# What does the term "broker" mean to people?



## Yellow Belly (2 Mar 2009)

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:


Tied Agents
Multi Agency Intermediaries
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.


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## george.shaw (2 Mar 2009)

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.


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## Askar (2 Mar 2009)

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.


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## NovaFlare77 (2 Mar 2009)

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?


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## PaddyBloggit (2 Mar 2009)

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.


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## mathepac (2 Mar 2009)

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


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## Bronte (3 Mar 2009)

Yellow Belly said:


> :
> 
> 
> 
> ...


 
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.


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## Yellow Belly (3 Mar 2009)

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.


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## AlbacoreA (3 Mar 2009)

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.


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## Bronte (3 Mar 2009)

Yellow Belly said:


> 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?


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## AlbacoreA (3 Mar 2009)

Bronte said:


> You must be very young if you can't figure this out?


 
What has age got to do with it. Why not just answer the question.


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## Bronte (3 Mar 2009)

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.


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## AlbacoreA (3 Mar 2009)

Nice. 

I assume they did a better job at selling their product via what ever means.


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## Bronte (3 Mar 2009)

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.


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## AlbacoreA (3 Mar 2009)

Captive markets can be won over. Places like Eircom, NTL are losing customers to rivals.


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## NorthDrum (3 Mar 2009)

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.


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## AlbacoreA (3 Mar 2009)

My main issue would be they mainly act as agents, not brokers.


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## Yellow Belly (3 Mar 2009)

Bronte said:


> 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.


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## Allen (3 Mar 2009)

Yellow Belly said:


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


 
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.


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## AlbacoreA (3 Mar 2009)

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?


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## Yellow Belly (3 Mar 2009)

AlbacoreA said:


> 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?


 
Many competitors cannot "capture" these customers are they cannot access them. The financial regulator effectively banned cold calling so either clients are referred to a competitor or shop around themsleves the competition have almost zero chance of outlining their case to these customers. The fact that they have a current a/c with the bank makes them fair game for the bank advisor- I mean sales person.

The net effect of this in the real world is thousands of people with financial products which could/can be purchased on a more cost effective basis elsewhere but they don't even know it!


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## mathepac (3 Mar 2009)

Yellow Belly said:


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


No issue, provided some protection for the client is built in to avoid misselling / misrepresentation of products at the point of sale or subsequently.


Yellow Belly said:


> ... 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 commissions are paid to tied agents / staff for sales similarly as to brokers, in fact tied agents / financial institution staff have sales targets to meet.


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## AlbacoreA (3 Mar 2009)

Yellow Belly said:


> Many competitors cannot "capture" these customers are they cannot access them. The financial regulator effectively banned cold calling so either clients are referred to a competitor or shop around themsleves the competition have almost zero chance of outlining their case to these customers. The fact that they have a current a/c with the bank makes them fair game for the bank advisor- I mean sales person.
> 
> The net effect of this in the real world is thousands of people with financial products which could/can be purchased on a more cost effective basis elsewhere but they don't even know it!


 
Why can they not reach them through the traditional mean of advertising, like any other product? 

If people don't shop around, thats their own fault.


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## Askar (3 Mar 2009)

This is an interesting article, which confirms my own views of the value of brokers
http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5775156.ece

It appears that even whole of market brokers in the UK are guilty of shenanigans.

The consumer should be empowered to shop around with price comparison websites/papers (such as the best buys on this website). A basic financial education at secondary school level is all that is required. There should be a mandatory home economics course teaching this and basic budgeting. Indeed, why not give a QFA type diploma for those who pass it.


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## Bronte (4 Mar 2009)

I recently went to my Irish bank to open a new current account.  I was in a hurry and it would have been my only visit to the bank in a year.  Plus I had kids with me.   The front desk told me I had to have an appointment with my 'special relations advisor' to open an account.  I said is this a bank, all I want to do is open an account, I do not need to meet anyone, I already have many accounts etc can you just open an account for me please.  I was a bit more irate than this because really to open an account (I had ID, addresses paperwork etc) in a bank you are a long term customer of should be say 5 minutes.  Anyway she must have realised I was irate so she got out the form, no kidding I think it was about 10 pages.  Anyway I said what bits do I have to REALLY fill out.  She objected saying basically the whole lot (they train them well on this)  and there were rules etc about cheque books, bank cards, income etc. I filled it out in 1 minute flat, ignoring most of it, said you know all my details and about 1 week later I had my new account.  This 10 page form is not for my benefit, it's for the bank to know everything they possible can about the customer's financial situation so they can target me for pensions/savings/life insurance/funds etc.    They are getting slicker at getting the information and I'm sure they are getting better at selling their products.  I also learnt something new, they won't open accounts for everyone, apparently you have to have an income or something but maybe I misunderstood this bit.


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## NorthDrum (4 Mar 2009)

Because brokers (I mainly speaking for life, Investments and pensions brokers) have a strong relationship with Life Companys and Investment firms they can negotiate better deals (higher allocation of investment, shared comission on Life policies).

If you feel that you can do a better Job then them then do it, but theres nothing to stop you going into a brokerage with your information and seeing if you can negotiate a better deal for yourself. 

This is called "execution only" service. You decide what cover you want, who you want to take it out with and let the broker process your application. In return the broker shares the commission. Its a win win situation really. Broker gets paid for simply sending in your application form, client knows that they have gotten the best deal in the market and they have gotten some money back or savings, then if they simply went in off the street.

You will seldom get a better deal going into a life company or Bank off the street. Its kind of like how in Musgraves you would get better value for money then you would by buying goods in your local shop. Life companies do not want (generally) to undercut brokers (who are a major part of their marketing network).

You dont have to like brokers to do business for your own benefit . . .


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## Yellow Belly (4 Mar 2009)

Bronte said:


> I recently went to my Irish bank to open a new current account. I was in a hurry and it would have been my only visit to the bank in a year. Plus I had kids with me. The front desk told me I had to have an appointment with my 'special relations advisor' to open an account. I said is this a bank, all I want to do is open an account, I do not need to meet anyone, I already have many accounts etc can you just open an account for me please. I was a bit more irate than this because really to open an account (I had ID, addresses paperwork etc) in a bank you are a long term customer of should be say 5 minutes. Anyway she must have realised I was irate so she got out the form, no kidding I think it was about 10 pages. Anyway I said what bits do I have to REALLY fill out. She objected saying basically the whole lot (they train them well on this) and there were rules etc about cheque books, bank cards, income etc. I filled it out in 1 minute flat, ignoring most of it, said you know all my details and about 1 week later I had my new account. This 10 page form is not for my benefit, it's for the bank to know everything they possible can about the customer's financial situation so they can target me for pensions/savings/life insurance/funds etc. They are getting slicker at getting the information and I'm sure they are getting better at selling their products. I also learnt something new, they won't open accounts for everyone, apparently you have to have an income or something but maybe I misunderstood this bit.


 
Spot on Bronte- the banks modus operandi is what they call "profiling" where they know so much about you that they can then pin point what products they can SELL you.

It used make me laugh how many people were contacted by their bank teling them that they were getting a poor return (from the same bank!!!) on their deposit account & that they would now "advise" them to switch to a capital guaranteed tracker bond (with no guaranteed return bar capital sum). The only benefit in this was the hefty commission & charges which said same bank were going to make- why didn't the bank contact these customers & say you are getting a poor return so now we are going to add 1% to your deposit rate?

This was wholesale in the banks and still goes on today. Can people really not see what they are doing when the sign up for these bonds?


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