Scotia to brokers: commission cut is 'growth opportunity'

Scotia to brokers: commission cut is 'growth opportunity'

Brokers are scratching their heads over comments from a Scotia exec suggesting they view the commission cut as “a growth opportunity.”

“Moving to a different lender if the deal doesn’t suit the client has always been a broker’s prerogative,” said Bob McDonald, owner-broker of Mortgage Centre – RDM Financial Consultants in Welland, Ont. “But I don’t really know what he means by saying the commission cut could be a growth opportunity for us.”

The seasoned broker is one of many parsing comments made by  Scotia’s managing director of real estate secured lending , David Stafford, in the Globe and Mail Tuesday. He speaks to not only the bank’s motivation in loping 5 bps off of broker commission on 5-year deals, but to the possible consequences for its relationship with brokers.

“Brokers could vote with their feet if they decide they want to favour somebody else who hasn’t moved yet,” Stafford said in the interview, “and some others might see this as a growth opportunity for them.”

It’s that last point that has brokers confused as they decide what if anything they will do in response to the finder’s fee drop.

“I get what he (Stafford) says about voting with our feet,” said Bill Phinney, a broker with Mortgage Intelligence, “But I’m not quite sure what he means with it being a 'growth opportunity.'”

The Mississauga.-based broker is nonetheless downplaying the significance of the respective moves by Scotia and First National.

“I don’t see this as a major issue and there’s a lot of hoopla over nothing,” said Phinney. “If you’re a high-volume broker in a bank’s list, you still get very well compensated by them.”

For instance, he said, a broker bringing in $25 million a year in deals would still receive 35 bps in volume bonuses, in addition to the 0.75 per cent finder’s fee that Scotia is now offering.

“Taken together this would equal 1.10 per cent in commissions,” Phinney said. “Brokers are still pretty well compensated in the industry as a whole.”

That notwithstanding, Stafford may want to clarify that “opportunity” point, said McDonald.

“We need to dig deeper to find out in what context he means this to be ‘an opportunity,’” he told MortgageBusinessNews.ca. “At any rate, the benefit to clients and not our compensation is the main a reason a good broker choses to stay with a lender.”
 

7 Comments
  • Fred Darlington 2012-10-25 5:32:56 AM
    We have other lenders that pay higher fee,s
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  • len lane 2012-10-25 6:13:36 AM
    I think he has it backwards, its a growth opportunity for their bottom line. We already get 1.1% from a lot of lenders. .05 bps is a big number when your now the top big 5 lender still in the broker world.
    Post a reply
  • long time banker 2012-10-26 2:04:43 AM
    when the broke rmarket had consistent rates better than the branches and the road reps the compensation averaged about 80 basis points all in for a lender. Now it averages 110 basis points in a much tighter financial market (bigger rate discounts). This 30 basis points difference in finders fee equals about 10 basis points in yield just in the brokers compensation and not comparing it to the other business lines. If the channel wants to have leading rates the reality will eventually be that something has to give and it will be unfortunately compensation. Yes Scotia and First National will save a lot of moneey with the reduction in finders but overall it is only 1 basis point in yield to the lender an dthis channel is at a higher cost to originate that the branch and road rep channels. So either less competitive rates will emerge or the numbers have to get back to making some better sense.
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