Bonus commissions to be in firing line: FBAA

by Julia Corderoy16 Jun 2016
Incentive-based commissions are also likely to face the axe under ASIC’s remuneration review, the FBAA has told brokers.

Speaking at the FBAA National Tour in Sydney yesterday, the FBAA’s Peter White told brokers that special bonus commissions or volume-based commissions are likely to come under a lot of scrutiny by the regulator, and could even be banned. 

“There is nothing fundamentally wrong with commissions that are paid to brokers today. The baseline commission is perfectly commercial,” White said.

“One thing I will say is that there are probably some commissions in the industry which are paid which are incentive based to drive volume that probably will get ruled out or challenged.

“If you get a one-off special which is all about volume, that could be problematic as the outcome of that is not necessarily the best interest of the borrower. It’s not to say it [isn’t], but it may not be. The risks of that are potentially negative outcomes.”

White’s comments are in addition to concerns expressed by mortgage industry veteran and former CEO of Mortgages at Barclays in the UK, Steve Weston, who also told brokers at the FBAA National Tour yesterday that the future of trail commissions could be a shaky.

“We need to be very, very clear about what it is we do to justify trail,” he said.

According to Weston, Australia is one of the last markets in the world to pay trail commissions to mortgage brokers.


  • by Bj 16/06/2016 9:22:36 AM

    So, if bonus commission and trail commission is banned, one would expect a flow on to the client in the form of a sharper rate. Waiting, waiting, waiting...

  • by Albert Waldron 16/06/2016 9:39:31 AM

    Steve Weston of Barclays in the UK thinks that the future of trail commissions could be a shaky, because according to Weston, Australia is one of the last markets in the world to pay trail commissions to mortgage brokers.

    I have three words for him Global Financial Crisis (GFC).

    The fact that trail commissions encourage and make the ongoing monthly service portion of the broker proposition viable and stop the need to be constantly finding new client to maintain business income should be the absolute key to why they should be maintained.

    Long term clients with the right loan, make for happy clients and consistent business income. If you take away the trail payments you inadvertently start to create an environment were brokers have to continually find new clients rather than looking to maintain there existing ones.

    I do agree that commission incentives are both a waste of time and a distraction from the service proposition of brokers. I would much prefer a set commission level regardless of lender to avoid perception that commission has anything to do with our recommendations and then have the lenders incentivise the borrowers with special offers or rebates of fees.

    I am also getting increasingly frustrated with Financial Planners who now 'refund' the lenders commissions to appear 'unbiased in their advice' but then charge clients a 'fee for service' that is well in excess of commission any lender is paying. I certainly hope this is not the direction the ASIC review sends us.

  • by New broker 16/06/2016 1:17:56 PM

    I wonder if internal incentives by banks to cross sell products to clients that are not needed and staff incentives being based on these sales will hopefully come under review too. Dont only go for the little people. Cross sales form part of their incentive schemes