How many kicks can a broker take?!

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 …

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The errors of compensation

One of the most pointed arguments that we hear about is that of bankers pay, some people have even started to refer to them as ‘banksters’ instead of ‘gangsters’. The reality is that both the industry and the shareholders and everybody else got it terribly wrong, even the corporations with their internal and agent remuneration models got it wrong. We were rewarding short termism in a long term game, something akin to having a footballer who has to play the full 90 mins but we base all their pay on the first five minutes.

On one hand the general mass of decision makers didn’t see the financial crisis coming, granted, there were some who were shouting it from rooftops, in some cases those same people have predicted 15 of the last 2 market meltdowns (our most well known one began calling it from late 1999), with others they were just plain ignored. The best analogy I have heard so far came compliments of a very respected colleague with over 40 years of banking experience …

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Rent, Dead money?

Is rent dead money? Are you throwing your money away? Should you rent or buy? This is a complex question but when you are trying to make up your mind keep some perspective.

Is rent dead money? Well, not really, you still have to live somewhere, people don’t say ‘why are you throwing your money away on food, or clothes to wear’. If a person asks you this ask them ‘Why throw away money on mortgage interest, property related taxes, management fees etc.’

As an investor there are one set of rules, as a homebuyer there are another, the same as the difference between a person who buys a car for personal transport or as an investment – when you buy for yourself you can get a functional car or a fancy one, equally there are standard and trophy home, a car as an investment is a trickier proposition.

The argument currently for a property purchase has more to do with credit pricing and the ability to afford to buy …

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Banks ARE lending, just not freely or irresponsibly

I have read several articles in this week in our  national papers and in them the authors said ‘banks are not lending’ and in one it was implied that this was somehow wrong. A point of order must be raised, firstly, it’s not wrong and secondly they actually are lending, just not freely or irresponsibly.

The frustrating thing is that even after all of the fallout, all of the crashing property prices, all of the international crisis news, that so many people still don’t get it. Cheap credit and easy lending is what go us here to begin with, we won’t fix the Irish economy with more mortgages being freely available.

Lobbyists take note: While you might strong-arm or influence the Government (I don’t know which method lobbyists use but either way they are effective) into supplying money for mortgages via recapitalisation or Homechoiceloan or any other plan, the fact is that reasonable people will not sign up to it, they will buy when …

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Trade Unions and recessions, why they should not be considered.

Trade Unions, by definition are not academic organisations dedicated towards finding working solutions for the economy, rather they are protectionist in nature, specifically towards their members, which is why I am constantly surprised by the media leverage they achieve in various ‘solutions’ they arrive at for the current crisis.

To put it simply, Trade Unions are to economic progress as Kryptonite is to Superman. The wage deflation required to restore a working status-quo in our nation will not be achieved with increments, or guarantees of high wages, rather the inverse is true, now more than ever there is an argument for removing the minimum wage and allowing employment to find its own level, alternatively we can tax ourselves into oblivion and support artificially long dole queues and public spending.

‘Artificially’? How? Simply put, there are many people now who would likely show up to work for eight Euro an hour, and there are perhaps employers who would be happy to pay this to them, but the minimum wage …

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