Australian Broker forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Clawbacks: 'We are definitely open to discussion'

Notify me of new replies via email
Australian Broker | 25 Mar 2014, 08:24 AM Agree 0
Most lenders are holding their tongues on their justification for clawbacks, but one non-major has said it is willing to discuss change
  • Todd | 25 Mar 2014, 09:06 AM Agree 0
    We are simply the facilitator of the loan. We are paid to put the deal together, not fund the deal. The lender takes on the funding risk, so if the client refi's or sells, they should take that risk on board.
    For ALL lenders, please tell me why it is the Brokers responsibility of risk if a client sells a property? Refi, sure... if we are looking after the client then they should come back to us and the Clawback stops churning, but selling a property can be for many reason totally out of our control.
  • Coast Broker | 25 Mar 2014, 09:19 AM Agree 0
    There has always been a glaring issue with Clawbacks especially when it comes to Lenders that have their own retail lending presence also. We have always been told that it is cheaper for a Lender to pay Brokers commission then what it is to have only employed lenders with the associated costs. So if a loan is repaid within 12 months of funding through their own retail presence does the in house Lender that arranged the finance have to repay part of any bonuses they have received. I would say not. 90% + of my client base are still with the same lender any that are not have been moved after 1 to 2 years with a non conforming lender because I had to clean up their credit issues and have them rebuild a clean credit track record.
  • Bottom Line | 25 Mar 2014, 09:19 AM Agree 0
    "Clawbacks cannot be talked about in isolation as they are intertwined with upfront and trail commission".
    So in other words, we'll cut your upfront and/or trail if you want us to remove clawbacks.......reality check: the industry has already done that. We're paid lower commission rates of commission than we were 7 years ago!
    We were also told that by lodging our deals online etc, and thereby saving the bank money; it would enable them to maintain/increase commission rates. After we adopted online processing, our commission rates dropped by 41%.
    Now ME appear to be proposing a lowering of commission rates in the off chance we get a clawback. The call to abolish, didn't include "cancel one cost, but recover the money from us somewhere else".

  • Vicky | 25 Mar 2014, 09:37 AM Agree 0
    Look honestly, what a lame argument - lenders have to cover their costs if they pay brokers commission and the loan doesn't run long enough!!! how do they recover their costs if the loan is written directly by lending staff? Sack a few more employees??? People get paid for the work they do - it is the peaks and troughs of lending - client's will refinance away regardless of who introduced the loan. I think the majority of comments are quite simple, fair days pay for a fair day's work.
  • Mountains Broker | 25 Mar 2014, 09:45 AM Agree 0
    I agree whole heartedly with "Bottom Line". Our commissions have dropped by 41% yet the banks continue to post record profits year in and year out. You show me one other profession that has copped a 41% pay cut. We are now doing more work for the lenders yet we are getting paid less. Then on top of that if one of our clients repays a loan that has nothing to do with us we have to pay back the commission we were originally paid. So if we want a level playing field the lenders (banks) should be recouping part of their Loans Officer's incomes if one of their client's loans are repaid within a clawback period. We continue to be bashed by the banks. What we should have done when Westpac and CBA first introduced reduced commissions was boycott them altogether. It would have only taken two weeks of getting no broker introduced business for them to realise what a mistake they had made and we would still be getting paid what we were 7 years ago. Shame on you banks!
  • Debbie | 25 Mar 2014, 10:37 AM Agree 0
    Totally agree with all the above comments. Why cant we just be paid fairly for the job we do?
  • SIDBROKER | 25 Mar 2014, 10:46 AM Agree 0
  • Coast Broker | 25 Mar 2014, 10:54 AM Agree 0
    ME Bank? Aren't they part of the union movement? Unions don't like commissions so be careful with anything ME Bank proposes.
  • GC | 25 Mar 2014, 11:20 AM Agree 0
    Here come the unintended consequences in the "new structure". You people do realise you will lose this fight - dont you? Clawbacks a cost of doing business. If you relationship is solid with the client you will invariably win and make more money than the pathetic amounts you people are talking about.
    Just beware - you may get get what you want - at a cost that you didnt want.
  • Incognito | 25 Mar 2014, 11:43 AM Agree 0
    Coast Broker I think you've swallowed the 'Union Movement=bad' line already and it's false.

    We should support member based lenders who compete with huge rent-seeking majors.

    ME Bank has shown their good colours right there today, along with their amazing fixed rate of past few months.
    I need to get accredited with them and start writing ASAP..
  • It's our own fault | 25 Mar 2014, 11:55 AM Agree 0
    I am relatively new to the industry. Although I have seen some gouging, I never received commissions 41% higher than now (sounds nice!). The simple truth is that we should all band together and make a stand, given that our industry bodies won't do it on our behalf (due to their own conflicts of interest). The reality though is that we won't - people have a remarkable capacity to get used to the status quo and once we are, the banks will start their next round of gouging, creating a new status quo. On top of that, there will always be a desperate broker somewhere that can't survive on their existing trail - what are they supposed to do for income during a boycott? That goes without mentioning the potential NCCP fallback of ignoring certain lenders because of the way we are paid.

    The simple truth is that the current state of affairs is our own fault (for accepting status quo and not doing anything about it) and we won't do anything about it (because we don't have the industry body to do it, the collective will to follow through, nor the political clout of the lending industry). Better to just see it as a cost of business and manage it as best we can until enough of us are prepared to be hungry for as long as it takes to change the system.
  • Fed up | 25 Mar 2014, 01:14 PM Agree 0
    What does Saunders mean "What brokers need to understand is the bank’s paying that commission prior to receiving the income from customers. It’s only fair to clawback when banks haven’t received any income.”?
    You are lucky, you only pay us for the work we do by bringing clients to you i.e success rate. Unlike the staff you pay sitting in the office whether they bring in any clients. That i would assume was upfront commission was for. We don't bring clients, we don't get pay, no cost to the lenders. Where in the workforce history do you claw back pays of staff 12 months down the track? Would be nice if we can do the same to the CEOs or the politicians, we might be able to avoid the GFC!
  • Tim H | 25 Mar 2014, 01:22 PM Agree 0
    This Clawback discussion is beginning to worry me. We have brokers crying foul and now lenders saying if you think it isn't fair we'll talk to your aggregators. Industry associations saying they will talk to the lenders about this also and aggregators well just saying nothing. Where is the bulk of an aggregators income, in the upfronts of course. So where will this end. We brokers will be told the system is the best for you and live with it by our aggregators or the lenders will say no clawbacks equals lower commissions.
    Personally I am ok with the system at present although as I have stated previously I like most the Bankwest system of clawback over 18 months with the clawback amount reducing by 1/18th each month.
    Clawbacks have represented less than 2% of my Upfront commission in this current financial year and in the prior financial year they were 4% but after one client re-imbursed me the amount of the clawback on his loan the remaining amount clawed back represented less than 2% of total upfront commission.
    Clawbacks are a cost of doing business in our industry. Check your numbers before bleating louder please.
  • Broker | 25 Mar 2014, 01:34 PM Agree 0
    What a mess parts of this industry are, and no body can or will do anything about it. Brokers are treated like you know what and have no voice whatsoever, not in my 11 years in this industry anyway.
  • Marty MCDonald | 25 Mar 2014, 01:43 PM Agree 0
    Upfront and trail commission is paid by the lenders as a profit sharing arrangement with more upfront due to that being the way it's evolved. The payments we get are NOT for processing loans!!! That's a $25 / hr job. Sourcing clients and providing advice is the $200 / hour activity. Some of you are completely missing this vital point. If you want to earn wages don't be a broker this is a business. Clawback are too heavy and go for too long but they can't disappear althogher. Lenders......What about 18 months and 50% clawback. Then everyone or the Bankwest model.
  • Broker | 25 Mar 2014, 02:07 PM Agree 0
    Best we just accept the status quo and all brokers should just include a clawback clause is their brokers contract. In my opinion you are seriously undervaluing yourself and your profession by not doing so.

    The broker industry has total control over this situation and we should all just make it an industry standard, as I don’t think we will see clients running back to deal with the poor service and general incompetence on offer with the banks.

    Nearly 50% of loan seekers today vote with their feet and use our services and expertise and they will continue to do so even with a clawback clause, remember the public generally have a serious disliking for our banks for all the obvious reasons, which is exactly why the broker industry exists and thrives today.

    Any requesting commission tweaking will only result in the Broker being financially worse off , which is always the banks underlying objective, always has been and always will be , as our banks can generally never be trusted to do the right thing, as greed simply overrides everything, morals included.

  • Bettina Westaway | 25 Mar 2014, 06:48 PM Agree 0
    We are the supplier, that's why we have Recipient Created Tax Invoices. My career was in accounting before becoming a broker so I always found it odd that this industry has RCTI. Really we are the business supplying the product (Customer) therefore my accounting brain has always thought shouldn't we be raising the invoice and applying appropriate across the board standard fee to recover our cost. Odd that a business would have fee charged dictated by the purchaser (Lender). Clawback does not stop churning as it is the other broker/lender that goes after our clients, rightfully the fee charged should have remained as DERF but at a reasonable charge not gouging as some non bank lenders were guilty of. Perhaps the pollies should have looked into the matter further eyes wider open before abolishing DERF.
  • Denise Brailey BFCSA (Inc) | 25 Mar 2014, 09:45 PM Agree 0
    Why should there be any risk to Brokers? They simply gather and present clients for bank. help with filling in forms, cannot give financial advice or strategies (not licensed to do so) and if there are loans approved by the Banks, then Bank pays for the deal and a trail until it falls apart as all of that time Bank is making money. No clawback. Bank takes risk and the responsibility. Look at their real estate holdings to see how wealthy banks are. Its the taking NO RESPONSIBILITY for the APPROVAL of the loan that is causing all the angst for everyone. Simply start by asking the Banks to be reasonable - it may be a new experience for them but if they want market confidence they need to jump on the starting block! Ripping off Brokers and Consumers was never going to be a good look.
  • S.S. | 26 Mar 2014, 11:21 AM Agree 0
    Bottom Line has reduced >41%
    The bottom line reduced from not only by commission cut also you need to consider the other cost increases effecting our cash flow. The following fees/prices increases also need to factor in
    * PI cover
    * COSL
    * CR/Licence
    * Software
    * Rent
    * Electricity
    * Gas
    * Water
    * Living cost etc.
    and other industries are receiving annual CPI for the rising cost and also the last Govt increased the MP's salaries by 30% and we brokers have gone backward. On top of this when we get a claw back it really hurt our cash flow/businesses.

  • Andrew | 26 Mar 2014, 01:26 PM Agree 0
    Exactly along the same lines as Coast Brokers comments, if Bank staff write a home loan and it falls over in a few months time, they are not clawed back in any way shape or form. Its not even monitored! A friend works in this space and he could not give a rats if he knows the loan is going to fall over in the first few months because he is judged on numbers for that month and there is no such thing as clawback to him or any bank staff writing a home loan. What is the difference I ask, why are bank staff exempt form claw back?
  • Positive Broker | 29 Mar 2014, 09:15 PM Agree 0
    I wish Denise Brailey would not comment. At the end of the day we run our own businesses and need to mitigate our own risk. If we hate the banks so much why are we in this business. Not suggesting we should just accept the status quo but we need to stop the whinging!
Post a reply