Regulator offers reason for requirement

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An upcoming disclosure change in B.C. is being implemented to ensure brokers put their client’s interests above their own … but is it necessary?

“Disclosure of conflicts of interest in terms that consumers can easily understand,” FICOM said in an email to, “reduces the risk that brokers provide advice that is not in the consumer’s best interest, but rather, in the broker’s pecuniary interest (for example, where lender A provides higher compensation than lender B).”

Brokers, by and large, pride themselves on the value they offer clients; the various mortgage products offered by many lenders, and the fact that there is no conflict of interest in hocking their own products.

However, the upcoming change that will require brokers to disclose the fees they earn to clients is being put in place to avoid a conflict of interest, according to the regulator. But brokers are arguing it’s unnecessary.

“I can speak for myself, personally, when I look for a mortgage for a client I look for the best deal that offers the least resistance to getting the client funding,” Jason Breau, a mortgage agent with Mortgage Intelligence, told “I just finalized a deal that earned me 25 basis points and I didn’t even realize the commission rate until it was done – it didn’t dawn on me to check what I would get paid.

“When the deal was done I thought ‘what was I thinking?’”

A big problem Breau and many other industry players have with the change is that it seems to unfairly target brokers.

“If it only applies to brokers it’s unfair, it’s punitive, it’s prejudiced,” Breau said. “If it’s applied to all professional who offer mortgages, then great.”

One major gripe among professionals is that bank counterparts in the province won’t be required to offer the same disclosure.

As FICOM points out, though, it doesn’t have jurisdiction over that sector.

“The Registrar of Mortgage Brokers does not regulate the activities of bank employees. A mortgage broker’s value proposition is that they work in the best interests of the consumer and are not beholden to any one lender,” Chris Carter, Deputy Registrar of Mortgage Brokers at FICOM, wrote in an email to “That is the channel’s competitive advantage. 
“Clearer conflict of interest disclosure strengthens that advantage and provides consumers with even greater confidence in a broker’s services.”
  • Victor Simone on 2015-10-26 9:39:34 AM

    I need to wonder how much protection FICOM offers consumers, when FICOM doesn't even make E & O insurance mandatory.

    What type of protection is being offered the borrowing public by disclosing the earnings of the broker handling the transaction ? Especially in cases when the earnings are paid by a lender.

    Just what is prompting this change ? Will borrowers really be protected by telling them what we earn ?

  • Randy in BC on 2015-10-26 9:49:11 AM

    It only works if there is a standard fee that the consumer is aware of. For example, if the standard fee was $1000 and you disclosed you were making $2000 at a particular lender then the consumer deserves to know why. Otherwise we are just confusing the borrower. Frankly it doesn't matter to me if I disclose it or not but it is irritating that FICOM doesn't understand the business or the issues within the business they should and shouldn't waste their time on. For example, can anyone tell me why a CMHC premium does not have to be disclosed as an increase in the interest rate of the mortgage?

  • Victor Simone on 2015-10-26 9:50:41 AM

    On the matter of "looking after the clients' best interests". I hope FICOM understands that earning mortgage business in the independent channel automatically qualifies that business as market tested. Surely, clients are shopping their deals to 2 or 3 banks or brokers.

    A bank ONLY sells their own products, so I just wonder how they are looking after the clients' interests over their own bank interests.

    It seems FICOM's response is only that we can't tell the banks what to do. I hope FICOM really takes more time to discuss this matter with actual stakeholders, because it seems there could be other changes that would address FICOM's concerns.

  • Brian Gentles on 2015-10-26 9:57:04 AM

    Will other financial service brokers be held to the same standard: life, disability, critical illness insurance brokers; home and auto insurance brokers, etc?

  • Mortgage Guy Geoff on 2015-10-26 10:24:46 AM

    In Ontario we already have to disclose that in most cases we do in fact get paid by the lenders and that as a result the potential for a conflict exists. In that discussion, I explain to clients that (a) the difference in comp from one lender to the next is not significant therefore making a decision on that basis alone is unlikely and (b) putting them into a mortgage that isn't right for them to make more money for me is counter-productive to future business with them and (c) all else being equal including the level of ongoing customer service why wouldn't I maximize my income. Not one of them has either disagreed with any of this nor have they ever asked me how much comp are we talking about.

    Its the disclosure of the potential for conflict that heightens consumer awareness and protection; the actual amount is irrelevant.

    Another style over substance initiative ("look what we're doing") because it sounds good instead of accomplishing the real objective.

    Sadly, I'm not really surprised. Perhaps this is an opportunity for our national industry associations to advocate on behalf of its members.

  • Rosemary Madden on 2015-10-26 10:33:56 AM

    I wonder why there is not the same qyestion "conflict of interest" when a Real estate agent who also has a mortgage license does both the sale of a clients home as well as the mortgage for said client? In my opinion this is definitely the larger issue but seems to be overlooked by the Government when it comes to the best interest of the client.

  • Bill...your favourite Mortgage Agent!! on 2015-10-26 10:47:58 AM

    This quote from above...“reduces the risk that brokers provide advice that is not in the consumer’s best interest, but rather, in the broker’s pecuniary interest (for example, where lender A provides higher compensation than lender B).”

    How would the borrower know how much other companies pay unless we were to list the compensation available from all lenders to them???

    Has anyone in charge really thought this through? All they're really doing is providing fodder for the client to negotiate a rate buydown from us...and I would have thought that the banks are doing a good enough job of that already!!

    Unless they just want us all to quit for lack of commission...and I don't believe that will serve anyone.

  • Ron Butler on 2015-10-26 10:58:26 AM

    I think it is important to realize the endless references to the banks is a waste of key stokes, the Act will likely never change so we need to move along.

    Their is pressure in all regulated industries to fully disclose compensation. I am not saying it is right but it is happening to the financial advisors, soon to the P&C brokers. It is coming everywhere although one province at a time and fairly disjointedly.

  • Lorne W on 2015-10-26 12:04:00 PM

    To accept something as perhaps not right but inevitable is not a good role for government or citizens. This is Canada, we are better than that.

  • Jacob on 2015-10-26 12:17:09 PM

    There are lots of parts of the financial system where one regulator does not control the entire industry. The federal government does regulate banks, not FICOM. But requiring fee disclosure from one one group in the industry prejudices it and gives the other one a big advantage. In our system of different governments controlling different parts of the same industry it is important for regulators to coordinate these type of changes. Coordinating changes is done all the time between provinces and the national government. FICOM probably has good intentions but their process is very flawed. These types of changes require a deeper understanding which comes with experience or a lot of learning. They lack the experience, they need to take the time to learn. True consultation with an open mind is an important part of the learning process. Announcing a conclusion and then pretending to consult is not good for anyone.

  • kevin on 2015-10-26 12:51:48 PM

    Does this, in the end, really matter to brokers? If you are truly putting your clients interests ahead of your own - then there is not o a single reason why this should be a concern for you. In BC we already are required to disclose to the consumer that we are being paid by the lender, now you have to disclose how much. Why is there such resistance to doing so? Are you afraid of what it will mean for your business? That you can no longer charge additional fees? What?

    Also, about the whole bank specialist argument. Brokers need to stop complaining about the banks and their reps and how "unfair" it is. Life isn't fair, get over it.

    That fact is this: Independent brokers are paid by THIRD parties. They tell clients that they work for THEM not the banks. The TRUTH? Brokers are PAID by the banks (Their third party) to originate mortgages for the banks and they are independent contractors. Because brokers represent, or claim to, the interest of the consumer first but are paid by the banks, there is potential for conflict of interest.

    Bank reps are employees of the bank, they do not claim otherwise. They do not make the statement "We work for you not the banks", they sell one line of products not many. They are not independent contractors, and they do not have the ability to charge additional fees.

    Independent brokers spend so much time talking about how different they are than bank reps... until it is not to their benefit. Then they cry foul when bank reps are not treated the same as they are. You can't have it both ways, and the fact is that so long as the bank reps are EMPLOYEES of the bank nothing is going to change.

    I'll say it again, if you are 100% above board, and have nothing to hide, then what's the issue? My friend the insurance broker discloses how much he earns to his clients, as do Realtors, investment brokers, etc. This is not singling out mortgage brokers, this is bringing them in line with other professions.

  • kac on 2015-10-26 1:10:12 PM

    just to show how ficom knows so little about the industry they regulate if i am not mistaken the only lender that one could choose a higher rate to be compensated higher was Firstline which was a division of CIBC and now no longer in the industry and now we are able to buy rates down for lower compensation not higher.

    also what ever happened to credit unions? last time i checked they were regulated by ficom, do they now have to disclose their compensation? certainly there has been no word of such.

  • ProBC Broker on 2015-10-26 2:47:05 PM

    This is ridiculous. Is this all that FICOM can come up with? The reason for this change is that we are making decisions based on compensation is ridiculous. Has FICOM actually had complaints regarding this? I have looked at the BC Mortgage Brokers Act. There isn't much there about disclosure. All it says is you must disclose conflicts. Chris Carter said that it was BC law. Well if it is show us where it says this is law. the Act has been around since the early 70's and we haven't had to do this. The consumer is going to get confused when they think I am charging them a fee when I am not. Next thing you know they will go to their bank and take a higher priced mortgage because their is no " fee". That is what this will look like even though my contract to get paid is with the lender. Time to defy FICOM. BTW FICOM. Please have the decency to inform BC brokers directly and not through a third party site. We deserve better.

  • MaryAnn - Calgary on 2015-10-26 3:18:21 PM

    Thankfully we do not have such nonsense here. I would think that FICOM is breaking some part of the privacy act because they are forcing brokerage companies to have open book on their financial dealings, which no other business is required. As agreed with many who commented, it has nothing to do with the consumer. I think when we talk disclosure, maybe the government should be first to disclose to the taxpayers; every little nickel they earn and spend and then they can demand disclosure. Unfortunately the brokers, the associations, basically all industry members have to come together and challenge this disclosure in court. This would at least protect our dignity, and our professional image.

  • Kevin on 2015-10-27 11:44:11 AM

    I think what is ridiculous or nonsense is that brokers are so afraid of disclosing how much commission the lender pays them to originate the mortgages. Because folks, at the end of the day... guess what? You work for the lenders. They pay you to originate mortgages for them, and the consumers have a right to know that, and how much. If you do not want to disclose your very hefty incomes... then go work for a bank.

  • stop the madness on 2015-10-27 12:30:23 PM

    Everyone please read Kevin's comments again. He has NAILED it. If you've got nothing to hide, then SHOW the client your value, after all, you are working FOR THE CLIENT (but paid by a lender). Sounds like a good deal to me. The mortgage specialist works for the LENDER. I'm done with this site, bunch of whiners.

  • ProBC Broker on 2015-10-27 5:18:51 PM

    Hey Kevin... I mean FICOM! Are you posting your counter argument on this site? Sure sounds like it. Let's find out how much the management at FICOM make! Chris Carter and Carolyn Rogers. How much do you charge the tax payers? Please provide a Form 10.

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