Brokers discuss their standpoints on charging for their services
A large proportion of mortgage borrowers agree that brokers are entitled to charge fees, new independent research conducted on behalf of Boon Brokers has found.
However, the research also highlighted that an increasing number of younger buyers believe there is a direct correlation between brokers that charge a fee and receiving a better mortgage deal.
As such, Mortgage Introducer sought insight from brokers on both sides to understand why some brokerages charge fees and others do not.
Is there a right and a wrong on broker fees?
Steven Morris (pictured), advising director at Advantage Financial Solutions, said there is no right or wrong when it comes to charging fees; however, he believes there is a right or wrong when it comes to how a broker views charging or not.
“Many, if not all, fee-free brokers think they offer the same service as every other broker, yet they fail to spot the fact they have to do a much higher volume of business than their fee charging competition, meaning less time and service per client,” Morris said.
Morris stated that brokers who do not charge fees to their clients also rarely work on any complex cases.
“On the flip side, however, there are plenty of fee charging brokers who just take the extra income without any perks to the client; they do not offer anything in return for the higher fee, they do not specialise, and they do not take fewer cases for a higher service level,” he added.
Regardless of what you charge, Morris said it is all about good value for money, or ‘fair value’ as it is now outlined in Consumer Duty.
Fee-free brokers
Gary Boakes, director at Verve Financial, said his brokerage never charges a fee for the service it provides.
“We feel that our customers should be able to receive good quality mortgage advice without worrying about the cost because of their circumstances,” Boakes said.
Boakes said it means that during the meeting he does not need to spend the majority of the time trying to justify the fee, which allows the brokerage to be more transparent.
Rhys Schofield, director at Peak Mortgages and Protection, said there is more than one way to ‘skin a cat’ and the same stands for fees.
“Peak Mortgages and Protection is very much a no-fee model but that works when most of our clients are relatively vanilla, and would likely have gone directly to the high-street otherwise,” he said.
At the same time, Schofield has worked with great fee-charging firms with a model that works for them. Schofield said the big benefit to advisers of a broker fee is cashflow, especially when your pipeline is taking six months to go through.
“My approach was not to change our no-fee model but co-found a conveyancing service that just made the pipeline turn faster, and we never looked back,” he added.
Fee-charging brokers
Mike Staton, director at Staton Mortgages, said he is a big believer of ‘you get what you pay for’.
“We charge a flat fee because we offer a professional service and go above and beyond for our clients,” he said.
While Staton understands that some businesses are happy to offer a fee-free service and push for other revenue streams, such as life insurance, building insurance, solicitors and other add-ons, he said this may lead to mis-selling.
“I have dealt with too many clients who have been told by other brokers that they have to have life insurance - in my experience, these have mainly been fee-free brokers,” Staton said.
Staton is aware not all fee-free brokers will do this, but he said the model does encourage sales of other products. The average procuration fee from a lender for Staton Mortgages, Staton said is £400, which he added is not enough revenue to keep a business running unless it lowers its service standards.
Bob Singh, founder at Chess Mortgages, said whether or not a brokerage charges a fee very much depends on its positioning based on experience, qualifications, service and niche.
“Mainstream fee-free advisers I feel undervalue themselves as professionals, or they have low operating costs; you do not see many second charge brokers getting out of bed for less than £2,500,” Singh said.
As a brokerage, Singh said Chess Mortgages adopts a flexible approach and charges a fee based on the size, speed and complexity of the case.
“For high value cases, we may not always charge a fee depending on the revenue generated and prospects of future referrals,” he added.
Singh said any small practice which has staff and premises cannot be viable as a non-fee charging firm, and he added that the fees often go a long way to cover the overheads and provide liquidity for lean times.
Do you believe brokers should charge fees? Let us know in the comment section below.
