There are things in life that we take for granted. For a random set of examples say the air that we breathe, the love of another human being, a change of prime ministers every couple of years and the fact that the sun will rise in the east each day.
It’s a little like your home loan being taken for granted by your current provider. Whether it be a bank, non-bank or a broker. If you’re not feeling the love let me point out the reasons why you should.
Let’s start with your current lender. If like me, you received a letter in the mail recently telling you that your interest rates are about to rise for no particular reason (the temporary increase in the bond markets notwithstanding), then contact either another lender or a broker immediately. While there has been a broad increase in rates it is by no means universal. You can and will get a better rate. It’s what’s known as gouging. Why? Because they rely on your inaction. They take you for granted.
Let’s move on to your current broker. If you’ve been with the same lender your broker placed you with years ago, are you aware that your broker is still getting paid a trailing commission for that loan? What has he/she done for you in that time? Have they re-assessed your financial position more recently? Is the loan you currently have still the right one for you? Are you paying a higher interest rate than you should? When was the last time you spoke with your broker? The broker may have sold your trail as part of an exit strategy (yes your trail is currently worth at least two times its annual trail commission in a sale).
We had a couple come to us last week. They had been with the same mortgage broker for seven years. Hadn’t heard a thing since settlement. They had multiple home loans – all fixed of course. Even with them breaking the fixed rate loans, we were able to save them tens of thousands of dollars in repayments. We are by no means unique. It’s the inaction that cost this couple and it’s probably costing you as well.
For the purposes of full disclosure brokers get paid (by a lender) somewhere between 0.50% and 0.70% up-front as well as trail of between 0.15% – 0.25% for the entire time you remain with the lender. So why are you not using this valuable resource more broadly.
What else can they do for you?
Are you aware, for example, that brokers also arrange the following?
- Personal loans – even when banks won’t touch the borrower – for just about any reason. The last few weeks, credit card consolidation appeared to be the main reason but it could be a loan for a car or boat or any unexpected expense.
- Motor vehicle leases – Yep, we do these as well. At the moment car dealers are throwing money at you but in more normal times, we’re very competitive and usually much cheaper than a dealer. For god’s sake. don’t just look at the rate look at how much it’s going to cost you overall. The rate is only part of the equation (the others being purchase price, residual value, term and whether or not you contribute anything up-front either by trade-in or cash).
- Equipment leasing – anything from office fit-outs, home computers to plant and equipment. We’ve done cranes, forklifts, sideloaders and trucks. Brokers are usually far more competitive than your bank as they have access to the entire market of finance companies and banks.
- Property Investment – most brokers have a relationship with a property advisory firm or real estate agent. Be careful here as the broker needs to disclose whether the relationship is financial or simply a service offered to clients. Usually it’s financial but don’t let that stop you if the advice you receive is what you wanted. Get independent financial advice.
- Financial Planners – We are not financial planners but we do know and trust a few around town and in Wollongong. While we are not permitted to provide investment advice, we are happy to refer you to a planner. There should be no fee (between broker and planner) associated with this referral. If there is it needs to be disclosed to you.
- Accountants – same as for planners.
So, if your broker is not being utilised by you, it’s not just the brokers fault. The key driver in financial services is customer inaction. The entire profit margin of the industry is significantly dependent upon it. Funny thing is, it’s coming out of your pocket.