Do brokers provide the same value to customers as financial advisors – and should they be encouraged to charge similar consulting fees? Two brokers go head-to-head on the issue.
“An investment advisor has to master a huge universe of products and become a tax guru to serve their clients in a meaningful way; most don't but the great ones have a daunting learning curve and relentless study,” Ron Butler
Butler Mortgage wrote on MortgageBrokerNews.ca. “There is no comparison in depth of complexity a good investment advisor has to master compared to a mortgage broker and guess what; the public don't want to pay investment advisors a fee either.”
Butler does, however, admit that certain mortgage deals – especially those on the Alt-A side – require a level of knowledge and expertise.
On the other side of the conversation, brokers argue the value they add is in exposing the consumer to hidden product pitfalls – the sort of information no one else in the industry willingly provides.
“Please do not make light of that fact that we explain the vast difference between fixed and variable if rates rise, the dangers of a collateral mortgage, and high penalties from some banks,” Don Johnstone of Real Mortgage Associates said. “It may not seem like much but you know what? We are the only ones telling them.”
The conversation stemmed from one industry player’s argument that the broker industry will eventually shift to a fee-based model, not unlike the practice preferred by a growing number of advisors. They’re moving themselves to a fee-based compensation model ahead of full implementation of sweeping regulatory reform focused on increasing commission transparency.
“There is no doubt about the value good and consistent advice provides -- but unless we normalize and enforce a commission structure that various lenders provide us, the unbiased fiduciary value of our professional advice will suffer,” Aaron Vaillancourt of Mortgage Architects
wrote on MortgageBrokerNews.ca earlier this week. “This likely won't happen because aligning broker sentiment and behaviour is worse than herding cats. And so, the fee-only model is coming, as it should.”