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Final Sedgwick report released

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Australian Broker | 19 Apr 2017, 10:34 AM Agree 0
The final report following a review on retail banking remuneration has been released with 21 recommendations for change
  • None the wiser | 19 Apr 2017, 11:23 AM Agree 0
    Lots of tip, not much iceberg.

    Can someone translate this into anything useful?
  • Ex Banker | 19 Apr 2017, 12:32 PM Agree 0
    Of course the Banks will follow the recommendation - will mean less money to be paid to their over-worked staff and add add to their bottom line. A win win for the banks and the pay lip service that they care.
  • Chris C | 19 Apr 2017, 01:45 PM Agree 0
    "A holistic approach ............. and remuneration of third party channels such as mortgage brokers" (suggest this also includes Accountants Solicitors Agents Developers etc) "as each determines for its own staff. “In my view, any changes, however, must preserve competition and the viability of that industry.”

    Does this also mean that those Banks will have to amend their commissions paid to reflect a fairer footing for their 'Referrers' who receive up to 0.66% per deal with no clawback for just a referral with no or very nominal time and cost incurred by the referrer ie the bank does all the work, compared to Brokers whom they pay 0.55% and sometimes a trail before all our business costs, paper, travel and submission time etc. as to compare a Broker who may get 0.1% to 0.2% profit out of an average sized deal to a referrers' 0.6% suggests that Brokers are grossly underpaid and the banks clearly know and acknowledge this. If it were to continue, does this mean that Brokers will just take up referrer positions, forego all the costs and start earning what we should ie. the banks meantime kill off the competition and viability of the broker .......and then stop referrer payments = a big win to banks again and less competition and choice for the consumer.
    • Matt | 20 Apr 2017, 11:39 AM Agree 0
      You raise a good point about introducers/referrers. It is covered under recommendation 20 the report but will be up to the banks at this stage if they make changes. The report notes: Given the limited work undertaken by Introducers and Referrers compared to Mortgage Brokers, the upfront commission paid to them for a successful ‘sale’ appears to be disproportionately high in comparison to Mortgage Brokers and Aggregators. Introducers and Referrers may legally provide only limited support to their clients, for example. This is a matter for the commercial judgement of the relevant banks.
      Recommendation 20 is:

      'In respect of Introducers and Referrers:
      a. Banks examine their governance of these arrangements to ensure that existing practices are appropriate; and
      b. ASIC, in due course, investigate whether the upfront commission paid to Introducers and Referrers is justified'
  • Fish and Chips | 19 Apr 2017, 08:35 PM Agree 0
    We cannot lose sight of who commissioned the report (ABA) and that they most likely paid a fee to the writer. In effect its hard to think of any business that sells itself as having great products and services, that makes the owners (shareholders) money, but the value creators now are pulled back to the field of the plodders that are nice people, earn more because they service without revenue??

    ASIC has a far wider range and depth and should discount the ABA report as far as brokers are concerned. The industry cut commission by 30% /- after the GFC on the back of perceived fear only to see the Banks profits march on unabated. Throwing $1200-$1500 to new clients who refinance without $0.01c extra to the broker today is clear evidence the consumer wins.

    The elephant in the room is the profitability of the Banks. Cutting mum and dads Bank staff bonuses, the fragmented industry of brokers (who are mum and dads) will simply reduce the hourly rate for .... the enrichment of the Banks.

    Anyway, the Banks are disrupting themselves and we need them to hold the customers until we can get to them and deliver a better solution then the same ... fish and chips.

  • Rob | 20 Apr 2017, 10:56 AM Agree 0
    What these people do not seem to appreciate is that without the recommendation of the broker, they would not get ANY of the clients we send them. As with a client's accountant and solicitor, they also trust their broker's recommendation as to which lender to deal with.
    Of course, the deal must be competitive, but so many other factors besides rates and fees determine which lender a good broker will recommend to his/her client, such as turnaround time for an approval, loan servicing guidelines and borrowing capacity,paperwork required.
    As an example, one bank recently advertised a very competitive interest rate of 3.79%, perhaps around 25 bps lower than similar products elsewhere. Looks good on the TV ads! Only trouble was that from the time an application was submitted they were tellING us brokers that a deal would not even be looked at for around 21 working days from submission. What good is that to a client who has had an offer accepted on a property and needs to exchange contracts within a week or so?
    Regarding flat fees for a loan, nice try by the banks there. If I send them 1 loan of $1,000,000 and another broker sends 1 loan of $250,000,the bank makes 4 times as much from the higher loan, and processing costs are no different, yet want to pay a flat fee for each?
    See how that goes for you if you bring that will be like the old days when Westpac decided they don't need brokers, then after their volumes plummeted they came back begging us for business.
  • Amazon | 20 Apr 2017, 10:25 PM Agree 0
    Your right on the money here.

    Imagine if Amazon.... opened a broker channel.
  • Brado | 22 Apr 2017, 10:30 AM Agree 0
    I think as an industry, we brokers need to implement boycots on any lender that tries to cut commissions. If all 17000 of us do it at once, they will very quickly change their stance!
  • Clawbacks | 01 May 2017, 10:55 PM Agree 0
    The core problem with the ABA report is that is was commissioned by Banks. Its a conflict.

    The ASIC Enquiry was not going to plan as lenders were growing market share that were paying less, and have a higher cost of living hurdle, all blue.

    Commission is not a bad thing when the introducers have no control to flex like car finance comms we have seen.

    The Sedgwich report would have better resonated with brokers if it looked at clawbacks.
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