Brian Murphy, head of lending at the national brokerage, says that around half of all existing brokers fear they will lose business if they charge a nominal fee for their advice.
Current industry estimates put the number of active brokers in the UK at 12,000 and Murphy says around 6,000 of them could well be heading for disaster if they don’t buck their ideas up and start charging fees.
Murphy says: “There’s a misconception that brokers just find their clients the best rate but that is just part of what advisers should be doing. Brokers provide a professional service and shouldn’t be scared to charge a professional fee.”
Murphy said anecdotally nine out of ten consumers expect to pay a fee for advice. And in a recent experiment he challenged a broker who was convinced his clients would refuse to pay a fee to ask his ten most recent customers their thoughts on the subject. Nine out of ten said they had expected to pay a fee and were surprised they hadn’t been charged.
Murphy added: “There must be thousands of brokers out there missing out on income because they don’t value their advice as highly as their customers do.”
Murphy’s view is backed up by Andrew Montlake, communications director of City of London-based broker Coreco and an appointed representative of MAB.
He believes brokers’ reluctance to charge fees is due in part to the industry suffering a “massive de-professionalisation” over the past ten years with professional standards only improving “by default” since the credit crunch hit the industry.
He said that brokers should up the standard of advice they offer to justify charging a fee, even if that means advising clients to take a direct deal if that is the most appropriate product for them.
“Brokers who won’t charge a fee are doing themselves and the industry a disservice,” said Montlake. “Refusing to believe that clients will pay for your advice almost suggests that brokers don’t value what they do themselves.”
“Unfortunately there are too many brokers who won’t charge fees,” he added. “They’ll find it much harder to do business and they’ll go bust eventually if they don’t change tack and start valuing the advice they give and start charging a fee for it.”
