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Standardising commissions unlikely to work in practice, says broker

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Julia Corderoy | 10 Dec 2015, 08:00 AM Agree 0
A standardised commission structure for mortgage brokers is good in theory but is unlikely to work in practice, according to one Sydney-based broker
  • Anna-Louise Brown | 10 Dec 2015, 09:08 AM Agree 0
    When writing a loan I have no idea what commission is payable until I have selected the appropriate product and have to input commissions into compliance documents.

    Therefore, personally, standardising commission makes no difference to me.

    However, I totally agree that banks would jump on the opportunity to reduce commissions and therefore we need the current system. Perhaps a declaration in the compliance documents of what is an average commission (published each month by the MFAA say) and stating whether the recommended product is below or above this and the reasons why it has been chosen when it is above.
  • Dave Robinson | 10 Dec 2015, 09:21 AM Agree 0
    Wow wish I had the ability to read other people with little or no input from them: “Overall, I don’t see an issue with standardised commissions across the board. I have seen some clients that have been placed into products of smaller funders who do provide higher commissions in order to attract brokers with a detrimental interest rate being delivered to a customer. So it does happen. There is no dispute about that.”

    It couldn't be because there is no channel conflict, that the smaller lender provided a more personalised service to the client and broker, that the smaller lender would look outside of credit scoring, no it was all commission related... Oh if only I had that crystal ball!
  • Macarthur Broker | 10 Dec 2015, 11:05 AM Agree 0
    Excellent comment Anna-Louise. How about we flip this around and go full fee for service. Would we all have to charge the same fee? Doesn't make sense does it? I just wish regulators would stop meddling with an industry that is NOT BROKEN.
  • Marty | 10 Dec 2015, 01:18 PM Agree 0
    What about having a mandated maximum level. Say 1% upfront and 0.5% trail. What the lenders do within that cap is up to them.
  • steve reid | 10 Dec 2015, 02:14 PM Agree 0
    I would Love to see the commissions all the same that would put all lending in the same corner or go Fee for Service that would get rid of clawbacks.

    Specialist lending is normally higher risk lo doc lending through non-conforming lenders.

    Who have higher commissions and put it up the customer for the privilege everyone know this.
  • Alex Stephen | 10 Dec 2015, 04:22 PM Agree 0
    As I mentioned, standardised commissions is the path to reduced income. Same goes for ASIC believing that remuneration is influencing decisioning/too high for businesses to earn.
    Fee for service won't work, unless banks/lenders also charge fee for service.
    But what is the fee for having analysts, variation managers, premises and the kind of back office support that clients want/need? Otherwise you have a very hard sell for your services over that of the clients favoured bank.

    Lo doc lending, from what I understand as I have only done two in four years, does have across the board higher rem. But ANZ's lo doc is excellent and pays no more than normal, and I used that as it presented as the best option for the client at the time. And I earned less than I could have if I'd placed it with other options.

    The reason we're under scrutiny is because clients HAVE been placed into inappropriate products, to their detriment, when better options existed. It would appear that the only reason for this recommendation was the level of remuneration to the individual who recommended said product, abetted by the borrowers lack of financial sophistication.
  • John Sanders | 11 Dec 2015, 09:09 AM Agree 0
    Brokers do of course have the option of charging a fee for service and plenty do. Is it double dipping?

    In some cases not. For example if a broker spends 7 hours on a file and it ends up getting declined or the client pulls out surely they should be compensated for their time.

    Tradespeople start charging the minute they arrive. I had a painter who I admit did a great job and I offered him a coffee. He charged me right up until he had finished that coffee and our friendly chat had ended!

    We shouldn't sell ourselves short. The problem is the consumer can hunt around and find a broker or a bank branch that will do it all for free.

    There are sneaky brokers who will recommend certain lenders if they know the commission is higher. If a loan amount is high, over $1.5mil for example, getting paid .7% instead of .6% makes a huge difference.
  • Marty mcdonald | 11 Dec 2015, 09:33 AM Agree 0
    @ Alex Stephenson. We need to be mindful that we are not giving advice / recommendations on whole of market. We can not as we are not able to access all lenders. So let us accept (even though the vast majority of us do provide the best advice and service proposition available in market) that we are just selling home loans. If everyone understands that including the consumer then the commission differences becomes a non issue. Just like the consumer who goes to a lender direct knows or should know that they can only offer their own products and the lender is remunerated partly on commission ie the consumer is being sold to.
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