Good advice isn’t free

There are good and bad credit counsellors, mortgage brokers and investment advisers out there. But it’s a mistake to think what they do is free.

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by Gail Vaz-Oxlade
January 22nd, 2013

Online only.

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I wish people would get over the desire to get something for nothing just because the something you’re getting was created, produced, written, invented, or provided by an independently wealthy organization or person. When you get stuff for “free,” you’re deluding yourself into thinking you beat the system. Chances are you didn’t. The system probably beat you and you just don’t know it.

Whether it’s the free t-shirt that comes with the credit card application you filled out, the free TV that comes with your brand new buy-now-pay-later couch, you’re paying for it somehow.

But nowhere is this more apparent than in the financial services arena. People waltz into a company where the advice is “free” without giving two thoughts to how the person giving the advice buys food for their baby’s belly.

You know that mutual fund salesperson? Sure, you don’t have to fork over dollars directly for his advice, but you’re paying anyway. It’s wrapped up in the commission or the management costs. And as for credit counsellors, they’re paid by credit card companies. (Doesn’t that seem weird to you?) And your mortgage broker? She gets a commission from the lender, which varies from 0.5% to 1.2% of the mortgage, depending on the type of mortgage you get.

Maybe it’s time to take off the rose-coloured glasses and look at “free” for what it really is: a trick. A way to make you feel that you’re getting something for nothing so you don’t look too closely at the something you’re getting.

Hey, if that t-shirt you got when you filled out the credit card application shrinks after two washes, what’s the big deal, it was free, right? And if you walk out of credit counselling with a ruined credit history and the propensity to go right back into debt–that’s the reality for so many folks–hey, at least you didn’t have to pay.

There are good credit counsellors, good mortgage brokers and good investment advisers out there in the marketplace. But it’s a mistake to think what they do is free. If that’s how it’s positioned to you, know that it’s a lie. You’re paying. The only way to be sure you’re dealing with someone reputable is if they answer the question, “So, how are you compensated?” without waffling.

Like all products and services, advice has a cost. Know the cost and you can make a smart buying decision. Delude yourself into think it’s free and you’ve been had.

9 comments on “Good advice isn’t free

  1. It's important to not that, while it's true that mortgage brokers don't work for free (who does?), the consumer does not pay them. Mortgage brokers are compensated by the lenders for bringing business in the door – it's called a finder's fee. The only time a consumer pays a fee to the broker is if their deal cannot be done through traditional means and private and/or non-prime lenders must be used. These types of deals take a lot more of the broker's time and, as such, both a broker and lender fee are often charged. All fees must be clearly indicated upfront to the borrower.

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  2. Hmm….as a mortgage professional, I can't help but wonder what the point of this article really is. When I advise a client who then does her mortgage at the bank was my service/advice not free? I certainly don't send them a bill nor do I get payment of any sort. I will admit "Free" is a funny word for sure. I think "no charge service" might be a better way to advertise yourself in my profession. The above argument has serious logic flaws in it as well. If you believe what the author says, then nothing is free. Free speech…nope, we can all find exceptions here. Free will…..nope, not entirely. Even air isn't free if you consider the PRICE your body pays for all the pollutants in it. I think the author is attacking the word "free" itself, but has decided to submit a bias against financial service providers while she's at it. Possibly the poorest article I've read in 2013…congrats!

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  3. The posters above seem to have a hard time differentiating between direct and indirect fees. The author is simply pointing out that, at the end of the day, the consumer pays for indirect fees as well. Does anyone think that health care is free in Canada? Only to those that have never paid any sort of tax.

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  4. Hmm, that's some good advice from an article I got for free, wait a second…

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  5. I wonder why this attack on mortgage agents and brokers. I did not see her suggesting to ask the friendly bank advisor how they are paid – salary or commission and do they get extra for trying to sell you some of the other bank products. What about car salespeople – they love to have you ask for add-ons. Mortgage agents get the best mortgage for a person’s credit situation. We can offer mortgage insurance but that is the client’s choice on whether to buy it or not. As was suggested above any or all fees and their source are disclosed to a client.

    Most people are reasonable and do not expect a person to work for free.

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  6. Wow, mortgage brokers sure are sensitive about people pointing out that they're compensated by the people selling the products! Must be from hanging out with realtors…

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    • Clients are made aware of this. They are provided a disclosure sheet, this point is read to them and then they sign it.

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  7. There is no doubt that free advice is not completely free while it is paid from different ways. on the other hand some are paid advisers. Do these advisers also earn from indirect ways while paying directly?

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  8. The nearest fee-for-service advisor on moneysense's directory is over an hour from Gail Vaz Oxlade's office. They just don't exist in some locations.

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