Broker Channels and Banks

Big-Banks Dow Jones ran a story Friday on how different banks view brokers.  As those in our industry know, CIBC, Scotia, National Bank, and TD embrace broker business.  BMO and RBC do their own thing.

Last year, BMO lost market share because of their decision to close their broker channel.  Now it says it’s got that share back. As for RBC, according to Dow Jones, it has a mortgage book that’s growing at 17% a year (there was no mention on the profitability of this book however).

RBC’s banking head Dave McKay, was quoted as saying the broker model “just doesn’t work for us.” He says it causes the bank to “lose control” of the customer. 

(Of course, that begs the question: Do customers really want to be “controlled?”  Moreover, do they even realize they’re being controlled?)

BMO VP, Lynne Kilpatrick, says, “When [a] mortgage comes up” for renewal, broker-referred customers “tend to chase the next best rate.”  She says clients now come to BMO “with a warm handoff to the banker, where they can then have a conversation about other banking needs…We do find our ability to cross-sell products that come through the [branch] mortgage specialist is exceptional.”

In short, RBC and BMO deem it critical to manage the client because they want to sell more to the customer than just mortgages.  The last thing they want is for homeowners to build a relationship with a broker (who can suggest any of several other lenders).  We’ve talked about this many times before, so readers probably know our position.

Thankfully, CIBC and others have a far more progressive view of mortgage brokers. CIBC Executive VP, Rick Lunny, says, “We see a tremendous advantage in attracting customers through brokers.”  Scotiabank agrees.  In fact, 53% of Scotiabank’s mortgages were originated by brokers in 2007.

Desjardins analyst Michael Goldberg says Scotia can cross-sell products to broker-clients just as well as it can for branch-originated clients.  (That’s probably because Scotia mortgages are always closed at the branch.)

  1. “… chase the next best rate”? Well duh, yeah!
    Just like people look for a broker with low trading fees, banking services with no or low fees, low insurance rates for life/home/auto, credit cards with good terms, compare prices on purchase … no need to go on. All the more reason to teach personal finance in the schools.

  2. I am a regular reader of your blog will i would like to disagree with your opinion.I shopped with brokers in toronto.All of them made big claims what rate they can get me.But they were interested in more fooling me around with rate which is clearly out of prevailing market rate.I got very good variable rate with RBC.I liked their customer service as they gave me good rate with out haggling.In my experience it is better to go directly to big banks than Broker who take customer for a ride.

  3. My experience has been quite opposite. We went to RBC and BMO and were offered slightly below their discounted rates. I then called a broker my friend recommended and was able to save another .23% and get approved the same day.
    The other thing I didn’t like about banks was that they were very sales oriented. I felt we were being unecessarily pushed into other bank services like chequing accounts and rrsp accounts.
    Like anything else, it probably depends which bank agent or broker you choose.

  4. I agree – banks usually play games with rates. It’s perfectly natural, since they’re trying to maximize their profits, but I’d rather deal with a lender who gives their best rate up front.
    Unless you got a ridiculous deal from a bank, you’d be crazy not to go with a (good) broker. Unless you really like haggling, that is.

  5. Hi Simmavishnu,
    Thank you very much for the feedback. Your point really deserves an in-depth discussion. The truth is, like any industry, some in our business do their jobs better than others. The real objective should be to find a planner you can trust. Good professional mortgage planners base their entire business on their reputation. I can guarantee that if you contact this sort of planner you will not be disappointed.
    All the best,

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