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Aggregator: 'There always is a loser and it tends to be the broker'

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Australian Broker | 27 Mar 2014, 08:30 AM Agree 0
Aggregators believe clawbacks as they are now are reasonable and lenders have the right to claim back their losses from brokers
  • R Ted | 27 Mar 2014, 09:19 AM Agree 0
    well I believe that u you shouldn't bite the hand that feeds you. the act allows for the bank to recover cost from the clients including commission, they are the ones causing the loss. imagine if a ceo got his base pay clawed back if he didn't make enough profit. or missed a target
  • mick | 27 Mar 2014, 09:20 AM Agree 0
    If its not a churn,there should be no clawback.If a prime or near prime lender comes out with a no clawback policy ,they will be inundated with business.I would be prepared to give up a small % of upfront to quarantine any clawback.Use lenders like Choicelend (Advantedge) ,Pepper or mortgage managers who have a 50/50 clawback deal or no clawback like La TRobe and Future Finanial .Avoid the Majors like the plague
  • Richard | 27 Mar 2014, 09:24 AM Agree 0
    Glad I'm not a VOW broker, with an industry advocate like that who needs enemies.
  • Scott Beattie - Cube Home Loans | 27 Mar 2014, 09:34 AM Agree 0
    I believe that any aggregator who is in favour of clawbacks, should not withhold ANY % of commissions should the broker choose to leave that aggregator for ANY reason.
    I am assuming that if I joined Vow and then left for what ever reason, Vow would still withhold a % of commissions for future trail payments.....
  • Bottom Line | 27 Mar 2014, 09:35 AM Agree 0
    Wow. Glad I'm not with Vow!
  • Steve McClure | 27 Mar 2014, 09:35 AM Agree 0
    Has clawback insurance been explored? Clawback is the big brick wall on which we might have to pay a toll to get around it while we work on knocking it down. Don't bang your head on it.
  • Brisbane Broker | 27 Mar 2014, 09:39 AM Agree 0
    “There is an opportunity to reason with the lender, no doubt about that, but at the end of the day you’ve also got to see it from their perspective. They’ve had to fork out money for a client but then the client hasn’t stayed with them, and so they’re entitled to get their money back.”

    Mr Brown, what about the money that we have spend to get a client, can we ask aggregator to pay us back. This is cost of running a business.

    One more point;

    'third party distribution arms have to be profitable.'

    Simple, if 3rd party distribution is not profited for bank, bank will not deal with brokers.

    We are holding nearly 50% of the home loan market and we have aggregates, MFAA & FBAA that can not do anything they just saying 'we will step in'. Right, I had a issue with BankWest and my aggregator told me; 'what you want us to do we need BankWest'. That when i realized that we are just paying them money for nothing.
  • Peter | 27 Mar 2014, 09:45 AM Agree 0
    Vow said:
    “There is an opportunity to reason with the lender, no doubt about that, but at the end of the day you’ve also got to see it from their perspective. They’ve had to fork out money for a client but then the client hasn’t stayed with them, and so they’re entitled to get their money back.”
    Then Vow Said:
    “Unfortunately there always is a loser and it tends to be the broker. I suppose that’s the nature of the business though.”
    And I said:
    "I am also glad Vow is NOT my aggregator"
  • SIDBROKER | 27 Mar 2014, 09:47 AM Agree 0
    LETS DO AWAY WITH AGGREGATORS ALL TOGETHER. THEY ONLY SAY WHAT THE LENDERS WANT TO HEAR. BANKS ETC. NEED TO BE RESPONSIBLE FOR PAYING THE BROKERS WHO SUPPORT THEM. THAT IS SURELY ABC STUFF. CEO`S FROM THE AGGREGATORS ARE USUALLY TO SELF OPINIONATED AND ARE NOT NEEDED IN OUR INDUSTRY.
  • michael eberand | 27 Mar 2014, 09:52 AM Agree 0
    Applause to Vow for speaking to the market, but perhaps Vow and the aggregators should be listening to the overwhelming views of their customers, the brokers.

    Customers leaving early is a risk of the product supplier. Keep customers happy, and you won't lose the ones that do not have unanticipated circumstances.

    ASIC wanted a free market consistent with the general overriding principles for the Australian economy. ASIC chose to prohibit lenders passing the cost of early repayment risk back to the customer.

    So the lenders chose to pass it back to the labour source, us.

    There is no justification, and no excuses.

    Time for MFAA and aggregators to listen to their members and customers and not come out with this excuse crap all designed to justify their case, which I and most brokers do not accept.

    Kudos to Advantedge. While owned by one of the major product suppliers/ lenders in NAB, they clearly have a better relationship with their brokers, with clawback limited to 50% for their in house aggregator product. Good work Advantedge. I am glad I am with you.
  • Aarong | 27 Mar 2014, 10:08 AM Agree 0
    I'm with R Ted. Do the conveyancers get clawed back? Does a bank manger get his wages docked? Does a financial planner get his guarantee advice refunded if the client leaves in a year? No. Everyone from Asic to the banks and the aggregators want brokers to act impartially. What are we supposed to do if we know someone will probably sell in within 18 months? Do it for free? Do twice the work on the hope we get the next deal for the same pay? Do any of these other entities do it for free? How about if they come back in a year, do they do it for free? Lawyers and banks seem to be the ones who think clawbacks are fine and if we were just better brokers, it wouldn't happen. Of course, they don't get clawed back....
  • CHANGE Broker | 27 Mar 2014, 10:18 AM Agree 0
    Tim Brown, I can not imagine a situation where I would let an aggregator chase a dispute on my behalf, I would do it my self for a better result. Claw backs for two years, Low Commission payments, no trail in first year, the whole thing is broken, and the Lenders have structured the third Party Channel so that there is no avenue to challenge or change conditions, MFAA and FBA are useless to us on these issues and Aggregators are increasingly owned by the Banks. We need to restructure the whole thing, its a mess. Anyone have any suggestions on how to do it so that the Mortgage Broker has impute into the system?
  • Marty | 27 Mar 2014, 10:26 AM Agree 0
    Westpac are you listening.
  • robert C | 27 Mar 2014, 10:30 AM Agree 0
    Reduced Claw-backs in under 12 months with upfront equally shared on claw-back, not re-written by the same broker, or associated, with Fore-warning of the loan being discharged, the moment that lender is advised,would be reasonably acceptable. But the fact most of the larger banks give no warning as to the potential discharge of a loan from your book, is NOT ACCEPTABLE. If we are unable to be advised as to this potential claw-back, then we should NOT be liable in any way.
    The big banks need to be aware that Brokers/Credit Reps are now major players in the loan process with their banks.
    Why should we suffer a loss for something that we have NO say or ability to control.
    I think to many brokers seem to accept this as process. I do not believe this should be the case.
  • Broker | 27 Mar 2014, 10:48 AM Agree 0
    I agree with change Broker 100% - the broker industry is a real mess and has been for years with no improvement is sight.

    I have been a broker for more than 10 years, luckily I have decent sized trail book , but gee is it so much harder to grow it post June 2008 with the current miserable trail commission levels. I would not dream about joining this industry as a new broker today, as there is way too many negative forces against you to ensure long term success for your hard work.

    The likes of the MFAA . FBAA and all the Aggregators are all unnecessary baggage to this industry - please remind me what they actually do other than rip a decent percentage out of our income for doing as little as possible and ensuring that they don’t create any waves with the lenders.

    Never once in the past decade can I recall the MFAA .FBAA or any Aggregator challenge a bank on any topic in defence of their hard working Brokers – we pay their damn wages and we get zero support from them, it is a farce.

  • oldBroker | 27 Mar 2014, 10:59 AM Agree 0
    @CHANGE Broker. Yes, there is a solution to this mess. The contractual relationship to the lender needs to be via the ACL. This current system and all it's warts is directly attributable to the fact that the contract that we all operate under is between 2 self-serving entities neither of which is representative of the professional who does all the work, and now holds the credit license.

    I implore brokers to do the following: First of all, get your own ACL. This is imperative. Your only power is the ACL. I'm an oldBroker and even I have processes in place to handle compliancy and licensing regulations. It's not that hard. 99% is just common sense. If your aggregator wants you as a CR, move.
    #2: We need to open-up a discussion with Jon Denovan and get his view on whether the current lender<->aggregator contractual relationship is now at odds with the new NCCP credit-licensing/regulations. If he believes that the contract must be between the ACL and the lender, then the path is clear. We need to lobby the MFAA and FBAA to act correctly and start the processes necessary to change this contractual relationship, or we use legal means... it's up to the MFAA/FBAA.
  • Country Broker | 27 Mar 2014, 11:00 AM Agree 0
    IF I was considering changing aggregators Vow would not be on my list ! The inly way we are going to get rid of these claw back is tell the BDM for the lenders why you are refusing to do business with them .
    Once they lose market share and understand why , they will reconsider.
    THE MFAA and FBAA NEED to become proactive as well the only way they will do that is if we their members pressure them into it.
  • BF | 27 Mar 2014, 11:03 AM Agree 0
    A broker gets paid to write and introduce the loan, and a clawback can be applied to the broker. The staff with the bank who are required to implement the loan through to settlement. Are there wages also clawed back, or is it only the broker that is exposed to this risk?
    If a lending manager with the branch writes a loan and receives a bonus, does he / she have to reimburse the bank part of that bonus?

    Yes there is a cost to write the loan, it appears the broker is a 100% liable for that cost in the first 12 months.
  • Papery | 27 Mar 2014, 11:10 AM Agree 0
    Most Lenders do not acknowledge the Introducing Broker once the initial deal settles, so why would they be pro-active in notifying the Broker when a potential clawback situation arises (& nullify a lucrative & 'free' revenue stream for the Lender).
    Majority of the Lenders want the Broker out of the client picture as soon as possible. Start reading the correspondance that Joe public receives.... there arnt too many places that the Lenders allow even a reference to a Broker let alone the actual loan writer !
    Dont kid yourself there is no Lender/Broker partnership & 'know your client', well most of us think we do, and it doesnt take much for the client to find themselves in direct contact with the Bank via the phone or internet chat or even with the friendly teller at the local branch.
    The Banks will poach our clients back.
    Fee for service is the way to go, but our industry (for the most part) is not there yet. Most of us think very highly of the advise & service we provide, but we dont value it & dont charge for it. We like telling clients that that dont pay for our service the Lenders do...its a selling point after all.
    So until there is some serious changes in the industry led by MFAA/FBAA in respect of FAir Trading practices, we need to suck it up & mitigate the risk, Perhaps by way of a Clawback insurance (but who needs another cost impost on our business!) or very simply with a Clawback clause written into our Broking Agreements.
    Most of us dont suffer too many Clawbacks, but even one is enough to seriously affect our business & cashflows, especially when they come out of the blue.
  • michael eberand | 27 Mar 2014, 11:23 AM Agree 0
    Steve McClure on 27/03/2014 9:35:43 AM
    Has clawback insurance been explored? Clawback is the big brick wall on which we might have to pay a toll to get around it while we work on knocking it down. Don't bang your head on it.

    STEVE- it should not be our cost in the first place. The banks margins are very good. They are the product provider, they should be wearing it. There's clearly room to restore commissions closer to pre GFC levels, and there is room for the lenders to move on claw back. We need to be firm in our resolve. When GFC came and funds were tight, banks cut our margins. They now are competing for our business again, and we should be letting them know that's a key point of their ability to do business with us.
  • Mark Perth | 27 Mar 2014, 11:31 AM Agree 0
    like so many other Brokers I am certainly glad I am not with Vow, we need responsible people who have some clout with the Banks ie Aggregators, MFAA, FBAA etc to take this disgraceful practice on, we dont need people like TB to try and justify a disgraceful practice that simply is not right
  • Freddy | 27 Mar 2014, 11:40 AM Agree 0
    Mick - there are a number of brokers starting to use the services of a mortgage referral aggregator. Access to a 'spot and refer' solution' direct with local bankers from recognised lenders but under that model there are a number of options that don't have clawbacks, and there's not a huge difference in commission. There's options out there if you spend some time searching the market.
  • Mark | 27 Mar 2014, 01:39 PM Agree 0
    With all the discussions and comments has anyone seen a reply or comment from the MFAA? At least Peter from the FBAA has had something to say
  • Mick Ward | 27 Mar 2014, 02:49 PM Agree 0
    If clawbacks are any more than a minority, then I agree that a broker needs to perhaps look at their own process and technique. Overwhelming though clawbacks are the minority for brokers luckily, but when it happens it does hurt cash flow, because unlike comments in the article it’s often unforeseen and not anticipated. The lenders are better equipped, more so than ever, with the reductions in commissions and efficiencies with systems like apply on line where we do the input, to cover those costs. In the early days when there was no claw backs lenders would review any cases of a broker with a high number of drop offs within 12 to 18 months of settlement, and address the issue with that individual broker accordingly. That worked, but now all brokers are penalised by the minority it seems. If the client is selling and buying another property, the chances are you get a new upfront to replace the clawback, which reduces the risk of overall loss even further. But that still does not make the current situation right, it only helps us deal with it.
    I’m more disappointed to read a quote from an aggregator head that states “Know your client. There’s really no excuse. The writer would know if the person has bought an investment property to hold on to for two years then flog it off to make a capital gain.” In the real world there are so many circumstances that can result in a client deciding to sell a property within a 12 to 18 month period which is not only not known to the loan writer at the initial point of the transaction being written, but also completely out of the brokers control. Comments like that can only suggest that they are out of touch, which is sad when you consider we rely on these people to represent us and the industry with issues like this exact one. With that type of attitude and lack of understanding of how it really is on the front line, I hold little hope.
  • GC | 27 Mar 2014, 03:02 PM Agree 0
    A $300K loan will earn the bank interest in excess of $15K P/A @ 5.3%. You cant tell me the bank hasnt covered its costs back inside a year or made a bloddy profit on the deal.
    It really is about time the banks and dickhead aggregators stopped this crap of attacking the people that feed them the deals.
    The banks tailor the contracts so its a win/ win for the bank and brokers pay the penalty if the clients sells or refinances. The brokers have done their job and brought the deal to the lender. Its this sole component we get paid for. We have done our job and it about time the lenders treated brokers as a Business Partner" as they constantly state.
    Aggregators and the MFAA are full of crap and sole there just to take money from the brokers for what really amounts to doing nothing.
    I hold direct accreditation with the lenders and have done so for over 10 years. The disgusting behaviour of the aggretators makes me very happy I took this step ten years ago. Unfortunately I think the brokers are on their own. The MFAA and ALL aggregators are completely full of crap.
    Tim Brown - you really need to get out into the real world and see how good Business Partners treat each other. You might be surprised what you find.
  • Broker | 27 Mar 2014, 03:23 PM Agree 0
    No comment is coming from the MFAA - as the majors called them and told them not to support their members under any circumstances!!! , otherwise no more sponsoring of the MFAA gravy train .
  • Steve McClure | 27 Mar 2014, 05:08 PM Agree 0
    Michael Eberand, I'm simply suggesting alternatives, lateral thinking. Staying firm is what the lenders are doing too. If we want concessions, they'll want them too.

    Jump up and down all you like, but this is not a moral issue, a service issue or a product issue, its a transactional profit issue. There are lots of clever brokers taking steps to minimise clawbacks and protect their income from them by contractual means. If lenders didn't protect their income on each transaction they'd be fools.

    Effective negotiation will only take place once that quandary is resolved and it hasn't. Therefore, almost 20 years of staunch protests later, clawbacks are still in place. Needs a collection of stakeholders from all sides to meet and discuss and resolve.
  • Michael eberand | 28 Mar 2014, 08:00 AM Agree 0
    In my view, the best avenue at this point is to use market forces. Where clients needs are met suitably, use Advantedge lenders or associates who are supporting us with 50% clawback only (and whom also have very flexible product and are very price competitive). That will impact their market share and have them on notice that if they want to compete for our business, then they have to compete on the claw back issue.

    Steve , I acknowledge your points , but sitting down with them, I can't see it working , they hold the dominant position is discussions and they may be able to control our representative MFAA who is weak, but what they can not control is who we support in terms of product recommendations .

    In summary, if we feel strongly on the issue, vote with your actions.

  • CHANGE Broker | 28 Mar 2014, 09:22 AM Agree 0
    Tim Brown Current President at MFAA
    CEO at Vow Financial, seems we do have an official opinion from MFAA. We pay MFAA membership, which is run by Lenders, for Lenders.
  • Positive Broker | 29 Mar 2014, 09:20 PM Agree 0
    Good point CHANGE broker.
  • Papery | 04 Apr 2014, 01:35 PM Agree 0
    One more point to put forward.... Before Brokers, Banks charged applicants an upfront estab fee. Initially the amount was calculated as % of the loan amount, then because of competition, it was reduced to a flat fee of $600 then eventually reduced to $0.
    Val fees have come down form $hundreds to now less than $50 & in some cases a valuation can be performed desk top ie $0 to the Bank.
    It stands to reason, that for the most part, the cost for establishing a deal introduced by a Broker, using the online platforms & prescribed supporting docs in todays techno world, should be a low fixed cost to the Bank REGARDLESS of the loan amount. Afterall, we know that most Bank-jockeys have mere minutes to process each new deal, compared to the many hours required by a Broker, & Im pretty sure your friendly Mobile or Branch Lender does NOT go to the lengths a Broker has to in justifying & writing up a compliant deal.

    We also know that the Banks primary source of profitable revenue is NOT the interest charged on each loan but in the ancilliary fees generated, ie monthly/annual admin & account fees, variation fees, transactional cost via whichever additional related products the clients also enter into.
    So, the Banks really do need to justify clawback policy, which in my opinion (& setting aside aggressive loan refi churn) is nothing more than gouging...after all the Banks have been forced to justify excessive client fees in relation to their actual handling cost (for example dishonour fees)...especially when most of the Bank processing is automated & handled by the 'puters not by people.

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