Adjustments to commission needed: NAB

by Miklos Bolza11 Aug 2017
One of the broker heads at National Australia Bank (NAB) has come out and expressed the bank’s “broad” support for the ASIC review recommendations, saying that the current commission model needs to be adjusted.

“We don’t believe that the current standard commission model has resulted in poor consumer outcomes, but we believe it is essential to manage not only actual conflicts but also the potential for perceived conflicts of interest,” said Anthony Waldron, NAB executive general manager of broker partnerships.

ASIC had suggested that incentives not be structured to encourage larger loan sizes with larger offset balances, he said.

“We believe the industry needs to make adjustments to the standard commission model by paying up-front commissions based on the drawn down amount, not the total facility amount, and by paying up-front commission net of offset balances.”

On 30 June, NAB submitted its response to Treasury on the ASIC proposals which Waldron noted recognised the positive effects that brokers had on the market.

“In its comprehensive review, ASIC made many observations that acknowledged the value that brokers play ‘in promoting good consumer outcomes and strong competition in the home loan market’.”

NAB supported the six ASIC proposals “in broad terms,” Waldon said.

With regards to the regulator’s suggestion to move away from bonus payments, NAB had never paid volume bonuses on mortgages, he added.

“The time for such payments has passed.”

Soft dollar benefits should also be managed transparently through the use of gift and conflict of interest registers, he said.

“We note however that the ongoing education and professional development of brokers is essential and we need to continue to focus on this, ensuring it’s conducted in line with community expectations.”

Related stories:

Industry association says flat fee model will hammer consumers

Industry association blasts consumer groups for commission calls

Non-bank raises broker commissions

COMMENTS

  • by Steve reid 11/08/2017 8:39:44 AM

    So the nab are going to increase commissions LOL
    I wonder is Anthony will reduce his income in line with the commissions Cuts goings

  • by Awesome Albert 11/08/2017 8:48:47 AM

    So if you base the upfront on the amount drawn down and not the total facility will the balance of the upfront be paid when the funds are drawn down? We often set up clients with a loan where the undrawn funds are applied for but not used until clients finalise their next investment property or the property renovations. This sounds like the Banks are looking for yet another way to reduce the commissions they pay which are incredible hard to calculate even on the most simple loans. Serious penny pinching by lenders making Billions in profit

  • by AaronG 11/08/2017 8:59:19 AM

    Paying the net balance/not paying offset amounts is a moot discussion. This already happens in the form of a clawback from most banks at the end of a period of time (a year, for example). This takes an average approach and makes good sense. The issues with the net approach is that clients might cash up and then spend for the purpose 6 months later. Its unfair to ask the banks to further complicate the industry by tracking this and its unfair on the broker if they don't get paid the full amount for what they have introduced.

    Once again, this is a solution that is searching for a problem. Rather than giving strength to something that is a bookkeeping process rather than an influences policy and customer outcomes, the banking world should have pulled up the regulators and simply said," Hello, this is already happening and no harm, no foul". At some point the lenders will have to plant their feet on the ground and say "no" and everyone (asic, lender, aggegators) will have to go to courts to decide. Obviously, this has to be initiated by the Big Four. By the way, this is a normal process in civilised society and the whole financial world won't come crumbling down if a few legal challenges were issued.

    As far as the appearance of impropriety goes.... Nobody is talking about this in the consumer world. They don't care and wouldn't care if you spelled the process out to them. There is no aid to competition in this policy and consumers would just stop listening if you had to discuss or make them read about net amounts and offsets this or that. They assume that brokers get paid and aren't nearly as interested in the topic as ASIC seems to think. The whole discussion about the "need" for this a furfy.