A spot-check could turn up no major complaints against any advisors operating in a mortgage revenue sharing arrangement. But then again, most regulators agree that nobody is likely to complain with rates as low as they are now. The tide easily could turn if, as many economists predict, rates rise.

"Maine consumers are not shy about speaking up," warns William N. Lund, director of that state's Office of Consumer Credit Regulation. Any financial advisor originating mortgages in Maine must register as a loan broker or credit services organization, he says. "There is no exception in our loan brokerage laws."

Catie Marshall, spokeswoman for the New York state banking department, says her department received just one complaint from a consumer asking whether a financial advisor originating mortgages needed a license. Her response: "If a financial advisor wants to receive a separate fee for obtaining a mortgage, he needs to be registered as a mortgage broker."

She acknowledges that an advisor can avoid registering by working as an independent contractor, receiving a 1099 form from a licensed mortgage banker or registered mortgage broker. "But if they do that, they can only work for one broker or banker and can't try to sell the loan in multiple places.

"Laws vary from state to state," she stresses. "What's legal in Oklahoma may not be legal in New Jersey."

"HUD (the U.S. Department of Housing and Urban Development) would be concerned with the service that's being provided and what the consumer is being charged for the service," says HUD spokesman Brian Sullivan. Sullivan also warns against "upcharging," or charging a borrower more than a service costs to provide. Example: If a client's credit report costs you $30, you can't charge a mortgage borrower $40. "The courts have disagreed on this point," Sullivan says, "but HUD's historical position has been that upcharging violates RESPA (the Real Estate Settlement Procedures Act)."

There also are state and federal laws that govern predatory lending. "It's illegal to do continuous refinancings that benefit only the lender and not the borrower, because costs go up and up," Marshall, of New York, says. Exactly how strict those laws are may depend on the entity for which the advisor is originating mortgages. If an advisor originates mortgages for a national bank, the rules may be different than if he or she affiliates with a state-chartered bank. "It's really up to the confusion level for a lot of people," she says.

Some advisors rebate mortgage fees they receive to clients as an added service. Plus, there are a variety of other relationships that financial advisors are forging with mortgage companies. Nicholas says that he also will rent desk space from financial advisors, at market rents.

Another option is a strict referral. Even if advisors don't obtain fees for the mortgage referral, they can retain management fees on assets clients might otherwise tap when they need money, says mortgage broker Nicholas. The relationship also prevents clients from getting a mortgage at a bank, which is likely to cross-sell a borrower investment and insurance services-stealing an advisor's business.

If a fee-only advisor refers clients to him, Nicholas adds, he might help sponsor a client appreciation event. One such event recently cost him $2,000. Besides abiding by state mortgage brokerage and lending laws, advisors also must consider state securities laws and ethics issues.