Lender incentives for brokers: good or bad?

Lenders offering rewards and incentives to their top performing brokers does not cause any conflict of interest, according to the CEO of the FBAA



Lenders offering rewards and incentives to their top performing brokers does not cause any conflict of interest, according to the CEO of the FBAA.

Segmentation strategies offered by lenders to their “platinum” brokers was the most divisive question in MPA’s latest “Brokers on Banks” survey, splitting the respondents almost down the middle.

According to the survey, 55% of brokers said that they were not in favour of segmentation strategies, leaving 45% who said that they were. 

While the proponents of segmentation argued that it was simply to reward top and loyal brokers, opponents claimed that it opened the door to a number of problems, including disguising poor service levels for non-premium brokers and discriminating against younger brokers who require more help to get started.

Perhaps the most worrying complaint from brokers, according to the MPA report, is that segmentation strategies can ultimately hurt the consumer by penalising them without their knowledge.

However, Peter White, the chief executive of the FBAA told Australian Broker that offering incentives or rewards to top brokers is fine – incentivising is different to preferential treatment.

“I don’t think it is a bad thing at all. In any industry, top performers are always rewarded,” he said.

“As far as incentivising brokers who are performing better, that’s fine. But I don’t believe in preferential treatment as such, as far as getting better rate opportunities for example. I think that the service levels should be standard across all brokers. Everyone’s loan is important.”

According to White, the difference comes down to what is offered, who it affects and how it is disclosed.

“When it comes down to disadvantaging a borrower, I don’t believe that is right. Just because the broker only gives you half the volume, the client doesn’t get the same level of service – that means the actual outcome has nothing to do with the broker, the outcome is all about the borrower," he told Australian Broker.

“If it is a financial incentive, that is one thing and it needs to be disclosed. But if I am a ‘platinum’ broker with a lender and that means I can get the loan approved in two hours, but with anyone else it is going to take them two weeks, I don’t believe that is correct because you are actually penalising the broker who isn’t a platinum status. All loans should be treated with the same priority, regardless of who they come from. 

“If there is disclosure and it ultimately doesn’t disadvantage the borrower then it is okay. If it disadvantages the borrower, who is an innocent party to this leveraging of platinum brokers or anything else, that is not fair.”

Read the "Brokers on Banks" results in full in MPA's 15.07 issue, on desks this week.

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