Also an upfront fee model requires brokers to write an unsustainable amount of new loans each and every week to survive.
read this first:
MFAA article on number of Brokers and new loansAs an example.
Say I'm a broker and I want to generate an income after expenses of $100,000 per annum, say I have fixed costs of $30,000 per annum (Fuel, car, office, rent, admin, etc) and my aggregator takes 20% of my income.
Based on that I need $162,500 in new business every year or $3,125 per week in advice fees per week before costs to generate that income.
Depending on what you charge a client, but to keep it easy @ $3,125 per client that's 1 new client per week / 52 new clients a year (assuming you have no holidays).
Sounds easy right? but to get one new client a week you have to wade through the tire kickers and time wasters so you'll need to see 4/5 new people every week to get that one client.
So every broker needs to have a new client appointment every day or 260 referrals a year.
Based on there being 16,000 mortgage brokers out there, they need 16,000 new clients each week / 832,000 a year. And as an industry they'll need to be having 4,160,000 new client appointments to achieve those sales.
Based on broker-originated new loan applications being around 303,300 per annum (in 2017), brokers will need to write an additional 529,000 loans each year.
@ $3,125 its unsustainable, the true cost would then rise to $5,000 to $10,000 and that would act as a big disincentive for your "mum and dads" to use a MB.
