A few options provide opportunities for advisors to originate mortgages.

State and federal laws make it tough for financial advisors to obtain fees in the mortgage world. But several companies are getting around the rules, arranging for advisors to earn commissions of 25 to 125 basis points on mortgages they originate for clients.

A major catalyst, these companies say, is that they actually are hiring financial advisors either as employees or independent contractors. Either W-2 forms or 1099 forms, based on company policy and/or state law, are generated. The advisor is required to perform a series of specific duties. These arrangements, the companies say, satisfy the requirements of the Real Estate Settlement Procedures Act, which prohibit the acceptance of referral fees for mortgages. They also may eliminate the need for advisors to register as mortgage brokers in certain states.

Randy Verlin, a CFP licensee with MainStreet Financial Advisors in Kalamazoo, Mich., figures he earns an extra $1,000 monthly-some 5% of his total income-by originating mortgages for clients. He does it as a part-time employee of Nicholas & Co. Mortgage Planning Solutions in Ann Arbor, Mich. Verlin, who otherwise reaps income primarily as an asset manager, estimates he spends an average of three hours weekly on a mortgage and submits a weekly time log. He gets paid for a series of duties, which include completing a mortgage analysis data sheet for his client and faxing it to Nicholas & Co. Then he works with the mortgage brokerage's president, Gibran Nicholas, who often deals directly with Verlin's clients by phone or e-mail.

"If you're doing a good job as a financial planner, you're going to do a mortgage analysis anyway," Verlin said. "Previous to this arrangement, we would just farm out the mortgage business to different banks."

Nationally, financial advisors originate less than 1% of all mortgages, says David Peskin, CEO of Vertical Lend of Melville, N.Y., a mortgage banker that claims to have mortgage relationships with 2,000 financial advisors nationwide. He expects that figure to swell to 5% of mortgages over the next five years.

Other firms offering revenue sharing arrangements to financial advisors include National Advisers, a marketing company established by financial advisors that is now a subsidiary of Access National Mortgage in Reston, Va., and FinancialCircuit Inc., a technology and financial services company in Campbell, Calif., which issues mortgages through a subsidiary, Innovex Mortgage Inc.

Mortgage companies peddling services through financial advisors are not limiting their offerings to simple 30-year, fixed-rate mortgages. Some offer clients mortgages that confuse even the most highly trained lenders, including reverse mortgages, adjustable-rate mortgages and commercial loans.

Nicholas & Co. Mortgage Planning Solutions touts to advisors, "The Best and Most Conservative Mortgage Option Available Today." It is a mortgage that charges interest only for the first ten years, based on the one-month LIBOR (London Interbank Offered Rate), plus two percentage points. The adjustable-rate mortgage, which requires principal and interest payments in years 11 to 20, has no periodic interest rate or payment cap, according to Nicholas. It only has a lifetime interest rate cap, he says, of 12%. There is no prepayment penalty.

This mortgage is quite attractive, now that the fully indexed rate is about 3.25%. At that rate, an interest-only monthly payment on a $200,000 mortgage would run $542-less than half the $1,134 monthly for a 6%, 30-year, fixed-rate mortgage. The problem: If rates ever hit the 12% lifetime cap after the first ten years-and fixed-rate mortgage rates did in 1985, according to Federal Reserve data-a client's monthly payment could more than quadruple to $2,202.17.

"That (the mid-1980s) is the only time in the history of the United States where we experienced double-digit interest rates," Nicholas says, noting that the specific events that triggered them are unlikely to repeat themselves.