron guy likes to voice his opinion doesn't mean anyone should give it any merit or ask him for his opinion if he clearly doesn't understand it.
    Ron, if you're a mortgage broker maybe just listen to your peers and don't take the other side of this argument just to stand out. Maybe try to be a voice of strength and representation of the broker community instead of just spouting off so someone will have to pay attention to you.

  • Liz on 2016-02-01 12:05:24 PM

    What are you guys afraid of? The client asking you to cut your commission. As a realtor it happens all the time, learn to deal with it.

  • MG on 2016-02-01 12:37:48 PM

    I'm not in the mortgage business but as a consumer, if I was seeking mortgage advice, I would never deal with a broker that didn't fully disclose thier commissions. Some brokers are saying the fee is paid by the bank so what does it matter to me? If you went in to buy a vehicle and your salesperson was paid $1000 to sell you a car or $2500 to sell you a truck, how can you make an educated decision without knowing the salesperson has a personal interest in selling you a truck? To say that you would need to disclose what you "could have made" is ridiculous. I only want to know what you are going to make on the deal in front of me. And when I want to see a quote for a 4 year, 2 year or VIRM I want to see the quote for your commission on those as well so it can be a factor in my desicion. It absolutely matters that I'm being recommended a product based on suitability and not the highest payout for the broker that doesn't have to live with my mortgage afterwards. It may not cost me upfront but the wrong mortgage will cost me in the end. Any broker that doesn't see the ethics in that and wants to continue to hide their commissions does not deserve my business. And I know I'm not the only one that feels that way. On the other hand, if I have done my homework upfront and I am seeking someone to prepare my mortgage but not offer advice then I see no reason to see the commission the bank is paying. Same with the car scenario, if I already know I want a truck and I'm making the decision myself then the commission earned by the salesperson is irrelivant.

  • George Christopoulos on 2016-02-01 12:45:44 PM

    FICOM is playing right into Ron's business model.
    If course he will support it.
    While Ron does a lot of volume , it is small fraction of the volume in our industry as a whole.
    And how is the insurance industry avoiding full disclosure of referral fees.
    Do you think the big 5 banks may be behind this?

  • Rick Robertson on 2016-02-01 1:21:05 PM

    To Ron and JR,

    To add to Ron's comments, There are lenders who's volume bonus is on a sliding scale AND retroactive. (e.g. Scotia) That adds another level of unknowns to the concept Ron brought forward. That can sometimes make a large difference to the dollars and cents compensation by the following October for a deal done in the previous November. Do we report that additional income we receive at the end of the year on the last file we did? That's when we receive it!! Is that then true disclosure to the latter client???

    A key difference between what John has said, and what's on the table at FICOM is we are being asked to disclose on a third party payee situation. I don't see it elsewhere in the marketplace. If I have water damage in my home, I do not get to learn how much the insurance company paid the flooring tradesman. If I have gall bladder surgery, I don't get to know how much the medical insurance company paid the surgeon.

    I asked some clients about the concept and one lady responded that she had recently lost her diamond wedding ring and the insurance company refused to tell her how much they paid for the replacement. Their response was basically "it's none of your business, how much WE paid!"

    BTW - of the customer interviews, the only "consumer" who thought we should disclose was one that was concerned we were paid enough. "you put in a LOT of hours and work for me and I hope the lender paid you enough".

  • The Mortgage Broker on 2016-02-01 1:37:28 PM

    Hi Ron, Kudos for you for talking this stand. Also, I agree with you fully. It is long overdue.

  • SB on 2016-02-01 2:15:51 PM

    I call baloney. In 15 years, I haven't yet had a customer ask HOW MUCH I get paid...and I disclose to everyone that the lender pays me for sending them business...and I earn commission. As long as they aren't writing the cheque, and are happy with my service, and are comfortable with the product WE decided on, they could care less how much I'm paid. For a CLIENT to get to choose their product based on MY commission is absurd.

  • Debbie on 2016-02-01 2:28:02 PM

    We already have to do that, on Form 10 it asks are we being paid more by volume bonus or by higher rates. I just don't think we should have to disclose how much, we already disclose we are being paid, and seriously...who would work for nothing...oh I forgot, Ron Butler

  • Ad Lakhanpal,Mortgage Broker on 2016-02-01 4:26:56 PM

    Further to comments by John Ribalkin above, the main reason for regulations for disclosure is to make sure that the consumers are made aware of all costs that they will be required to pay and there are no surprises. The consumers are free to shop around and see what is being offered and select the package that best meets their needs in terms of price and service. At that stage,profit of the provider should be irrelevant.

    It is possible that a high volume broker can offer a lower rate and also make more total profit than a low volume broker for the same deal. Should a consumer deal with the broker who is making lower profit or the one who is offering lower rate?

    Answer to this will answer the questions being raised in this matter.

  • Not Self Serving on 2016-02-01 6:17:29 PM

    I think disclosure is great. Just not when it gives one channel within a certain industry the advantage over another channel.
    Shouldn't the banks be disclosing to consumers why they are pointing them in the direction of longer term rates which are more profitable to them? What about the bank internal sales force disclosure on their commissions-they too earn more for different terms. They also earn incentives during mortgage campaigns and additionally for cross selling (usually inferior) bank products.
    Ron IS NOT the only broker that agrees (he only likes to think he is). He might be the only one who focuses all his time commenting on every blog out there (with self serving purpose).

  • John on 2016-02-01 7:03:01 PM

    Clients are buying a product( mortgage). Clients are looking for a good mortgage. The amount of commission paid to the Broker is not necessary a reflection of the quality of the mortgage. I don't care how much Walmart makes, I just want to know how much it is going to cost me and am I getting a good quality product. The commission paid does not tell the client what it will cost him or or of it is a good mortgage.

  • MJ on 2016-02-01 7:07:32 PM

    FICOM is really playing the 'bad cop', and brokers need to fight the issues at hand. Cancellation fees should be permitted, and we should not have to disclose our commission to clients. FICOM is breaking the 'Don't be an A$$hole.' RULE, and has very little grounds for implementing these changes. Maybe they need to find something better to do with their time, like answering the phone or taking care of routine work better. When governments don't allow free enterprise and try to control everything, it ultimately hurts business and will give the consumer fewer options and inevitably higher prices.

  • Bill on 2016-02-01 7:47:07 PM

    Its all about a level playing field. If brokers has to provide full detailed disclosure, then have all bank specialist do the same thing so consumers are truely fully informed that they are not getting a better deal with the banks

  • Rick Robertson on 2016-02-01 8:05:47 PM

    To Ad Lakhanpal

    In BC we have had to disclose all the costs related to obtaining the mortgage since 2006. It is part of our Cost of Credit Disclosure and includes: mortgage insurance, fees, legals, appraisal, title insurance, well water and septic testing, credit union shares, back taxes, payments being held back, and even any & all pre-existing financial obligations that are being consolidated under the new loan.

    Many other provinces are still in catch-up mode to us on disclosure!

  • Gale on 2016-02-02 7:52:20 AM

    I am perfectly fine to show my commission provided the bank employees do so as well. Including salary and their bonuses (which in some cases can be more than triple their salary). I want to know how much they make for selling me a product and compare their product to all other banks and explain why their priduct is best

    I want to know, with what agency they are registered that verifies them as an expert on all of the products they sell.

    Do what's best for your client leaving your needs last. That's just the right thing to do. If you get paid well for that then so be it. You are a professional and you deserve to get paid well for what you do. Repeat Business only follows the best.

  • BJ on 2016-02-03 12:09:21 AM

    I knew who the "broker who agrees with FICOM" was going to be before I even read the article. I don't think commission disclosure is necessary because nothing is forcing the client to deal with me or take my rate: unlike with real estate, we have no binding contract. If a client contacts me and I quote them a rate of 2.69% and they say "Butler Mortgage is offering 2.54%" the client is free to go use Butler Mortgage - they are by no means forced to deal with me - the commission is irrelevant.

  • James on 2016-02-05 10:19:31 AM

    Here is an article idea...why don't you profile the FICOM big cheese who hatched this idea. Who is he/she...where did he/she come from, background etc.....

  • John Greenlee on 2016-02-05 11:37:06 AM

    I don't see an issue with disclosing commissions. I do see the issue with disclosing potential income that may not even happen so I hope this is dealt with appropriately.

    Most clients expect and appreciate the fact that the lenders pay us on our A deals and that they don't have to pay us a fee. I quite often get different comments when my clients get to the Finders Fee Disclosure I provide on each file. Most of the time, they don't care. Sometimes they say "That's all you get?" and very few are confused by the form because I bring up the fact that I receive a commission in the very first meeting.

    That said, I also let the client choose the option that best suits them. If the option that best suits them is the rock bottom rate that pays me 40bps (or lower in some cases) then that is where I send their deal. If they want to deal with a lender of familiarity to them who has a higher rate than everyone else, despite me showing them the other available options (I've had this happen a few times), then I send them to that lender.

    The way I look at it is this. At the end of the day we have to do what is best for the clients in front of us and we all have to be doing deals. If we aren't doing this we won't have a commission to disclose to anyone.

  • WhaTheFacebook on 2016-02-09 11:21:07 AM

    Ron is about Ron. No surprise there.

  • Tony Colalillo on 2016-02-10 7:26:48 AM

    I believe in full disclosure. FICOM should force ALL lenders, including bank mortgage specialists and service reps in the branches to fully disclose in order to level the playing field for all in this industry - imagine the clients reaction when they see the bank's theoretical fee on mortgages written or renewed at the posted rate! Also, all lenders should fully disclose their margin spreads to broker/agents as well.

  • Nick Bachusky on 2016-02-11 11:02:54 AM

    Yes, James. That is what I have wanted to know. I love transparency and it works both ways. We need the full story and know what lobbyists he/she works with.

  • Shubha Dasgupta on 2016-02-16 2:31:27 PM

    Aside from the many valid arguments my peers have pointed out here the one that I think is being missed is that we're running businesses. Should we also disclose the overhead costs associated with the service we provide? The Brick and mortar locations that clients expect, the cost of travelling to see a client at their convenience, the cost of marketing and acquisition of said client, COI relations, education, training, software, licensing, insurance etc. etc. etc. All these costs are what we as business owners take on so that consumers can reap the benefits through competition and choice. Without independents such as ourselves offering a wide variety of product and selection the larger institutions would have there way with us. There is a very big difference between commission employees and business owners.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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