New brokers are being ripped off by mentoring schemes that charge thousands of dollars and deliver little, according to CEO of the Finance Brokers Association of Australia (FBAA) Peter White.
Mr White said new brokers were being quoted many thousands of dollars to be guided by supposed ‘certified mentors’, adding that he knew of some who were seeking to charge tens of thousands of dollars over the life of the program.
He said the practice is scandalous and will end up hurting the industry’s reputation and dissuade new brokers from entering the industry.
“As an industry, we want to encourage new participants, not take advantage of them.
“Mentoring new brokers should not be seen as cash grab for established brokers and industry associations, but as an opportunity to develop new brokers, promote professional conduct and practice and enhance the industry.”
Under some mentoring schemes, those wanting to be ‘certified’ can pay around $3,500 for a three to five day course, setting them on a course to then charge mentees virtually “what they like”, according to Mr White.
“In one example we have seen, the mentor charges an initial large fee, plus a percentage of the mentee’s upfront and trail, and then they continue to take a quarter of the trail for the life of the loan even after they stop mentoring in two years.”
He said some new brokers are led to believe that they have no choice but to pay these exorbitant fees, yet there are many alternatives.
“Some have borrowed from their parents to pay these high up-front costs, and they haven’t even started earning an income yet.
However he said there are many brokers who will charge a reasonable amount, “which makes it financially viable for them, while providing solid advice and support at an affordable price.”
The FBAA also recommends RTOs that offer long term, proper mentoring by qualified and skilled industry personnel.
“While RTO’s have costs, these can be accessed through HECS so there are no upfront fees.”