Commission disparity could cause broker conflict

by Julia Corderoy29 Sep 2014
As competition in the mortgage market heats up, lenders are shaking up commission structures in a bid to increase market share. However, one industry pundit has raised concerns over the disparity of commission structures seen in the market today.

This comes on the heels of the Commonwealth Bank announcing last week that it would implement a new commission structure from 1 January 2015 that will see it pay 15bps year one trail for all new settlements.

Mortgage Choice chief executive officer Michael Russell told News Ltd he has never seen such a great variance in upfront commissions paid to brokers.

“The upfront commissions can vary as much as up to 30 points (0.3 per cent), we haven’t that sort of variance ever, that’s a significant variance,’’ he told News Ltd. "The competitors of CBA will look to review their current commission levels and it's a sign of a very strong level of competition.’’

It is this disparity between commission structures that has Russell worried about rogue brokers making decisions for their clients based on kickbacks. 

“If brokers are paid varying levels of commission they are inadvertently, whether they like to admit it or not, placed in a position of conflict,’’ he told News Ltd.

“I would like to think the industry has come far enough ... that we are all focused on what is right for the customers but it’s a comment that is frequently echoed and can’t be denied.”

Mortgage Choice has a policy whereby brokers are paid the same rate of commission regardless of which home loan the customer chooses.