Peter Brodnicki, chief executive of the Mortgage Advice Bureau (MAB), gives his tips on making the move to fee-charging.
Q: How do you start charging fees?
A: First of all you have to believe that the service you offer is worth charging for. It is also important to understand that resistance about fees is not with the client, but with the broker.
Put yourself in your client's position and reflect on the advice and service they receive and why you believe it is exceptional. Continue building your confidence to charge fees by calling your ten most recent clients - tell them it is a service call, find out what they thought about the service they received and then ask them if they would have paid a fee for that service if you had charged one. Then ask what they think the service they received was worth.
If you still need convincing after that, mystery shop some other brokers and lenders to see how they position their service and how those that charge fees introduce them.
Having done all of the above, you should be feeling really good about the service you provide and that your clients will pay for that service.
Q: What fee should you charge?
A: Although I know many brokers who charge more, £495 is a level at which many are comfortable at. However, you may want to build up to that level to help build up your confidence in those early weeks and months.
A good way to start is to set a fee policy at say 1% to 1.5%, but then on each occasion reduce the fee down to a level you are most comfortable with. For example, you may decide to start off with just a £95 application fee (non refundable) with the completion fee waived. This is very straightforward and easy to do. You will not have objections regardless of what market you operate in, having just reduced the fee from say 1% to just £95.
After a few weeks, start to introduce a completion fee at say £195 and, as you get more comfortable, maybe increase it to £295. Where you go from there is your choice.
However, at MAB we have found is that once the right fee level has been found by advisers and businesses, then many of our most successful advisers move to charging that fee on all applications rather than on completion.
What many of the brokers that charge far larger fees do is sell a service for life; they genuinely deliver that service with no further fee being charged. Immediately, the client sees you as far more than a mortgage broker and, as well as increasing your earnings on the initial sale, you have a far bigger income opportunity by simply taking a genuine ongoing interest in your client and becoming their first port of call for all matters financial.
Without exception, we find that once an adviser starts charging a fee, it very soon becomes second nature to them and they wonder what all the fuss was about.
At MAB, we work with many estate agents throughout the UK and clearly a very large element of their income comes from the sale fees they charge. Some agents try and ‘stack ‘em high' and ‘sell ‘em cheap', charging bargain bucket fees which in these market conditions is quite frankly commercial suicide.
Others are somewhere in the middle in the level of fee they charge. However, the most successful and profitable agents, who virtually without exception have the greatest market share, charge the highest fees in town.
The reason I have used that example, is that some brokers I come across think they offer the same service as their competitors who charge no fees. You can make a similar argument with estate agents, but the fact is that although the public may at first glance think that all mortgage brokers and estate agents offer a very similar service, the fact is they don't, and the few that do very often undersell themselves.
Q: How and when is it best to introduce your fee policy to a client?
A: I see too many brokers start their meetings by rattling off a whole pile of disclosure statements which includes their fee policy, and then dive straight into discussing mortgages and initial basic fact finding. Many do this because they have been told so by their network or compliance manager, who need to make sure these important boxes are ticked.
This is not the only way of doing things and it is certainly not the best.
Your first ten minutes or so with the client is the most important so don't waste that opportunity. Forget about your disclosures and fee policy for a few minutes and chat to the client.
Tell them about yourself, and find out about as many soft facts about them as possible by taking a genuine interest in them, their family, their plans and ambitions. Explain how you operate and that you are a financial adviser, not a mortgage broker whose sole aim is to get you a great ‘deal'. Explain how your business is built around providing personalised solutions for your clients, building long-term relationships with them, and receiving recommendations on the back of the service you provide.
You have now set yourself completely apart from the competition and your client will fully understand why you charge a fee while others may not
Ultimately it's not about cost - it's about value for money. If that is what you deliver and believe in, then fee charging will very quickly become an extremely valuable and essential income stream.
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