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January, 2016

FICOM publishes open letter

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The B.C. regulator has released an open letter to the industry, outlining its plans for future compensation disclosure while also inviting further broker comment prior to implementation.

The letter, which was sent to MortgageBrokerNews.ca by a FICOM representative, explains its proposed plan to require brokers to disclose, in dollar terms, commission and volume bonuses earned on deals, as well as other rewards the broker may earn from the lender.

FICOM publishes open letter

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The B.C. regulator has released an open letter to the industry, outlining its plans for future compensation disclosure while also inviting further broker comment prior to implementation.

The letter, which was sent to MortgageBrokerNews.ca by a FICOM representative, explains its proposed plan to require brokers to disclose, in dollar terms, commission and volume bonuses earned on deals, as well as other rewards the broker may earn from the lender.

It also explains the reasoning behind the additional disclosure requirements.

“A declaration that the broker is paid by a lender does not go far enough in describing, in a meaningful way, the interests that the broker and related parties receive from the transaction,” FICOM writes in the letter. “It masks the nature of those interests and keeps them hidden from the consumer.”

FICOM explains that the changes are a pre-emptive measure.

“FICOM's primary job is to anticipate risks and take action before they can become problems for the public and the economic well-being of the province,” FICOM writes. “We take that assignment seriously.”

FICOM says it has not yet scheduled an implementation date.

FICOM has also invited industry stakeholders to contact it directly at brokerconsultation@ficombc.ca to share their input by February 20.

To read the letter in its entirety, click here.
  • Tony Piattelli on 2016-01-06 3:38:55 PM

    What I still don't understand is that they claim the following: "“FICOM's primary job is to anticipate risks and take action before they can become problems for the public and the economic well-being of the province,” FICOM writes. “We take that assignment seriously.”", yet fail to identify the risks that they are anticipating that will affect the well being of the province? If these risks are so significant, then why aren't they disclosing them? Sounds like a lot of administrative blarney to me. Sure sounds nice, but I'm quite sure that if broker's didn't disclose full compensation per FICOM, that the province of BC will still doing fine. Are we to speculate what the volume bonus is as this may vary depending on volume?

  • Mary Blackmore on 2016-01-06 3:45:51 PM

    This is discrimination on brokers. Does other salesman and women such as financial advisor and car salesman and women disclose. We explain we are paid by commission and that should be disclosure enough.

  • Leslie on 2016-01-06 4:28:53 PM

    Why are mortgage brokers so afraid to tell the consumer how much they make? What is the big secret? My stock broker discloses his commission to me, as does my independent financial planner.

    What sounds fishy to me is that brokers are fighting this so much. There is only one reason to do it... because you have something to hide.

  • Sarah on 2016-01-06 4:36:49 PM

    I agree with Leslie... why are brokers so afraid of this?

    I work for a bank, as an employee. I sell only one line of products and I do not tell the customer that I work for them. All of my customers are very clear who I work for and they all know that I get paid by my employer.

    Brokers tell everyone that they work for the customer and not the banks, but the banks pay them... and they all get incentives for sending deals to certain lenders over others.

    There are also many lenders that have minimum volume requirements. So that right there means that brokers send deals to lenders to meet those minimums, or in a lot of cases to get "status". Brokers also get rewarded with lavish trips like the famous Scotia trips.

    I know several brokers that send the bulk of their business to one or two lenders only but they tell people all the time that they have access to "over 40" lenders.

    In both of the above they are not being truthful to the consumer.

    As for the big brokerages, they get kickbacks from some lenders, and if this legislation passes that will come to light too.

    I say this is a good thing, it will force the industry to standardize. Something that is long overdue.

  • Victor Simone on 2016-01-06 5:02:46 PM

    How will the Finder's Fee Disclosures by only the mortgage brokers affect the mortgage brokerage industry with a 35% market share when banks at 65% market share don't follow those rules ?

    Surely, a mortgage broker that offers close to an average of 50 to 80 lenders is doing a much better job looking out for the client, than a bank that somehow only sells their own brand to the clients.

    FICOM hasn't even proven that a finder's fee disclosure protects borrowers, or helps in any way. Let alone how this change will impact their mortgage brokerage industry when the changes don't apply to 65% of the market place.

    "I'd like to ask that all employees FICOM to publish all their salaries in all future communications so I can be sure I can trust their communication. SARCASM OFF"

  • Broker on 2016-01-06 5:26:50 PM

    At what point does telling someone how many dollars you are earning PROTECT them? The amount of dollars is not the issue. The issue is a broker trying to persuade a client into a 5 year (or a 7 year/10 year) in order to earn more commission. I believe the answer is to disclose or state when a commission has increased due to a specific product, which should never cause an issue for anyone as long as the broker acted on the best interest of the client. Putting a dollar value on a piece of paper doesn't even tell this story, it just says "Hi, I made $5,000 off of you" which doesn't protect anyone. Now think if others (car salesmen, dentist, doctor etc) disclosed the amount of Income they were earning off of you, it is impossible to not start judging the amount and viewing the transaction differently. Again I want to go back to this point that a dollar figure is not the answer, disclosure should be happening to inform a client that certain products may be attached to higher compensation, the amount of compensation whether $100 or $1000 is meaningless.

  • James on 2016-01-06 5:43:35 PM

    Hi Leslie,

    What is your discipline ( career ) and how much do you make. Salary, hourly, bonuses, commissions ... do you receive a perceived or unperceived benefit by anyone buying and selling or simply receiving support of your services ? Please disclose in full to everyone you directly or indirectly come in contact with as a course of these actions.

    Your statement is unfounded and the course of this action of further disclosure is an industry burden that is unnecessary. I with confidence, assume that you don't do this nor would you be happy and or feel it necessary to do this in the course of your regular interactions as such.

    "Fishy" and "something to hide" are ignorant suggestions.

    The Industry service providers are compensated for that service by the lending institutions that we place your mortgage financing through. You have the option to accept the terms or go it alone with your banker.

    Do you ask your banker to qualify how much they make and or justify whether the commissions or bonuses they receive are justified ?

    Better yet, I ask you if this is such a benefit to the public, then it should be implemented with any compensation you have to justify your worth of value in that same compensation.

  • Conrad De Jong on 2016-01-06 8:14:46 PM

    Ficom is concerned about the economic well being of the province? And this will protect the economy? I've heard it all now. Personally I have no problem letting my clients know what I earn, but the truth is 99% of them don't care. They just want to know they are taken care of on all fronts.

  • Brokers United on 2016-01-06 9:21:27 PM

    Just so I'm clear...

    After heavy out-pouring to MLA's, the Minister of Finance requests FICOM to open up a dialogue with Brokers regarding this 'proposed' new disclosure. Instead of opening up a correct dialogue on this 'Proposed' Disclosure, FICOM instead, is ONLY asking for feedback on how & when it should be rolled out. To me, that infers that we have in fact accepted this new DISCLOSURE and it is Law. Umm, NO...

    We have learned through our consultations over the previous 6 months that:

    -You want consumers to continue to receive quality mortgage advice. ABSOLUTELY!
    -You want consumers to understand the disclosure being provided, particularly any dollar amounts. ABSOLUTELY, as it relates to current disclosure!
    -You want to ensure that disclosure is not required to an unreasonable degree of accuracy, particularly when it comes to volume bonuses. N/A
    -You want to know how to disclose compensation splits between brokers and brokerages. N/A
    -You want to know when the changes are coming, how they will be rolled out, and how you can prepare. As a group, WE are fighting these changes, are we not?

    PS - FICOM, under the Freedom of Information Act, please provide us with any any complaints relating to improper product placement, linked to compensation. Please & thank you...

  • Blair Anderson on 2016-01-06 11:33:50 PM

    FICOM’s open letter should be mandatory reading for every mortgage broker/agent in Canada. Better still, get involved and email FICOM your opinions and concerns as they have requested. You might also contact your industry association to see what position they are taking. New legislation is coming, with or without your participation. Don’t miss a chance to have your say.

    For what it’s worth, I will give you my opinion. First of all, anyone who thinks the regulators’ efforts to protect the consumer are easy, or misguided, should spend a few days in their shoes. Look no further than the number of complaints they receive each year. I think FICOM’s open letter does an adequate job of describing the risks, or conflicts of interest, associated with our industry. There’s a long list of potential influences on the mortgage intermediary: Tiered pricing, volume bonuses, proprietary points, non-monetary rewards, business partners/relationships, to name a few. Do you really think the consumer is adequately protected?

    This level of protection is not unique to the mortgage industry. How many more commercials do I need to see about how my financial planner gets paid. The financial services sector continues to get more sophisticated, and as FICOM pointed out in their letter, “there is increased international and national regulatory focus on compensation transparency in the financial services sector”.

    Consider the following purchase transaction on your next deal, and the parties involved vis-à-vis their compensation disclosure in dollars:

    Realtor (full disclosure)
    Lawyer (full disclosure)
    Default Insurance if applicable (full disclosure)
    Appraisal if applicable (full disclosure)
    Home inspection if applicable (full disclosure)
    Mortgage Broker (?)

    Yes, the above list represents a typical “prime” application. If this was a sub-prime application (i.e. private lender), there would be full disclosure on mortgage broker fees and lender fees. I don’t think it is mortgage brokers working in this market that are making the most noise. This is a greater concern in the prime mortgage market. Changes are coming, and it is up to us to provide the necessary feedback so FICOM and other regulators can achieve the balance they are looking for.

    Get involved!

  • Broker on 2016-01-07 9:47:42 AM

    Blair Anderson,

    You listed these professions:

    Realtor (full disclosure)
    Lawyer (full disclosure)
    Default Insurance if applicable (full disclosure)
    Appraisal if applicable (full disclosure)
    Home inspection if applicable (full disclosure)
    Mortgage Broker (?)

    Do you not realize that every profession you listed is a service that the client pays out of pocket for except for the Mortgage Broker? Of course if a client is paying for a service, they need to know how much to pay but a Mortgage Broker is very different.

    What we could compare is maybe a bank manager (originating or signing off on Mortgages) and a Mortgage Broker. If we have to state the income earned, should it also be fair that the Manager must show his Salary, Bonus, overtime, Incentives etc. for his annual income so that the client knows there is someone earning income behind the scenes?

  • Blair Anderson on 2016-01-07 12:41:55 PM

    Who ever you are?

    I do realize borrowers pay the other parties listed directly. But how are mortgage brokers “very different”, as you put it? On the one hand, we are providing a service, and paid for it, just like everyone else. The consumer is the beneficiary of our service, just like everyone else. On the other hand, unlike everyone else, mortgage brokers are the only party whose compensation is unknown to the consumer, sub-prime applications notwithstanding. Is this lack of transparency good for the consumer? Then add all the conflicts of interest to the equation. This is the dilemma FICOM is looking to solve.

    It is a similar situation for most of the financial sector. I agree with you, the nature of our service is different. Yes, we also work for the FI, and we have a number of them to choose from on every application. But as I said in my previous comments, in addition to our base commission, there are a number of additional perks which we can receive. They can also potentially influence our advice. Hence, the need for greater transparency.

    I don’t pretend to have the solution, nor am I suggesting FICOM’s current recommendations are the answer. But if the goal is for greater transparency so that consumers are better informed, as a consumer advocate, I’m on board. At this stage, we all need to get involved so that the solution is something we can all live with.


  • Leslie on 2016-01-07 1:13:00 PM


    Firstly, I am a teacher, and my income is public record. So your point about me and my income is simply not a valid argument.

    Secondly, the banks DO tells us how much they make, in fact they do so in a highly detailed document called a mortgage disclosure. IN that document it outlines all fees, etc. The same for any other product they offer. They also disclose their total earnings every quarter, and that information is readily available for anyone to see.

    Your own argument is not valid. There are a lot of professions that disclose their incomes. Dentists do, after every visit you get an invoice that discloses exactly what they charge for what service. You can also access their scale through the Canadian Dental Association. Doctors are all paid the same scale based on their area of specialty, again this is public record that can easily be accessed.

    The difference here... is that brokers are paid for a specific transaction, by the lender, yet make the claim that they work for me - the consumer. Under the law, a person is employed by the person that contracts them for work - in the case of a broker you are contracted to source mortgage business for them. Thus, you do not work for me the consumer, you work for the lender you are sourcing business for. Furthermore, the lender offers you incentives to send them business, things like volume bonus, points, etc.

    You are paid a transaction fee by the company which contracts with you to source them business. Thus, you telling the consumer that you work for them and not the lenders is false by definition.


    For those brokers that complain about the bank sales forces, it is not a valid argument. Why? Because these people work FOR the lender, they do not claim to work for the consumer. They are paid by their EMPLOYER. They do not claim to be independent or impartial. Their employer discloses 100% of the money that they as a company earns to the customer, it is public record as mandated by OSFI.

    A bank managers... everyone KNOWS that they are employees of the bank. Again, they do not claim to work for the customer. They work for the bank.

    If you are going to argue this, you had better come up with better ones than what you are putting here, because so far all you are doing is sounding like petulant little children.

    As for how do I know all of this? Back some years ago I worked for a mortgage broker while I was in school getting my education degree, and waiting for a position. I currently have my PHD in education.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.


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