Clawback extension fears rise as Murphy's Law bites

by Mackenzie McCarty29 Mar 2012

Brokers hit by commission clawbacks are expressing a 'once bitten, twice shy' reaction causing fears of potential bank extensions to clawback terms.

Following the GFC, banks rolled out clawback policies to recoup costs in the event of premature refinancing. Non-banks followed when DEFs were banned by the Federal Government.

Connective principal Murry Lees said that those brokers who had been hit with the reality of commission clawbacks were voicing fears about them, as well as their possible extension.

"What I think has happened is that when a broker has copped one, it is really front-of-mind at that stage, and maybe becomes more of an issue in their mind than it really is," he said.

"I would say that it is not a problem all the time and it is not universal, but when it happens it's like Murphy's Law, it usually comes at the worst possible time to get a clawback, like in a bad settlement month, so it has a double impact," he said.

Lees said while commission levels in general were being seen as 'business as usual' by the banks and nothing has been said on clawbacks, the possibility of extension remains.

"I think it is always there in the background," he said.

Lees said brokers should stay close to their clients in the first instance, and that some brokers were also charging a contingency fee to clients in the event of a clawback.

He added that banks would be wise to implement fair clawback policies, that took into account the concerns of brokers rather than their own bottom line desire to recoup costs.

In terms of churn, Lees apportions most of the blame to banks rather than brokers, following the bank-led pricing wars that drove a spike in refinancing activity last year.

Lees said banks make calculations based on pricing and business volume on a huge scale, whereas brokers are focused on sitting and maintaining a relationship with the client.

"You hear the word churn, but the biggest culprits there would be banks rather than brokers. Brokers are relationship-based, they are happy for the client to stay where they are for the most part. You are dealing with two totally different beasts in brokers and banks, and sometimes they are miles apart when it comes to looking at any given situation," he said.

 

 

 

 

 


 

COMMENTS

  • by Tony 29/03/2012 10:15:16 AM

    there's an easy fix - use a lender/mortgage manager that does not have clawback!

  • by Todd 29/03/2012 10:20:22 AM

    I have received two recent claw backs from clients who have sold their properties. Now at what point is this my fault nor could I have done anything to negate this... I don't believe there should be any claw backs when selling has occurred... just another " the banks rule roost " tactic where they can get out of paying...

  • by Rach 29/03/2012 10:40:55 AM

    Agree Todd. If I've done something wrong, I'm happy to cop the clawback, likewise if I refinacne the deal and get paid upfront again, no problem... - but if the cusotmer simply hits rough times and there's nothing I did wrong or can do to assist... If clawbaks MUST exist, then let's at least have varying degrees dependent on reason ?