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New refund broker claims cash back not a marketing gimmick

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Australian Broker | 06 Mar 2013, 08:00 AM Agree 0
The head of a new refund model brokerage has defended his model and said consumers deserve the ability to make an informed choice and avoid being conned by ‘wolves dressing up as sheep’
  • OzBoy | 06 Mar 2013, 09:42 AM Agree 0
    Just bringing his income forward that's all. Don't know why he finds it necessary for some of the comments...perhaps it makes him feel better?!

    What about when St G/BOM/Westpac stop paying commission as they do for no reason, who will follow up the lender then?

    Clawback? From the consumer or from you?

    Another layer of complexity for the commission departments to deal with. Mmm interesting times ahead for all the admin departments.
  • Mike Clarke | 06 Mar 2013, 09:46 AM Agree 0
    I'm only going to say one thing. It's very much skewed to a 'transaction' based operation & not 'relationship' based. An 'adviser' can & does provide much more than just that one off transaction. Think value add.
  • BONED | 06 Mar 2013, 09:51 AM Agree 0
    'Commissions have to come from somewhere and the online lenders are putting gaping holes in the broker myth that ‘the lender pays our commission - so it doesn’t cost you anything’... I still can't get my head around comments like these! Lenders don't pay their staff Comm's so how do you explain accessing the same rate through a Branch. If Morgan's theory was true, then obtaining a loan via the Branch network would in fact be cheaper - but it is not! Ultimately, people with an agenda like Morgan are simply trying to justify their model. The online space is cheaper for obvious reasons - you don't need Einstein to tell you that!
  • NoTimeLikeTheFuture | 06 Mar 2013, 09:52 AM Agree 0
    It sounds difficult getting 3.5k upfront from a client but at least those who paid would be committed and not time wasters.

    This broker might end up with a lot of time on his hands I feel.
  • Matthew | 06 Mar 2013, 09:53 AM Agree 0
    Im a little confused. The person makes reference to brokers in the past using "independence" and perhaps in a less than truthfull manner, yet he calls himself Independant Planner? Does he pay all commission from his planning business back to the client too? maybe he does? BTW, why is it you can't call yourself an independant broker yet you seem to be able to call yourself an independant planner?
  • moonae | 06 Mar 2013, 09:56 AM Agree 0
    Complex. Lots of stress points for future failure. Can only end in tears. I feel very comfortable with fee for service too, but until lenders can dial commissions out and reduce the rate and fees at source, too many players (Bank, Aggregator, me and my creditors) between the commission rebate and the client. So much can go so wrong.
  • Malcolm watkins | 06 Mar 2013, 09:56 AM Agree 0
    Good luck. Our average Homeloans is more like 420k and the AUSTRALIA average is much less then that again. that means the commission is more like 2500k . The average borrower does not have 3500 dollars to pay upfront. More so they can get a pretty good idea online as to what rates and products are out there so why would you pay upfront for that. If the average loan term is 4 years then they will never recoup that cash. Yes they will ultimately come out in front but most consumers will simply be driven to more affordable options like going to bank direct.
    In the interim I cannot see how this focus on commissions helps anyone in the industry.
  • Broker | 06 Mar 2013, 10:03 AM Agree 0
    I wish him luck, he will need it
  • Rach | 06 Mar 2013, 10:05 AM Agree 0
    Um, and that's an interesting choice of name - I thought 'Independent' wasn't allowed to be used in marketing or reflected in businesss names any longer?

    Clawback will be interesting !
  • Brisbane Broker | 06 Mar 2013, 10:17 AM Agree 0
    Rach - the word independent cannot be used by any broker who receives commission. If you receive no commission then it is ok to call yourself independent.
  • Sheep | 06 Mar 2013, 10:34 AM Agree 0
    "Wolves dressing up like sheep" ha I like that !
    wonder if he will be around in 12 months ?
  • Andrew Hetherington, Intellitrain P/L | 06 Mar 2013, 10:51 AM Agree 0
    Set it up well and you will no doubt do well Craig. I have seen others do similar with great results. Yes you may end up with more time on your hands, but that doesn't equate to less profit.
  • Keith B | 06 Mar 2013, 11:42 AM Agree 0
    The model is flawed because is based on the premise that commissions will be on-going for ever and a day. We know from past experience this not to be the case, so would not be lining up for a franchaise!
  • SteveL | 06 Mar 2013, 12:44 PM Agree 0
    Great idea from a marketing perspective. Client gets an automatic 0.15% (Or whatever) rate reduction (Sometimes after year 1 and sometimes building up over time) PLUS a generous rebate upfront. He gets the clients insurance and super commissions, maybe sells some property as well.....He's ahead of the curve for sure and I can see him really making inroads into the market. He clearly understands one important fact - The home loan is only a lead in for other products. Well done Craig and best of luck....
  • OzBoy | 06 Mar 2013, 02:55 PM Agree 0
    Around the use of independence, can you use this if you get commission but then refund it? Can you use this if your aggregator gets a portion of the commission and keeps it? What do you do with the "extra's paid" by some lenders? Can you finance the fee (well with a lender apart from CBA)? Is this fee and it's subsequent interest added onto the loan?

    ASIC, what do you think?
  • Melb broker | 06 Mar 2013, 05:55 PM Agree 0
    $3.5k good luck with that!! They can come to me and it wont cost them a cent
  • Double suspicious | 07 Mar 2013, 12:18 AM Agree 0
    Good brokers don't need much more than 30 mins to know if there is a better deal in the market for the client.

    What happens when the client wants a $20K increase in 12 months?

    The model does sort out the tire kickers.

    However with no trail book, what is the asset value to sell? Names and phone numbers.

    How is it a better model when your collecting $3.5K and the client is rebated $18K?

    Unless the model clips tickets elsewhere, can't see the competitive strategy (Michael Porter, 1980) of Cost Leadership, Differentiation or Focus.

    Transaction based or relationship based? That is the question.
  • Jb | 07 Mar 2013, 11:23 AM Agree 0
    Maybe it looks great on paper, but can't see it gaining traction. Given the option, Australians will opt for the current model of no payment to broker, bank pays broker commission.
  • bayside broker | 07 Mar 2013, 05:30 PM Agree 0
    Gee What happened to understanding people. I dont think I have any clients who believe I should not be paid for my service. They are happy that the bank pays me not them. As mentioned above, if the lenders all reduce rates and costs to the consumer, I dont believe there would be an issue charging them directly. Mind you there is a LONG way to go before anything like that can be contemplated as it has to be implemented system wide.
  • Rex Wood | 08 Mar 2013, 12:22 AM Agree 0
    @Matthew - one can only assume the business name is skewed toward 'financial planner' however we haven't been able to use independent, unbiased, or anything close for years, and it's got some to do with payment and the APL. July 1 that becomes even more convoluted.

    However any financial adviser that hasn't cottoned onto the fact that financial advice in all forms is heading rapidly towards fee-for-service, hasn't read the FOFA legislation. And the same will happen in the mortgage market, as it is in the UK next year. It will become an 'advised' service along with all the legislation that wraps financial advice today.

    People will pay fees, no issue, but the value proposition needs to be far more robust and differentiated from what may have been acceptable previously. To that end Craig is heading on the right track, but is far off the logical end point. The rebating is simply a marketing exercise, that may well work.
    It's possible to do much much more for clients than simply following his mortgage approach.
    Provide terrific outcomes for clients, help them move forward substantially, generate long term business... and get paid fees.
    It's all about the engagement process.
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