Forget the argument over whether commission or fees are best – an undeniable truth is it is always wrong to be unclear about how much you charge.
Some of you were up in arms while others of you nodded and tutted in agreement when mortgage brokers were accused of scamming British buyers out of £370m a year on unnecessary advice fees.
Independent broker One 77 Mortgages claimed most intermediaries are slapping an extra charge on more than 900,000 buyers a year – often hitting the less experienced buyers who can least afford it.
One 77 Mortgages stated this ‘double dipping’ allegedly takes place despite the fact brokers are already paid a commission fee by lenders.
One 77 Mortgages said many consumers don’t realise that mortgage broker ‘advice fees’ are not inevitable and they could save an average of £400 each by shopping around.
The firm claimed consumers can be charged as much as 1 per cent of the loan balance for advice by brokers, who often levy them on less experienced or younger first-time buyers.
Some of you argued this was evidence that mortgage advisers should be forced to follow investment advisers lead and no longer be paid by commission.
I would argue what this is evidence of is more needs to be done to make sure mortgage brokers – and lots of investment, pensions and protection advisers too – do a better job of explaining how much they get paid.
It is vital that those who seek financial advice understand what they are paying for.
There is nothing wrong with a broker requiring more cash for his services than is paid to him by the lender via commission if that is what is required to keep a roof over his head.
Nobody wants financial advice from an individual who is so poor at money management their own business is likely to go bust.
If you want to pay to visit a broker in his swish Mayfair offices or your mortgage adviser is willing to drive a significant distance to see you in your home hidden away in the hills then it is right that you should pay more.
But the fact that you need to pay more – and exactly how much you are getting from the lender and will require from the client on top of this - should be made clear to the client.
You need to say: “Sorry, Jim but to visit you at your home 50 miles away from my office is going to mean I am out of the office for half a day so I am going to have to charge more to reflect this.”
It wouldn’t be acceptable if at the end of your meal you were delivered a bill in a chain restaurant that stated you had to pay a 20 per cent service charge because they only pay minimum wage.