Clawbacks “there for a reason”

by Miklos Bolza16 Aug 2017
While clawbacks are sometimes seen in a negative light, the heads of two aggregators have come out in support of the policy, saying it has been put in place for a reason.

Mark Haron, director of Connective, said that clawbacks are simply a part of the commission structure’s economy.

“If we want the higher upfront commissions, then you have to have clawbacks in that equation from the lender’s perspective. It just primarily comes down to that,” he said at the 2017 Aggregator Roundtable hosted by Australian Broker’s sister publication Mortgage Professional Australia (MPA) yesterday (15 August).

While clawbacks may have had the additional benefit of reducing churn, they were there for economic reasons, he said.

“If you want 25 basis points upfront and 15 trail, the lender will probably pay you that and not give you any clawbacks because they haven’t got much at risk. They haven’t pushed all their upfront commission out the door at the beginning.”

Tanya Sale, CEO of Outsource Financial, had a slightly different angle, saying that clawbacks were specifically there to prevent churn. As a result, she was not a fan of taking them away, she added.

She acknowledged that common sense had to prevail with regards to the clawbacks system.

“I think the lenders think this as well. We’ve had situations where we’ve had clawback, we’ve appealed it, and the lender goes ‘You know what? You’re right. Fair’s fair,’ and they haven’t worried about the clawback.”

The policy was not going away and anyone who thought so was dreaming, she added.

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COMMENTS

  • by Cranky Old Broker 16/08/2017 8:54:23 AM

    Distinctly unfair when applied for clients selling or paying debt. My business was nearly wiped out by clawbacks last month, none of which were refinances, so whilst Tanya is right in saying they are there to stop churn, she is also wrong in that banks are simply using them to screw over lenders when businesses/properties sell thereby undoing a hell of a lot of good work that the broker has done

  • by Xavier Quenon 16/08/2017 8:56:04 AM

    Mark Haron - clawbacks were introduced when upfronts & trails were much higher than they are now.. bank profits are increasing - so overall the current clawback system needs to be reviewed and modified. I believe clawbacks need to stay however there should not be equal to 100% upfront and nor for as long as 24 months in some cases...

  • by Moonae 16/08/2017 9:03:22 AM

    Mark is right and he is sensibly looking at the model from both perspectives. I have no issues with clawbacks at all. My perfect model for broking taking into account what Brokers actually do, the time cost and the advantages of Banks in embracing Brokers and not treating them as the enemy is as follows; Happy to cut up fronts as the fulcrum to everything else. If Brokers feel it necessary they can charge a fee to top up. Keep clawbacks - maybe though make them more gradiated for fairness. Increase trails substantially but require the Broker to maintain all aspects of ongoing management at the expense of losing the trail if they do not. (Reviews, variations, arrears management, banking changes to a lesser degree and where appropriate). The Banks do not want to do this as their modus operandi is to make the lazy broker irrelevant over time and take over the relationship and future opportunities. Lets be honest, the Banks go out of their way to make it hard for Brokers to look after their customers ongoing because they want to wrest control. Lets stop that nonsense. Lazy brokers collecting trails and playing golf will be a thing of the past as well. The industry becomes more professional and the customers get looked after much better. Matt Lawler proposed this model 15 years ago and it made sense then and makes sense now. How about that for good customer outcomes ASIC/Sedgewick et al! Doubt that the politics will allow it though.