MPA Top 100 broker Andrew Mirams used to charge his customers a $500 flat fee in addition to receiving the regular upfront and trail commission on the loan. Surprisingly that didn’t deter clients from seeking out his services, but actually increased business dramatically.
When people pay for something, they expect a certain level of service and quality in return, said Mirams, who has been a broker for 16 years and is the managing director of Intuitive Finance in Victoria.
“We found our standards lifted exponentially in what we were trying to drive and deliver back to our clients. We couldn’t do a good job; we had to do a great job,” he said. “If people see value in what you deliver, they’ll absolutely pay.”
While most people paid without any fuss, some refused once the loan had settled, creating some administrative challenges in chasing it up. If people asked for a refund once the loan was signed, Mirams was happy to oblige and asked for a referral instead.
After a few years of this, however, Mirams’s business got so busy it became more of a hassle than a benefit. It just wasn’t worth the time and effort to charge a fee.
“Do you want repeat business from that client or do you want to pursue them for $500? It’s just not worth it in the long term,” he said.
While Mirams is not about to start charging a flat fee again anytime soon, he says it isn’t something he’s ruled out entirely. Although he doesn’t believe brokers should charge a flat fee just because the work load and scrutiny has increased.
“If you aren’t doing a lot of volume and you think you need a fee to make up the business, then you are looking at it the wrong way. I think you need to get more volume, you need to work harder, work your referral sources and your client base. The upfront and trail and future referrals will pay you a lot more than the fee.”
While Mirams’s experiment proved successful, he’s opposed to a flat fee or fee-for-service becoming the sole source of income for brokers, as was suggested by CBA CEO Matt Comyn during the royal commission hearings late last year.
Even if the flat fee were between $2,000 and $5,000, it would still hurt broker businesses and would prevent people from lower socio-economic brackets from accessing the competition and choice that brokers provide, Mirams said.
“The fee has to be commensurate [to the work] and then what’s going to happen is those who can pay will and those who can’t will be penalised and will become mortgage prisoners and at the bank’s whim and desire,” he said.
Mirams said he’ll be putting the flat fee question to his clients in the brokerage’s annual survey.