What does the term "broker" mean to people?

Yellow Belly

Registered User
Messages
215
This thread is really just a survey which I wish to pursue.

  • What is people's perception when someone is referred to as a "broker" whether it is in the context of insurance, stocks or mortgages?
  • Do you know the difference between the 3 levels of authorisation below?
To be honest to everyone reading this thread- I am a broker (authorised advisor regulated by The Financial Regulator) and a former banker. I am just interested to get peoples opinion of our business, and also to see do people actually make any distinction between the 3 current forms of authorisation:

  1. Tied Agents
  2. Multi Agency Intermediaries
  3. Authorised Advisors
All opinions bad & good will be appreciated as I know that certain individuals in our industry have been dishonest & created bad feeling, however there are also many capable, honest people who assist people also.

Thank you in advance for your opinion.
 
Broker is someone who brokers and sells product. They are commission driven and this motivation creates a conflict of interest that can result in inappropriate products being sold.

Broker model is from the stone ages and nearly all tied agents and multi agency intermedaries have lost a fortune for thier clients in recent years. Many may even be sued by disgruntled clients.

Fee based wealth management is essential for all and is the way the financial industry has gone in the UK and will go here.
 
In the context of mortgages they are completed unncessary as there is no 'whole of market service' and there is no policed mechanism to avoid them promoting mortgage which pay them the best commission.

In the context of the current credit crises they ably assisted in the selling of high multiple salary mortgages. Just like those who sold sub-prime mortgages in other jurisdictions they do not carry the default risk of borrowers not paying. So they are incentived to get the biggest mortgage for the highest commission which is not in anyones interest.
 
This is my tuppence:

A broker is someone who will arrange a financial package/service in return for an agreed fee (either from the client or the chosen provider). They should have a comprehensive knowledge of the market in question and know what pitfalls and common mistakes heir client should be aware of.

A tied agent is a person/company that sells the products of one particular provider. E.g. Ark Life is a tied agent of AIB (or something like that).

A multi-agency intermediary is similar to the tied agent, except they deal with more than one provider.

An authorised adviser is someone who, in theory, has access to the entire market and reviews the offerings of all providers of the client's particular financial product.

..
...
....

Am I right? :)
 
To me a broker has a list of products, he/she gets commission from the client and/or from the product provider if the client signs on the dotted line.

I have used a broker for my car insurance, my house insurance and my life insurance and have always been of the opinion that the broker made a % of my premium.

I recently signed up for Life Assurance through a broker .... Irish Life were one of the most expensive but they told the broker they'd match the lowest quote I got .... a difference of over €100 per month.

Would I trust a broker? I've never had reason not to. If in doubt I always ask a question. I've had better deals for car insurance and house insurance through them over the years.

They've saved me money .... I trust those I've dealt with.

The old adage caveat emptor applies to all dealings financial .... be they with brokers, banks, service providers etc.
 
OK without referring to dictionaries or suchlike, when I hear the word "broker" in referring to an occupation, I have the following perceptions :

  • Professional salesperson rather than a technical expert
  • S/he has no ownership of the product
  • Not employed by the organisation producing the product being sold
  • Remuneration for the sale is paid as commission / finder’s fee
  • The broker has no role in post-sale product support
Tied Agent - An employee of the organisation producing the product (or a subsidiary); few if any alternative products to offer; lacks independence, a one trick pony.

Multi Agency Intermediary - A broker, see perceptions above

Authorised Advisor - A technical pre-sales support for the client and broker; can make detailed analyses of competing products
 
:


  1. Tied Agents
  2. Multi Agency Intermediaries
  3. Authorised Advisors

A broker is an intermediary you go to to get a certain product, most people use them for car or house insurance, next would be life insurance and then mortgages and then for investments.

To me they are just sales agents and they work on commission so I for one am wary of them because of the conflict of interest in that a broker can sell you say an investment or life policy that gives them a very large commission that often is detrimental to your investment.
Some people seem incapable of doing there own legwork and use a broker.
I have no problem using a broker for house or car insurance.
The tied agents are the sales agents in the banks - currently called your 'friendly relations advisor' (or somesuch)
Multi agency is a broker who has a right to sell certain institutions products.
Authorised advisors are allowed to advise clients for a fee so 'supposedly' more independant. I think.

The fact that the financial regulator regulates brokers would give me no confidence whatsoever.
As you asked, I would not trust a broker (LD excepted) unless I knew them really really well and furthermore I don't trust most financial institutions products. Particularly investment funds, mortgage protection products that pay out in case of illness/loss of employment, endowment mortgages, education savings plans, pensions etc. My rule of thumb is the glossier the brochure the more to stay away from it and someone is paying for that gloss and also if you don't understand it stay away from it.
 
Last edited:
I would like to thank all you guys for your opinions- it is interesting to get an "outside the fish bowl view" from everyone.

I do detect a undertone of mistrust of "brokers" (which may or may not be deserved?). Most people seem to at least have some idea the difference between the 3 levels of authorisation, which is good to note, however another question which I would like to ask in addition to those at the beginning of this thread is:

How many people would be prepared to pay a fee for their financial advice in lieu of commission?

Do people realise that it often costs the same to deal directly with an institution as it does to use a broker- be they multi agency intermediary or authorised advisor?

If people realise that bank "advisors" are tied agents/sales people for the institutions they work for- how come AIB & BOI have built up such a large share of the life & pensions market?

All opinions are gratefully received- it is great to get some fresh views. Thank you all very much.
 
No idea of the forms of authorisation. My experience of brokers, is that while I might expect them to shop around for the best price for something they don't do that. They usually have a preferred, provider/supplier who they use, or have a few they use and give the best quote from them. They do generally do not shop around outside of that. Some offer extra services and handholding or advice which might be worth the premium, for some people. In general, from experience, I find using brokers more expensive than if I shop around myself for the product. So I've stopped using them.
 
If people realise that bank "advisors" are tied agents/sales people for the institutions they work for- how come AIB & BOI have built up such a large share of the life & pensions market?

.
You must be very young if you can't figure this out?
 
I'm just surprised a former banker and current broker would not know the basics so I'm putting it down to being too young? Anyway I might not have the correct answer, you answer it.
 
OP asked specifically for all views, the big two are not better at selling products it's more they have a captive audience, I would have thought that was obvious. Also people tend to trust the big banks whom they deal with and respect throughout a lifetime (people are more likely to divorce than change bank) than an unknown broker. Banks exploit this.
 
Captive markets can be won over. Places like Eircom, NTL are losing customers to rivals.
 
I am a multi agency intermediary.

Like any industry, there are good and bad Brokers. Im not going to defend some of the advice given out in the marketplace.

Im not hear simply to defend my industry, more to give an incite into how the better Brokers/Advisors will treat their clients.

People keep saying that we are comission driven which is kind of unfair, is everybody in business not driven by the profit.

What is most important in this discussion is understanding why people (in any profession) would be driven more by comission/ remuneration, as opposed to offering their clients the best advice. I include most, if not all professions in this bracket.

For me personally (and many many good brokers), I dont see initial comission as my sole goal. If anything I believe (and practise) the art of getting whats best for my clients first and being satisfied with whatever remuneration I receive for the work done. If I have a happy client they will more often then not recommend me to friends and family.

I prefer to think as educating clients is part of the service i provide in that they understand the risks involved in their investments and that they understand how exposed they are in terms of liabilities if something should happen to them (in terms of if they get sick or die). Its up to clients to decide what they can afford and to prioritise the products that they need most. (some people take this that brokers are just churning out products for comission, if there are proper reviews done then normally you will find that people will be surprised at how exposed they actually are).

What some people dont seem to factor in is that, longterm, its not in a brokers interest to take huge comissions and "screw" the client. They will only lose this in referrals and having to spend more on marketing.

The old school opinion and understanding of brokers are fair to a degree (in that we are not all comission driven) as mentioned here. I believe the new school of brokering is by offering shared comission (normally offered as % of first years premium back) or by giving "financial Advice" either based on comission or service charge agreed at the beginning of discussions.
 
OP asked specifically for all views, the big two are not better at selling products it's more they have a captive audience, I would have thought that was obvious. Also people tend to trust the big banks whom they deal with and respect throughout a lifetime (people are more likely to divorce than change bank) than an unknown broker. Banks exploit this.

This is exactly the point I was getting at Bronte- I just wanted to see if anybody else had twigged that the banks have exploited their customers in terms of life & pensions since they were allowed enter this market in the 90's.

Shooting fish in a barrel is the best way to describe it.

I have a huge objection to going into a bank branch and seeing a sign for investment advisor- when it should read "investment sales person". Having said all that I do agree that this is no different than many multi agency brokerages also.
 
How many people would be prepared to pay a fee for their financial advice in lieu of commission?

I would.

Do people realise that it often costs the same to deal directly with an institution as it does to use a broker- be they multi agency intermediary or authorised advisor?

Yes

If people realise that bank "advisors" are tied agents/sales people for the institutions they work for- how come AIB & BOI have built up such a large share of the life & pensions market?

Trust (misplaced) of a large institution as opposed to a single broker, or small firm of brokers. Also the banks can access potential customers easily, and customers are often too idle and ignorant to shop around.

For the origional question I would only know the differences between types of brokers from being a member of AAM.
 
You can't dismiss the customers failure to shop around. Should the banks not try to leverage every advanatage and profitability they can.

Is it any different to people failing to shop around from Eircom, NTL, etc. Also failure of the competition, to capture these customers?
 
Back
Top