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Commissions incentives 'muddy the waters'

As the debate around commissions incentives heats up, Australian Broker talks to Tanya Sale of Outsource Financial for her opinions. 

Video transcript below:

Reporter:  The ongoing debate around commissions incentives has heated up recently.  Tanya Sale of Outsource Financial believes it’s a slippery slope.

Tanya Sale, Outsource Financial
Tanya Sale:  
There’s been a lot of things written in the media lately in regard to the commissions incentives that the banks or certain banks are offering.  My opinions are widely known within the industry.  I have been quite vocal and out there in relation to the commission incentives being offered by certain vendors in the marketplace.  

I think it really muddies the waters in our industry.  We don’t want to go down the path that happened with the [wrong side] the financial planning side, when all these incentives started coming in and planners were, were I am not saying all planners, but planners who are looking at the incentive rather than may be the product or the correct service for their clientele.

Reporter:  Sale says the danger for her is the power of incentives to tempt brokers back to lenders they previously stayed away from.

Tanya Sale:  The danger is, someone that hasn’t written lender A for two years, because they got so peeved off that lender A did something two years ago, they are not going write with you again.  Lender A comes out and goes, oh we are going to give you an incentive now, we are going to increase the upfront or maybe both increase the upfront and trail for a period of time.  And all of a sudden that mortgage writer goes hmm, this looks pretty good and starts writing lender A’s product again.

I am saying that muddies the water.  If they didn’t write it for two years, then why of a sudden are they writing it now and they can say all they like, oh it was because it’s a great product and everything like that.  I say that’s you know in a lot of cases that’s absolute rubbish.  They are writing it because they are going to get more money, they shouldn’t even be looking at the commission, they should be looking at which product and the benefits available, the features available that suit their client.

Reporter:  Sale believes that if any incentives are going to be offered, it really should be to the customer. 

Tanya Sale:  I am a great believer, if there’s going to be an incentive from a lender, it should be passed back through to the client, the consumer. It’s fantastic offering incentives to our industry and to the mortgage writers, but why not offer waiving of the application fee, I don’t know if sometimes there is a valuation fee involved, maybe better interest rate, that way or you know pricing of the interest rate for that, for the third party sector instead of saying to the writers we are going to give you more money.  

This is where the danger is.  So the lenders aren’t helping in my eyes with what they are doing.  Grey area comes in and that’s what I am talking about in regard to commissions and incentives.  I am a great fan of incentives, but incentives that are going to lead straight back to the consumer, not necessarily the mortgage writer.