In an industry where commissions are the primary form of remuneration, why would you charge a fee?
Most people are unaware of the significant time and effort that brokers put into a deal. Gone are the days when credit was freely available and easy to secure. The checks and balances have increased significantly and rightly so. With this comes additional time and that costs money.
If you don’t know how to value your time as a finance broker then you are destined to whittle it away unproductively, often on deals that go nowhere.
I specialise in large commercial transactions that are often highly complex, involve multiple parties and take far longer than an average home loan does to finalise. But I believe the same rules still apply regardless of your speciality. Here are the five reasons why I charge a fee for service:
Skin in the game: When a client parts with their money, they are making a commitment. They have made a decision to use our services and are confident that I am the broker for them. In this way, the fee becomes a symbolic gesture of their seriousness about the deal. They have skin in the game and are committed to seeing it through to completion. It’s very easy for a client to walk away from a deal when they don’t have any money at stake. Paying a fee prevents them from shopping around for a better deal while we’re busy working on the best outcomes for them.
Covering costs: Like I said, time is money. Working on a commercial transaction can take months. We operate a professional business and employ support staff, all of which cost money. Charging a fee not only covers the costs of structuring a credit facility, it also shows the client that we are serious about the work we are about to undertake.
Valuing your services: If you value the services you provide, then there is no reason why you shouldn’t charge a fee. Just because brokers receive a commission from a lender doesn’t mean they shouldn’t also charge clients for their time.
Managing expectations: When we first meet a new client, we look at the deal carefully and make a comprehensive assessment. Essentially, we are scoping the work involved and time it will take to complete the deal. A proposal is then put to the client and a fee is charged before any further work takes place. We’ve found this to be the most transparent way of managing expectations early, so that clients know exactly what they are paying for. It’s no use asking for a fee as soon as you meet a new client. They need to know what they are paying for.
Respect: Finally, I have a golden rule when it comes to fees: they are not negotiable. Once you start dropping your fees to win a client, they start losing respect for you. Be confident in the services you can deliver and in the fees that you charge. If a client won’t pay or demands a discount, let them walk away. Your professional integrity and reputation are far more valuable than that.