How many kicks can a broker take before rolling over and crying ‘uncle!’. A whole bunch it seems.

Today AIB informed the intermediary market that they were capping commissions at €1,500 per loan as a maximum irrespective of the loan size. We feel that banks reward people unfairly and in a ridiculous short-term manner, AIB are no different but they are doing so at the detriment of brokerage.

I’ll qualify that: currently, broker distributed loans are highly profitable for AIB, they don’t have to pay for broker overhead, branch costs etc. I have it on good authority that they have explained this to broker representation bodies in the past, so why curtail any money a broker might make? (As if the current market wasn’t making it hard enough already!).

Simple, because it means you have more money to keep branch distribution alive, and in order to support unprofitable branches you have to find excess profit elsewhere, one of the soft targets is brokerage. I’m not about to start crying about this, its frustrating yes, but to be fair, if I ran a bank I’d go after the soft target first too.

The reason banks can’t/won’t go down the route of closing branches and laying people off is because it would be totally unpalatable to do this after being bailed out, they are relying on retirement, attrition and emigration of their staff, but eventually the lay-off’s will have to come, if the Nordic crisis is anything to go by it will be about 40% of the banking workforce, and equally, there are too many intermediaries.

What can we do? Nothing, and it means I’ll get to watch yet more of the people I know and like in the industry go to the wall, nobody is safe. What we could try to do is get banks to reward people in a manner that fosters long term relationships with clients, that encourages responsible advice and longevity in the industry, unfortunately they are not interested.

Banks are very good at getting into trouble, they are also very good at getting out of it – especially with other people’s money – this time it just happens to be brokerage that is footing the bill.

AIB have said they remain committed to the broker market, to my way of thinking that’s like waking up one day for my wife to tell me ‘I remain committed to you but I’m shagging your best mate’, for now it’s back to the trenches!