Brokers can expect an increase in competition as many financial advisors are expected to make the transition to brokering as a result of pending regulatory changes.
“I don’t think financial advisors really understand the income possibilities of being a mortgage broker,” Jim Thornton, a mortgage broker with Real Mortgage Associates and former financial advisor told MortgageBrokerNews.ca. “The transition for these advisors would be fairly easy if they have any sort of client base.”
According to Thornton, many advisors making the transition will be able to bring clients with them if there is no overlap in products offered and, thus, their former brokerage will put up less of a fuss.
The one issue these crossover professionals will face is developing a Realtor referral base, Thornton said.
Many financial advisors have expressed concern about eventual moves to limit the use of embedded commissions, as well as increased disclosure requirements as a result of a pending regulation change called CRM2. This is expected to prompt advisors to transition out of financial planning and into other financial services professions, including mortgage brokering.
“We’ll probably see a 25 per cent drop in the amount of advisors we have in Canada and there’s no reason for it,” Kathy Waite, an advisor with Eureka Investor Guidance recently told WP. “What’s this going to do to the economy? All of those people being beat out of the business and it’s illogical for them to make such a decision without fully assessing the impact.”
However, Thornton believes this number may be a bit high.
“I don’t think it will be as high as 25 per cent; I could see 10-15 per cent of financial advisors making the transition to mortgage brokering or banking.
Anecdotally, one mortgage broker has encountered advisors who have left the business due, in large part, to compliance – and those numbers are expected to swell in the wake of CRM2.
“I have known many certified financial advisors who have quit that business and this is what I hear: too much compliance, too high continuing education requirements just to stay current with compliance and taxation and too many sophisticated clients are switching to online ETF and bypassing advisors,” Ron Butler
Butler Mortgage wrote on MortgageBrokerNews.ca. “So their world is tough too.”