Portability argument dodging the real issues: Connective

by Amy Rosenfeld13 Feb 2014
Aggregators who claim resistance towards broker trail portability sits with the lenders are simply 'passing the buck', says Connective director Glenn Lees.

Brokers and other aggregators recently took aim at Connective’s offering which gives brokers the ability to take trail commission with them when they change aggregators, saying it was unfeasible because of lender resistance.

“To say it’s not possible is simply not true, even to the point where we have transferred trail to some of those aggregators who say it’s impossible,” says Lees.

By volume, around 70% of lenders will agree to have trail transferred, says Lees.

“What you’re seeing here in some ways is differing views of lenders’ legal departments, essentially. Some see no barriers to this happening and so will do it and others see a barrier and so it doesn’t happen. But the key here is that none of these things are insurmountable.

“Just look at the financial planning industry which, with respect to trailing, is completely analogous.”

It is in fact in lenders’ interests to allow trail portability, as it reduces the likelihood of churn, says Lees.

“If a broker changes aggregator and is unable to transfer their trail there is an inherent incentive for that broker to re-write the loans on their old book to in effect bring them across to their new aggregator.”

Portability removes this incentive, says Lees, and the benefits of a longer loan life and reduced churn will far outweigh the cost involved in transferring trail.

But in order for the issue of trail portability to progress, aggregators need to stop making excuses and address the issue head-on, says Lees.

“It has to start with there being a change in attitude from aggregators to say ‘Yes it’s OK’. Now we’re not even at that point and aggregators are not saying whether it should or shouldn’t happen, they’re just saying it can’t.

“If they start off and say ‘Yes it should be’. Then everything else should follow because aggregators as a group are quite powerful, but it seems that no one actually wants to answer that question.”

The reason why trail portability has not become commonplace in the industry is clear, says Lees.

“Loss of revenue, plain and simple.

“The responses you get are what you’d expect from people who want to maintain the status quo.”

If all aggregators agreed to allow trail portability, the onus would be on the aggregators to ensure they provide quality service, says Lees.

“This whole lack of trail portability is really an argument about retention. Every aggregator should ask themselves ‘Why do my brokers want to leave in the first place?’

“If your brokers don’t want to leave then this whole problem goes away… If you’re at risk of losing that trail book maybe it’ll change the way you behave as an aggregator towards those customers.

“Everyone’s saying it can’t - which is ridiculous - it’s patently incorrect, and it’s dodging the real issue. Our firm position is it absolutely should be allowed, and then retention becomes an issue about quality of service and value of relationships.”


  • by Aarong 13/02/2014 9:30:04 AM

    I agree with Lees in principle. This should become an addressed part of Aggregator agreements, but sweeping rules across the industry wouldn't be fair. You should have trail portability if your aggregator offers it to you in your contract. The issue with sweeping laws for all is that I see, from the aggregators perspective, its a problem for the heavily branded aggregators. Aussie clients call Aussie due to its branding. They may come back to the broker or might come back to Aussie because they feel they have received great service. Who is to say who they attribute the good service to and who captured/kept the client. Lots of clients are loyal Aussie clients and can't even remember the name of their broker. They just call 1313whatever when they need money again. They know the phone huber because its thrown at them in expensive advertising. In this case I would argue that Aussie would be entitled to some of the trail ownership as their branding almost certainly (in nearly every single case) continues to be an influence on the customers decision to stay. A non-branded aggregator, without millions spent on marketing, has brokers who rely on just the brokers reputation. Nobody goes to an independent broker because they are with the Connective Group. They don't even know who Connective is. Therefore, Connective shouldn't even be asking to own the trail. They didn't pay anything to establish it. Lees is right though, this should be an option that is available if brokers and aggregators agree to this in a contract. Broker trail ownership would stop the shonky aggregators from simply stopping broker's promised 'lifetime' trail when they leave. Portablility of trail shouldn't be shoved down everyones throat as a mandate though. If this becomes well established I know I won't be moving to another aggregator unless they offer this.