There are a large number of different Brokers in Australia’s Finance industry:
- Mortgage Brokers
- Personal Loan Brokers
- Insurance Brokers
- Stock Brokers
Mortgage Brokers work specifically as an intermediary between many banks and the client. They assist in getting home loans approved for the client with the bank of their choice.
They generally have a higher approval rate than applying directly with the bank. Additionally, they should be able to assist the client in getting a better interest rate than dealing directly with the bank.
Mortgage Brokers are paid a commission by the banks once the home loan has settled, so the vast majority don’t charge the client anything to use their service.
A good Mortgage Broker will also follow-up every 6-12 months to get you a better rate, and discuss alternative options if your bank is no longer competitive.
Personal Loan Brokers
Personal loan brokers are experts in getting personal loans approved and at a low rate. A Personal Loan Broker should provide you with multiple quotes upfront without affecting your credit score.
In most cases, you’ll probably want to go ahead with the cheapest option. The Personal Loan Broker should then check your situation and income against that lenders policies. They should be able to give you a good idea of whether you can get approved upfront. The main advantage of this is that it will help you to avoid applying multiple times, which can drop your credit score dramatically, and result in you getting a worse interest rate when you are approved.
Unlike Mortgage Brokers, Personal Loan Brokers will usually charge a fee for their service as the commission paid by banks is negligible. The fee is usually added to the loan and charged only if the loan is approved – this fee is called a “Brokerage” fee. It generally ranges from $990 to $1,990.
An Insurance Broker can specialise in a large number of different insurance types, most commonly: TPD, Income Protection, Trauma & Life Insurance. There are some specialised Insurance Brokers that can do Health Insurance, Car Insurance, Home & Contents and the like.
Almost all Insurance Brokers are paid a commission from the Provider and therefore don’t charge the client for their services.
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Most insurances can be paid through your Superannuation or by Direct Debit, so can be done with no out-of-pocket expenses.
Stockbrokers act as an intermediary between the client and the stock market. Online stockbrokers exist, or in-person. Essentially, the client provides instructions to the Broker about which stocks to buy, and the Broker executes those instructions.
Stockbrokers are usually paid on a per transaction basis i.e. they add a percentage or flat-fee to the purchase price and take that amount as payment.
There are other Brokers that exist for almost all different financial products, but the ones highlighted herein are the most common ones, and the ones that you should become most acquainted with if you’re trying to start/continue your journey to financial freedom.