This raises the question of whether some advisers are being financially rewarded for simply selling products rather than the work that goes into finding suitable solutions for clients.
Payscale suggests that as of January this year, the average salary for a mortgage broker working in the UK was £25,887, rising to £35,000 for those with 20 years’ experience.
So, this week Mortgage Solutions is asking: Does the average basic adviser salary sufficiently cover the work that goes into the advising process?
Base salaries vary widely for employed advisers and clearly many mainstream mortgage and equity release advisers operate self-employed models.
Whether adviser remuneration is sufficient to cover the work that goes into the advice process will much depend on the nature of the business.
While fixed or minimum advice fees can help ensure much of the cost involved in delivering the advice is covered, this will not always be the case on complex cases for relatively small loan amounts.
It is also important to acknowledge all the other costs that go into running an intermediary business – regulatory fees, professional indemnity cover, customer acquisition expenses, sourcing and CRM systems.
Customer charges and lender procuration need to cover these costs on top of the investment in advisers in order to ensure that the service provided is of the standard required.
Avoiding poor customer outcomes driven by incentive-based remuneration models needs to be at the centre of the thought process of all intermediary firms.
We pay our employed advisers a good base salary with additional rewards for those whose hard work allows them to help many customers
Customer feedback, complaints and file review assessments all have a significant bearing on adviser remuneration.
Furthermore, we ensure there is no remuneration bias in the outcomes that customers receive through a series of checks and balances.
These include a proprietary adviser portal that combines integrated fact find and sourcing capability to ensure that every recommendation meets the customer’s needs and priorities at the lowest possible cost.
However, getting the culture right is also vitally important – the customer must be at the centre of everything with remuneration a by-product of delivering a great service and consistently good outcomes.
The average adviser salary does not cover the work that goes into the process.
Salaried staff are more likely to be mortgage salespeople, rather than someone who carries out the full role of a true adviser.
Advisers are taking the time to fully understand the client’s financial needs for their debt plans and considering how the implementation of that debt would impact their financial security should circumstances change.
Life insurance, income replacement strategies, estate planning and family insurance plans should all be part of an adviser’s fact find. This could take many hours per client to complete.
The basic salaried staff business model will only survive for fast turnover, quick sales centres. The difference between having customers and clients is one gets sold to, the other receives a professional advice service.
Customer-based roles can be done with a basic salary model, client-based roles deserve to be properly remunerated, and this also means by way of a fee.
The employee can’t possibly maximise any benefit and reach their full earning potential if they earn a basic hourly wage while the employer retains the majority of the procuration fees.
The salaried model leads to downsizing, furlough and redundancy. The commission-based business model has not only provided financial security for companies and their advisers, but along with the current heightened drive for financial advice, these robust firms are busier than ever.
In my firm, we have not furloughed admin staff, nor have we ended any self-employed contract due to them being a financial burden. This is because, quite simply, I don’t have fixed salary costs to pay.
As whole of market advisers, we should always be offering clients the best advice based on their circumstances and requirements. Not because of any company or lender commission incentives.
If the company offers an incentive that is not dependent on lender choice or the amount of business written, this would be a good way of rewarding advisers while not being to the detriment of the client.
The benefits of a commission-free model depend on the experience of the broker and the support offered through back office, compliance, CRM systems and leads.
If these are a good standard, the broker is scaled on the level of experience and more importantly niche mortgage fields, then this could be reflective in the salary. The old saying ‘you pay peanuts, you get monkeys’ comes to mind.
All our advisers are self-employed – our fees are transparent from the start and we charge a fee dependent on the complexity of the case. We also tell clients we receive a procuration fee.
In my experience, a reputable adviser will always charge a fee and receive a commission. A lot of work can go into a mortgage application especially in niche areas or complex client profiles which I can only see growing.
Undervaluing the mortgage advice and application process by not charging fees, and only receiving procuration fee or company commission could lead to bad, unsuitable advice and practices, by selecting lenders that offer higher procuration fees, or base the business profile on volume.
Also paying a salary with no commission could make an adviser complacent, lazy and again, lead to poor advice practices.