Have you ever stopped to wonder how it is a broker doesn’t charge you any fees for their service? You wouldn’t be the first. So, in the spirit of transparency, we want to let you in on the behind the scenes of our business...
Let’s start at the start...
Banks and lenders in the retail market have overheads. Aka - branches. They pay rent. Wages. Marketing. Utilities. Stationary costs. And, instant coffee costs (ewww! Who likes instant anyway?)
They also have what’s known as "Third Party Banking". That is us, the brokers. We are ‘freelancers’ because they don’t pay our rent, wages or, in our office, Nespresso coffee costs. Instead, they pay us commission based on our ability to get loans funded with them. Much like a real estate agent would receive commission if they sold your house.
It's simply a different model to branches, with a different remuneration system. We feel brokers have an edge though, as we can work for multiple banks instead!
But do you sell the exact same products as the banks?
Yes! However our brokers are accredited with between 30-40 lenders so you end up with way more choice!
Some lenders alter the name of a product for the broker market so they can distinguish where the loan came from, but the rate and fees are exactly the same. For instance, Commonwealth Bank sell a 'Wealth Package' which brokers sell to clients as a "Mortgage Advantage Package", there is literally no difference aside from what your contract says!
Surely the products you sell aren’t exactly the same as the ones I see in branches?
Absolutely, they are! However, we do have some tricks up our sleeve as brokers… Let me give you an example;
Today if I log on to a major bank website, I can see a home loan product offering a variable rate at - 4.80%. Less the package discount of 0.5% (for buying a package) and you get a rate of 4.30%
When you deal us, we can negotiate this rate further!
We recently negotiated a 1.70% discount on that same rate by undertaking what is called ‘price negotiation’ with that lender. That means the rate was 1.20% cheaper via us (i.e. 1.70% was our discount, but the package discount is only 0.5% online) than it was as advertised directly through the lender! Ergo the client got 3.10% via us Vs 4.30% with the lender!!! The average loan in the Southern Highlands is around $550,000 at Wilson Financial so the negotiated rate represents an interest saving of $6,600 ......PER YEAR
So why else would you choose a broker over going direct with a lender?
Aside from the obvious reasons above such as extra choice of lender and price negotiations, shopping around in one spot there are some other benefits...
- Strict ASIC financing regulation means brokers MUST provide at least two other lender options. As brokers, we often look at a lot more lenders than this, but we will narrow our offering to three to four lenders in our proposal to you, or else you may be a bit overwhelmed. This regulation ensures you get a range of products to choose from when making your decision, thus making using a broker the more transparent option.
- Brokers are often locals running small business's and have invested themselves into the local community. Supporting local is important to many people
- Some branches are shifting towards lower quality of engagement such as tele-conference for mortgage meetings, or online only. People want to know and trust their broker and not deal with call centre staff so they are flocking to brokers.
- Experience, so many brokers are ex-bank staff now! At Wilson Financial three of the five brokers worked for banks! Many of our clients locally are stating that they have come to us due to our experience, compared to the experience they had going to their incumbent lender...
Why would lenders use brokers then? Why not just only have branches?
Many smaller non regional lenders like ING for instance, grow their business quite quickly simply by using a broker network and some lenders are actually predominantly serviced by brokers, like Macquarie Bank.
Deloitte recently published findings in their Productivity Commission draft report which outlined that mortgage brokers have helped increase the market share of smaller lenders, and that to replace brokers, they would need to open 118 new branches EACH just to do what brokers have done for them. This is something that most small lenders are not planning on, due to the overheads.
We would add that the same independent report cited that;
“Preliminary analysis suggests that brokers do obtain slightly lower interest rates... it is not clear if this is attributable to brokers’ ability to negotiate with lenders or to other factors such as the characteristics of borrowers who use direct channels to source their loan”.
Ooh – shock horror – really? As a long term brokerage active now since 2003, here at Wilson Financial, it’s always been our ability to negotiate!
Want to take our google challenge? It's easy....
I have one challenge for you. Go online and google the name of any lender alongside the word “reviews”. Here is an example.
You will often find going direct CHALLENGING, from a service perspective. Meanwhile, have a look at our testimonials page, our Google reviews, or our Facebook reviews. The results speak for themselves!!!
How does the service compare - isn't it faster going direct to a bank??
*COUGH COUGH* WHAT!
Errr.... Ok, let me ask you, if you were in a jungle, with no map, no compass, no navman or phone, and needed to get from A to B, would you rather go yourself with say, a website, some brochures and a call centre to help you, and at every milestone you meet a new person who doesn't know your back story... By the way, if you got half way and were declined, they'd say good bye and leave....
OR would you rather have your own tour guide, who walked every step of the way with you, liaised with your accountant, solicitor, real estate agent, and was your confidante the entire time? We literally do not leave your side, we have a little policy that we do not leave any of our ducklings behind, we advocate for our clients loans to be approved, and we help show them HOW to navigate the massive minefield of finance and property.
We assist with the forms, the questions the long term planning, and the biggest one...
WE FIND A LENDER WHO WILL APPROVE YOU!
Because guess what... someone who goes to lender A and doesn’t always fit the policy mould may fit with lender B!
Imagine if you started your tour of the jungle only to find your lender wasn't the right fit for you, and didn't know the way - you have to go back to the start of the journey and find a new tour guide. Occasionally (and not often) we have a lender that declines a client, it could be that the property valuation didnt' stack up with that lenders valuer, guess who has the capacity to order two new free vals with two new lenders instantly, and push all your existing data to a new lender? BROKERS. Banks do not have this edge, they only work for themselves, whereas WE represent you and are motivated to get your loan approved because let's face it, even we do not get paid if we don't land you some debt!! Also, it's human nature to like and want our clients to get what they want, we love to get personally invested, so it's actually kind of awesome to be able to 'hustle' when the going gets tough and find a back up solution!
Furthermore, brokers are databanks of policy, and this is their MAJOR skill set when it comes to finding finance. Personally I am 17 years into broking and 19 years in finance and I’m still seeing new scenarios I haven’t seen before! The lending landscape never stops changing too, so we have to keep up, and we have done that at Wilson Financial by having Aces in their places! We have residential brokers, commercial brokers, equipment finance brokers, and a financial planner. We have a century of expertise in one spot, just to help you!
This is our passion and we love it. We are confident we enhance the client experience. We know lending is not a ‘one size fits all’ situation so we pride ourselves on finding the right product for you. All at no cost to you!
So how do we stay transparent?
We do a full commission disclosure in our credit proposal to every client. This MUST be signed before any client proceeds so nothing gets hidden or lost in a contract. We pride ourselves on being fully up front and honest about the money we make from selling you a lender’s product.
So, there you have it. A straight forward disclosure. No bells. No whistles. No T&Cs. Just truth.
Interested in talking loans?
Contact us today via the details below. We look forward to helping you on your journey.
Wilson Financial office - 1300 780 826 or 02 4860 3399