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Broker clients not better off, say consumer groups

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Australian Broker | 31 Aug 2017, 08:25 AM Agree 0
In a joint statement, consumer groups have panned current broker standards and called for major commission upheaval
  • BB | 31 Aug 2017, 08:46 AM Agree 1
    Choice cannot define what good customer outcomes are and even if they could, they would discover that best rate does not lead to best outcome. There are many other factors at play. These morons are running a dangerous agenda. I think ASIC though, are smart enough to realise that these submissions from the consumer groups are not worth the paper they are written on.
  • Brado | 31 Aug 2017, 08:47 AM Agree 0
    I do agree that many brokers use a preferred lender, rather than the best loan they can for the client at the time. we all know that scrapping commissions is the mantra of the big banks, as they will not reduce loan interest rates, and make more profit. it will also drive more clients to go direct, and decimate the lenders that only have brokers for distribution...
  • | 31 Aug 2017, 09:08 AM Agree 2
    http://www.afr.com/technology/choice-risks-the-big-bank-switchoff-20110824-i4a9i Choice are conflicted and their above comments are totally rubbish. What evidence do they have? A client walks into a branch and gets a 70 point discount. They come to me and get a 130 point discount. And they are worse off going to a broker who provides them access to 50 odd lenders rather than 1. These idiots need to be called out for what they are, i am sick of them rubbishing our industry.
  • Broker | 31 Aug 2017, 09:10 AM Agree 3
    CHOICE, Consumer Action, Financial Counselling Australia and Financial Rights Legal Centre, have as much creditability & knowledge of the broking industry as the Sedgwick report, about zero.
  • Regional broker | 31 Aug 2017, 09:11 AM Agree 0
    I agree with you BB well said
  • Glenn Rowan - Senior Mortgage Planner | 31 Aug 2017, 09:17 AM Agree 1
    The statement made by these consumer groups is majorly untrue!
    We as brokers always do what is right for our clients and finding the right loan isn't black and white, some direct channel lenders pick and choose their loans and this is determined on credit scoring and credit history along with serviceability and conduct.
    The minority of brokers who the consumer groups refer to are minority and should be weeded out and clamped down on, for sure.
    Commission structures don't determine where I place a clients loan nor do most other brokers.
    The commission we receive is for hard work and many hours of admin, meeting with clients and keeping in contact with them and to say we only place a client with the highest commission based lender is a lie.
    I spend hours of unpaid work to find a suitable solution for my clients and whatever commission is paid by the suitable lender, then it's deserved not premeditated.
    The many hours I spend dealing with clients and not always being able to help in the now is a lot of the time, unpaid.
    Would these consumer groups like to go to work and not be paid for their hours worked on a daily basis?
    I bet not!
    Shame to these groups and anyone else who thinks we don't do the right thing by our clients and the commission we deserve and earn, is not warranted!
    • Chris Szigeti | 31 Aug 2017, 09:58 AM Agree 1
      Well said Glenn - if you have heard Peter White of the FBAA presentation you would know that overall us brokers in Australia are paid at quite a lower rate than many countries overseas ie Brokers in the States are paid up to 3 % upfront and no claw back / good to see some common sense
  • Mark L | 31 Aug 2017, 09:19 AM Agree 2
    If Mortgage Brokers are not delivering good outcomes to clients, then why are most of our businesses built from cross referrals from satisfied clients or referrals from other trusted Advisors like Accountants and Financial Planner and why has the percentage of clients using Mortgage Brokers increased significantly over the last decade?

    We complete a full "Needs Analysis" with our clients and recommend products based on their identified needs; not just provide a loan that is "not unsuitable" as is being suggested. Our relationship extends well past the initial loan and these Consumer Groups are clearly ignoring the fact that we are available 24/7 for our clients and review their facilities when fixed rates or intro rates mature, interest only periods mature, regularly promote special offers to clients that may benefit as they are released by Lenders and guide them through regulatory changes that may impact on them like the recent APRA driven investment caps on Lenders. This is why we are paid trail and clients don't pay this, the Lenders do!!!
  • OzBoy | 31 Aug 2017, 09:21 AM Agree 0
    “Advertisements for brokers claim that they will find customers the right loan, provide tailored advice or get a great loan for the client. However, their actual obligation to clients is quite low – brokers are only required to provide credit assistance that is ‘not unsuitable’ for the consumer.”

    Well take it up with ASIC and the law makers, we didn't come up with this and stop blaming us for it. Also interesting to note that the Federal Minister disagrees with their comments and said so this morning via radio....mmm bad timing or just no idea? You decide.
    • SA Broker | 31 Aug 2017, 11:26 AM Agree 0
      The answer is: No idea - never had a good idea and never will.
  • Marty | 31 Aug 2017, 09:25 AM Agree 1
    20 years working for the big 4, 1 year working as a broker.
    Over 150 different loan options on my book and growing. The lowest rate offered as a broker is 3.49% as a Bank lender 3.79%
    As a Bank lender 90% application approval rate as a Broker 99% approval rate
    I have never written a loan more than what the customer needs or can afford nor have I written a loan based on commission payment.
    There are sharks in the broker space though I guarantee you there are more Sharks working directly for the bank.
    A broker knows he can have a lean month though there is always next month.
    A Bank lender must deliver a monthly/Quaterly target or they are managed out.
    Despite the banks removing incentive payments for their staff based on sales All Bank lenders are measured first on settlement volumes (usually around $5,000,000 per month) as a broker I can live on settlement volumes around $2,000,000 per month

    End result I spend more time with my clients, I am available 24/7 and I work on relationships not $$$
    • Gold Coast Broker | 31 Aug 2017, 12:49 PM Agree 0
      well said Marty. I agree with you, I too worked for a big 4, then i saw the light and became a broker. I can put hand on heart and say i have never written a loan for larger commissions, we get paid what we get paid sometime s for no money when we see clients just to make sure all is well with the loan we originally structured and that the clients are happy. These consumer groups need to pull their heads out of the sand instead of sticking their arses in the air, and trying to make everyone believe their bullshit.
  • Dean Lyons | 31 Aug 2017, 09:25 AM Agree 1
    Why don't we say it how it is - The BIG 4 banks are inquiring into the way brokers do business under the guise of Treasury. Maybe we should be having a Royal Commission into the Government.

    Firstly lets point out the article should read..some brokers! The majority of brokers including me, do the research go through the process with a fine tooth comb before suggesting anything to the client.

    I review the market daily...DAILY, I read all my emails from all the lenders so I am more up to speed with the market thatyn any BIG bank lender would ever be they are too busy filling out stat reports, to hand to the fat cat managers.

    Everyone should go buy a copy of 1984 and read it, that is the blue print to where we are heading and we are all letting it happen.

    Corruption starts and finishes with the Government and the BIG Banks and all these so called watch dogs are set up by either the Government and the BIG Banks.

    Of course they want to make the broker industry a non profitable industry for those that work in it, that feeds back into the hands of the BIG Banks and away we go again.

    ANGRY is not the word that describes how I feel about what is going on right now.

    I have nothing to hide as a broker I am in the industry because I saw first hand working for the Commonwealth Bank how they deal with clients.

    • Gold Coast Brokers | 31 Aug 2017, 12:54 PM Agree 0
      I agree Dean Lyons, i too worked for the BIG 4 and saw also how they treat customers. If we let this continue we will become a statistic, then what will happen the banks will keep hiking interest rates and the consumers will just have to bend over and take it as they will not have brokers to turn too.
  • Tony | 31 Aug 2017, 09:26 AM Agree 2
    I don't know why I waste my time in reading what Consumer Groups Say...........they clearly have their own agenda.
    Brokers achieve great outcomes for clients...........that's our JOB !
  • lex | 31 Aug 2017, 09:26 AM Agree 1
    It is incredibly unclear what service is being delivered,” they said. I would suggest these consumer groups come under this statement. Ignorant, misinformed & wouldn't have a clue about personal interaction. Is ongoing advice & problem solving enough evidence of why trail commission is paid?
  • Parker Finance | 31 Aug 2017, 09:26 AM Agree 2
    I used to respect Choice as an unbiased research body. It seems now they have become a political organisation and appear to act as a paid pen! I fail to see how a customer walking into a bank is better off with single set of products as opposed to using their broker to assess the entire market of products. A good broker will always advise the client as to what products are available and the customer should ask the right questions.

    Knowing what I know as a customer and a broker, where possible, I would avoid using the major banks. To suggest the savings are small between non-bank and banks is simply ridiculous. I am regularly saving refinance clients 0.5% to 1%pa in interest rates. Those savings can pay for an annual holiday for some or simply reduce cash flow pressure or allow their home loan to be paid off sooner.

    At the end of the day it is a market. Regulations, even with good intent, generally increase the costs to the consumer. The very name 'CHOICE' suggests there should be a market with competition. To make brokers less competitive only plays into the hands of the major banks and without a competitive market the prices will rise.
    • The train has gone | 31 Aug 2017, 07:00 PM Agree 0
      Well said.

      Why don't they provide the assumptions behind their recommendations?

      They don't quite understand how far the dial has moved to the need for more brokers as complexity and need for "choice" has never been more. The train left ages ago!
  • Clinton Waters | 31 Aug 2017, 09:27 AM Agree 2
    Unbelievable that consumer groups can get their facts so wrong - a client walking in of the street or trying to compare one bank vs another based on price, structure and policy is near impossible. Sure brokers cannot access the entire market but delivering our service is not without significant overheads and risk. The recent ASIC report processed an incredible amount of data that states otherwise - then a joint statement from a couple of consumer groups gets this sort of oxygen. They should stick to recommending which dishwasher we should buy next. I shake my head....
  • Ken | 31 Aug 2017, 09:31 AM Agree 2
    Ignorant statements by mis-informed people who simply do not understand the role brokers pay. The lowest rate may not result in the most appropriate loan for the client and may provide a worse outcome.
  • Just sayin | 31 Aug 2017, 09:36 AM Agree 0
    Just because commissions are removed the banks will not lower interest rates. They will keep the profit. Then clients will have to pay for a broker and be stuck with the same rate. Where is the client benefit? Look at the example of how the Insurers screwed financial planners. Insurance premiums haven't dropped. Just another agenda from the banks to reduce costs and increase profit. The rest of the arguments are just fluff around the outside.
  • Di | 31 Aug 2017, 09:47 AM Agree 0
    These comments clearly demonstrate the lack of knowledge by these groups of what a Broker even does. We have a huge diversity of clients with many different personal circumstances affecting their ability in many cases to even get finance with their own bank. Without our extensive knowledge & expertise of the lending policies of the various Lenders many people simply would not get finance.It is always our first priority to match the needs & circumstances of our client with the best Lender for them, which involves many considerations other than just rate. The comment that Brokers place a loan where they get the best Commission is getting tiresome & quite frankly is an insult. I don't know a Broker who even gives this a thought. There is barely any difference in commission rates now anyway & with the current complexity of lending we often only have the choice of a handful of Lenders from our 30 odd panel to choose from for any given deal. As for the Trail - come & sit with me for a day and see how much time I spend doing ongoing maintenance for clients & negotiating rates that saves them thousands of dollars !
  • MATT | 31 Aug 2017, 10:03 AM Agree 0
    And Choice understands broking how? Proven to be unethical. The people have voted with their feet, over 50% of loans are originated through brokers. Professional services require payment, nobody works for free, why do we keep giving this group air?
  • Angry broker | 31 Aug 2017, 10:19 AM Agree 0
    What a load of garbage. Anyone who may have dealt with a broker and then a bank branch can clearly tell the difference. This bashing of brokers who work long and hard to build and then maintain a long term relationship with their customers is now out of control. Choice have no idea of what a broker does and how they do it! If these consumer groups took the time to understand the world of the broker then they would certainly think very differently. Brokers are here to stay and the growth of the broker based business to over 52% of loans being originated, coming from brokers just proves it.
  • Incognito | 31 Aug 2017, 10:37 AM Agree 0
    Compressing 30 years into a lump sum approval - IN TIME FOR AN AUCTION - is not like choosing a washing machine.

    I respect Choice. I'm pro consumer. As a broker we get the best rates, fees, features and timing we can.

    Remember the timing element Choice. We know what we're doing.
  • Elisa | 31 Aug 2017, 10:42 AM Agree 0
    Yes I admit I do use a series of "preferred lenders" for the majority of my clients loans. This is for one very simple reason my clients come mainly from one source, they have very specific income structures and I use the lenders that understand and can appropriately deal with those structures.

    The idea they have that the "best product" is automatically the cheapest rate shows they do not care about the long term benefits, plans or real needs of the client, rate is often the last things we look at!

    As for trail not providing ongoing benefit to the client because the broker has no real incentive to take care of the client? Most brokers that I know these days take an active ongoing interest in their clients and how they are progressing with their loan(s), investment plans, and personal lives (we were lucky enough to see how one of our clients welcomed a new member into the family just recently).

    CHOICE are simply showing their very uneducated and narrow view of the mortgage industry and should pipe down.
  • Marcus | 31 Aug 2017, 12:16 PM Agree 0
    Ignorant fools!!! Be very careful what you wish for because the Major Banks will have a field day if you get your way and your constituency will be screwed because of your actions.
  • Back to the 90's | 31 Aug 2017, 02:42 PM Agree 0
    What is the suggested hourly rate taking into account rent, staff, wages, holiday, super, motor vehicle costs, licences, training, maternity/paternity leave, stationery, technology and incentive to justify to the family why your not at the meal table or bedtime? Who pays that, remembering the broker has to pay all this bills before they get paid?

    Is the premise that the consumer will get a cheaper rate if they start to pay fees?

    What impact would this have on regional Australia having access to finance? Is that a good consumer outcome?

    Margins were 4% in the 90's. They are now something like 2% and the clients costs are paid out of that by the lenders.

    Brokers are good for competition and anything to dilute that, such as a half baked, burr in the saddle against brokers, is bad for consumers.
  • Dave the broker | 01 Sep 2017, 08:39 AM Agree 0
    We have been in business for near on five years. We have in excess of 500 customers. We have 2 loans in arrears.

    But apparently we don't do research, or act in our clients best interests.

    There have been deals that we have refused to write that local banks have written. We know that some of these are in arrears.

    But apparently bank employed lenders do research and act in their clients best interests.

    Confusing isn't it, this having your clients best interests in mind?
  • Garry C | 01 Sep 2017, 09:01 AM Agree 0
    Maybe its time to start legal action against their lies. They are not proving what they are saying. They have their own agenda and its time they were stopped
  • Marcus | 01 Sep 2017, 09:09 AM Agree 0
    One needs to remember a number of years ago Choice's foray into the finance industry with their "one Big Switch" campaign. Is there an agenda here and are they conflicted in their intent???? Credibility zilch!!!!
  • Country Broker | 01 Sep 2017, 09:31 AM Agree 0
    I cannot believe anything that come out of Choice at all ( you have to pay an annual subscription to belong to them) , they to me are conflicted in everyway and have been since that advocated refinancing your mortgage in a campaign they ran and they were using an on line group who had trouble with their licence , their research is narrow and convoluted and cannot substantiate their claims , the other contributors are groups who see and hear from consumers who have a problem , they must be a very narrow sample as the arrears percentage is 1.5% for all home loans and the banks are now acknowledging that broker sourced loan arrears are the same as their direct loans. So where is the problem ?? The Broker , the lender or the Consumer.
    Do they realise we are obligated by law to research the clients needs , and they want me to do that for no reward!!
    If commissions are altered (except for Volume incentives) , the competition for loans from the lenders will be less and the big 4 will have a picnic , I can see rates rising !!! not dropping .
    The other problem with their assertions is that there is no acknowledgment that a borrower does not pay us it comes out of bank margins ( as a shareholder in the Majors I am more that happy with my dividends) , BUT rates are as competitive for a broker sourced loan as they are for a directly written loan, cam Chris Godfrey answer that ??
  • | 01 Sep 2017, 09:40 AM Agree 0
    https://www.choice.com.au/contact-choice Contact Choice directly
  • Bris Broker | 01 Sep 2017, 09:52 AM Agree 1
    If Choice think all brokers should get the same amount, a flat fee, for all loans - then they would agree that all employees at Choice should receive the same salary. Surely, if you have a desk, a phone and some files on it then the same pay would be suitable. I suggest Choice implement their own recommendations in house before making comments on others.
  • Rachelle Eyndhoven | 02 Sep 2017, 09:09 AM Agree 0
    Every quarter I review my entire book to see if I can reduce clients rate with the lender we out there with. I have a staff member dedicated to this role using my trail commission income. Last financial year we reduced rates that had crept up by all 4 major banks either by threatening to move the client or by using the current offers they have for "new business" only.
    In my time as a Manager for a big 4 bank I was told to contact my clients only for cross sell. I was once reprimanded for advising a client they could get a better rate than we had them on as they did not initiate the conversation I was "reducing the profitability of my branch revenue". local brokers were getting better rates for new to bank clients than I could get for long term customers.
    I opened my business, walking alway from a six figure salary and risking my family home paying staff and rent as I have a belief in what I do every day. We represent choice to the consumer. It is not just about rate.... it's about the clients needs and sometimes that is a quick approval or using a form on income the others don't take. We are not governed my profitability of a big bank. My name in my community is the back bone of my business. My staff, ex bankers feel relief without having threat of dismissal for nit selling some pensioner a credit card or meeting their insurance quota for the month.
    I can't help but feel this is a push to reduce competition.
    Yes, I am sure our industry has some short term players in it for the money not long term relationships. With a two year claw back (yes if a client moves banks within 2 years I did all that work for free) they just don't last. Clients are savvy, people refer to brokers that do the right thing. If any spot light is needed in the Home Loan industry it is at Home Loan lender level in the branch. I don't blame them as individuals for pushing, I've been the Manager that had to fire them or "Manage them out" if they did not only meet Home Loan quota but also "Cross Sell Quota".
    • One Direction | 04 Sep 2017, 07:50 PM Agree 0
      This is why the % of broker loans continues to rise. The above speaks for itself and can choice respond as to how the client would be better off by putting limits on what the Banks pay. Would the hourly rate or fee per loan they suggest cover the staff cost for negotiating the lower rates?

      ASIC findings were confirming the above and could not conclude anything other than brokers were good for competition. The ABA panicked and paid for their own report to provide wriggle room, however its discredited due to lack of source data.

      The technical skills, need for options (tools) to service a consumer or small business client are more than ever and how an organisation like choice is so far removed from this does ask the question on several fronts?

      Well done Rachelle, that is what we are talking about!

    • Banker | 21 Nov 2017, 05:16 PM Agree 0
      Great Response Rachelle, congratulations on your business success.
  • Melbourne Broker | 02 Sep 2017, 09:43 AM Agree 0
    Sorry to be negative but Commissions will be change in a huge way and this is to build the publics support from the ASIC PR machine so it forces the politicians to say YES when it needs there approval. MFAA , FBAA and the rest need to build a BIGGER PR campaign now and state that the only people that will benefit are the banks and WHY which is where a lot of ex asic staff go to. ASIC's Chairman was an Investment Banker for 30 years before taking over ASIC and where do you think he will go when his time is up or consultant to ?? Peter Kell deputy Chairman was CEO of CHOICE before his roll at ASIC. ASIC do not want middle men and women making commission from the sale of financial products and instead a flat fee for services which in turn will make the provider (bank or lender ) make more on each loan due to increase base rates. This will be GOOD LENDERS OUTCOMES Not Consumer .....
  • GS | 02 Sep 2017, 10:45 AM Agree 0
    Scary that a consumer advocate thinks customers are better off dealing with lenders themselves - because banks have such a great track record of looking out for the customer's best financial interests! Goes to show how out of touch these advocates are with their own audience.
  • Broke Broker | 02 Sep 2017, 12:22 PM Agree 0
    Are these really consumer groups or puppets with their own agenda ? A narrow minded view of how valuable majority of Brokers services is to the consumer. These so called consumer groups use of words mask the fact only a small minority of brokers may not provide better customer outcomes. Of these it is the almost level playing field of Major Banks that makes the case of lack of real competition. Only Brokers can ruffle through the smoke and mirrors to get the best fit for clients. The consumer groups are actually pushing for less competition and therefore more 'unsuitable' options for clients. Absolute disgrace from these self-centred lobby groups.
  • Marty McDonald | 02 Sep 2017, 01:24 PM Agree 0
    The consumer groups objections around why we get trail misses the point. Yes we service existing customers often for no income (besides trail) but that's secondary.

    Foremost it's a delayed payment mechanism. No one knows how long each loan will be in existence for so paying trail both protects the lender from paying too much upfront and rewards a loan that goes for a long time. It's the most efficient way for brokers and lenders incentives to align.

    It also just so happens to align with good consumer outcomes because it enables brokers to become less transactional and relationship focussed.

    Choice et al have clearly never used a good broker themselves. They are probably renters or living at home with their moms.
  • Keith Bridges | 02 Sep 2017, 04:53 PM Agree 0
    Totally agree 💡
  • Andrew | 03 Sep 2017, 02:05 AM Agree 0
    Hey there consumer groups!
    You say that we may not offer a diverse range of options to clients.
    Bank employees can NEVER do that, even if he/she wants to, as they sell a single brand!
    Start with fixing that which we know is wrong for consumers if you are true consumer protection warriors!
  • Peter P | 25 Sep 2017, 07:46 PM Agree 0
    When a consumer goes to the bank they have a choice of one, at least the broker has a choice. How many times has a customer gone to the lender and actually got the best loan for them or no loan at all. Commission - here we go again, written by people that have no understanding about relationships. It is very easy to comment that brokers are influenced by commission, if you believe that then you don't understand the importance of customer relationships. Every happy client who refers is more important than a few dollars. A broker does not need to make sales quotas like a bank employee does. When does a bank employee get sacked if a customer complains, as a broker if I am found to do anything in the slightest to be considered wrong my license is gone and so is my business. For CHOICE to write some an uninformed report I have decided to cancel my membership with them.
  • Broker growth | 26 Sep 2017, 10:02 PM Agree 0
    We only ever see a throw away blanket statement and never any detail, assumptions or facts behind why they feel the way they do.

    Will the consumer be better off without brokers? That is the question that needs to be asked, and, answered by the consumer groups. Someone need to take them, the UBS's, ABA, sedgwichs etc etc to task and ask the hard question.

    No one can escape the fact that the broker offers choice and that ASIC found brokers are good for competition. Supporting this is the % of new home loans originated by brokers continues to rise.

    We are well past the tipping point for consumer home loans and it seems the only lever everyone wants to position and pull is to cut commissions, for the benefit of the ...... master.

    Business clients, are too gravitating to brokers and the volumes continue to increase.

    Only see growth in the broker space.
  • Banker | 29 Sep 2017, 02:39 PM Agree 0
    Choice seem to not realise here that the cheapest rate and the best loan to suit the customer's needs are different things.
  • Better Broking | 05 Oct 2017, 04:14 PM Agree 0
    Wow. What a bunch of parochial responses. Barely a reflective sigh. The report mentioned "some" brokers - not "all" brokers". The call for a higher standard is obviously warranted - the current one is laughable. For so many here to suggest that there are no unscrupulous brokers who are not motivated by commission is farcical. Like financial planning, the broking industry has plenty of these types. This submission is not just by Choice either. It is by legal bodies who investigate the loans that many unfortunate people were recommended by bad brokers. It is about improving the industry, not destroying it. If you don't support moves to reduce the number of cowboys then you are part of the problem.
    • Rob | 19 Oct 2017, 05:16 PM Agree 0
      Sadly I have to agree and would like to add that the professionalism of the industry is sorely lacking. I became a broker 4 years ago after 30 years in other industries, sales and IT. With only 2 weeks of self study on the internet I had a diploma in finance broking. How many other industries can you secure a diploma in just 2 weeks? Ongoing membership of professional orgs (MFAA & FBAA) just requires CPD points and no or limited demonstration of competency. l have now written around $70M of loans and feel that I am now a pretty good broker, but maintaining competency is not just about CPD. I believe we need to be writing loans to remain competent. I have come across many brokers who have been in the industry for many years with significant loan books who write maybe 1 or 2 loans per month. They cannot remain up to speed across multiple lenders if they are not writing new business. I believe it is time the FBAA and the MFAA introduced a minimum loan volume in order to retain membership status.
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