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Brokers caution of dire consequences of banning trail

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Julia Corderoy | 17 Jun 2016, 08:00 AM Agree 0
Banning trail would destroy consumer outcomes and could leave many brokers considering leaving the industry altogether
  • Oscar Hvala | 17 Jun 2016, 09:08 AM Agree 0
    If banks are not charging fee for service, I believe a broker would not have a chance of getting any business. Many brokers have ticket on themselves if they believe their clients will come to them and pay a few thousand dollars when they could go to the bank and have the same thing for no service fee at all. The profession would become an "elitist" service and the average person would simply go the branch or go on line these days. Where is the competition then? Back to the banks. Adjustment to upfront would be needed.
  • | 17 Jun 2016, 09:19 AM Agree 0
    I understand that all mortgage brokers position will be against the banning of trail income, after all it's a threat to our livelihood.
    However if our reason for retaining trailing commissions is based on the argument that it is a form of deferred revenue or is a fee for the ongoing service, my view is that argument will ultimately fail because commission is based on the size of the loan.

    Up front commission and trailing commission is not a fee for service, it is an incentive for mortgage brokers to introduce profitable customers to a bank who then shares a portion of it's profits with the broker. Trailing income is only paid to reduce the appetite of mortgage brokers to switch their clients. The industry needs to recognise this and become more transparent.

    A more transparent model would be that lenders should provide fixed interest rate discounts to the clients of mortgage brokers to recognise the benefits we bring to them and in turn mortgage brokers should enter into a fee arrangement with their client.
  • Paul | 17 Jun 2016, 09:47 AM Agree 0
    Interesting point above, I also have an insurance business and the insurance company has just changed the commission model, from $ value on the property to a flat fee per policy.

    Their argument is it takes the same time to write an insurance policy on a $200,000 home as it does on a $800,000 home. Imagine if lending commission went that way. All the city brokers would be jumping up and down as their commission would reduce and all the regional brokers would be happy as their commissions would increase.

    Then it's a fair field, or is it? It really does take the same time to write a $200k loan as it is a $800k loan, just dealing with different incomes. This is correct for standard residential. Throw in trusts or commercial lending and the complexity changes.

    Is this an over simplistic view?
  • Aaron | 17 Jun 2016, 10:20 AM Agree 0
    Banning trail would just destroy the business goodwill of thousands of brokers. The banks hold all the cards, since they are the ones paying us. They would love to ban trail because it means they would be the only ones offering home loans - as someone pointed out if a customer had to choose between paying us a fee, or go to a branch - 99% would go to the branch any day of the week.
  • Papery | 17 Jun 2016, 01:15 PM Agree 0
    Just think how good the service proposition to clients would be if the majority of brokers had to return to bank lending positions... Imagine what the wait time to see a bank lender would be then... NCCP... No COSL... No MFAA... No PI... No aggregators... No clawback...
  • Marty McDonald | 17 Jun 2016, 05:09 PM Agree 0
    If there is catastrophic change to commissions what is stop lenders increasing their "franchise" model teams and surprise surprise paying their franchisees (probably ex brokers who wrote a lot of that lender) 0.65 and 0.15...Juts a thought.
  • John | 18 Jun 2016, 12:04 AM Agree 0
    Why is every crying so much? Trail income do you actually earn it or is it a payment for you to look the other way. If everyone here did do a constant review of client files they will know most times it may be in the clients best interest to refinance but since we all get paid trail and the bank says its churning we agree. The industry would be a better place with no trail and no aggregators all this are just use less cost that we have and it is reflected in the price been paid by the consumer. If there is no trail what does that really mean... Do we all only collect upfront from the major banks and go home or push non bank to become mortgage managers the choice is simple.
  • Tony D | 18 Jun 2016, 12:01 PM Agree 0
    Not every broker charge clients and too be honest I question that broker who do.
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