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No link between commissions and recommendations, say brokers

No link between commissions and recommendations, say brokers
Opinion is divided on why lenders have been increasing their commissions, with brokers insistent that it doesn’t influence their decisions.

This has been a big year for commissions, with Suncorp Bank the latest to increase its broker remuneration.

It comes after NAB and Westpac increased commissions earlier in the year, while Commonwealth Bank announced plans to reform its commission structure later this year.

All the brokers The Adviser spoke to stressed that commissions don’t influence their recommendations, although some thought that other brokers might be swayed by payment levels.

HMG Home Loans director Hayley Grant said she focuses solely on her clients’ needs and is not fully aware of which lenders pay what.

However, she added that she knows of brokers who steer business away from lenders that offer less generous terms.

“I sometimes think I’m in the minority of brokers who aren’t influenced by commissions and trail. I think a majority are influenced by it,” she said.

Brisbane Financial Services director Damian Mifsud said he would never make decisions based on commissions because he would lose credibility in front of his clients.

“It probably does influence some people, but the main thing is you’ve got to weigh up the features and benefits of each bank and give the client the information and let them decide.”

Haysman Financial Services co-owner Peter Bieg said he is happy to recommend products with lower commissions when that is in the best interest of his clients.

However, he also said that it would be logical for some brokers to compare commission payments if they had to weigh up several products of equal value.

Mr Bieg said the round of commission increases in 2014 might be because the banks had become more profitable and were in a position to compensate brokers for their increased workloads.

He also told The Adviser the banks might regard commission increases as a way to capture the attention of brokers with large panels.

Assess Financial Services managing director George Kostanski said commissions don’t influence where he sends his business, although he added that he had steered clear of Westpac since the bank reduced commissions during the GFC.

“Overall, when I’m with a client, I don’t think about the commission, I think more about the client and what they want,” he said.

Mr Kostanski said one possible reason lenders might be increasing their commissions could be to stop smaller rivals gaining traction in the third-party channel.

Author: Nick Bendel


  • Hard Working
    Hard Working Friday, 08 August 2014 02:00 Comment Link

    It appears the banks that give the most grief are increasing the commission. Is that because they want to say their sorry for all the pain?
    You could be me all the money in the world but is still try and avoid you.
    It is ultimately what's best for the client based on strategy/policy .

  • Buinessman
    Buinessman Friday, 08 August 2014 01:43 Comment Link

    Hayley I hope you don't run your own business. If you do you should have an intimate understanding of your profit margins and reward for effort. Not knowing this is foolish.

  • Mr
    Mr Friday, 08 August 2014 01:42 Comment Link

    Any brokers who place business purely on the commissions they receive are dillusional. It is a short term gain for a long time loss. My client's are number 1, 2, & 3. I place them where they will get the better deal, be it rate, costs, service, or turnaround. It is all a bout what the client wants. I f you look after your clients, the dollars will look after themselves.

  • Macarthur Broker
    Macarthur Broker Friday, 08 August 2014 01:41 Comment Link

    Speak for yourself Hayley, as a broker you should be ashamed of yourself to say that most brokers are swayed by commissions. I suggest you are in the majority and suggesting otherwise is just poor form.

  • Business Choice
    Business Choice Friday, 08 August 2014 01:39 Comment Link

    When banks reduced the upfront by 20% to 30% and slashed the trail by 30% to 50% I made a business decision to never deal with a banks again...
    They are meant to be my business partners but instead showed an arrogance thinking that brokers would effectively be wiped out...
    So for the last 3 years I have been writing 'white label' & non-bank lender products, all which compare to the banks products.
    The benefits... I get paid a fairer commission, I receive a better service, I get to deal with pro-active credit staff who assist me to write more business but more importantly, my clients receive a lower interest rate...
    Personally I cannot understand why brokers use the banks at all...
    And although the amount of loans written through non-banks is small, the big banks will either drop their rates or increase the broker's income to keep them at a level they are comfortable with.

  • marty
    marty Friday, 08 August 2014 01:39 Comment Link

    I am not embarrassed to choose one lender over another on commissions paid / claw back policy if they have virtually the same offering to the client as is often the case. Usually policy, service levels and relationship with BDM trump a few points in commission or rate to customer regardless anyway.

  • Broker
    Broker Friday, 08 August 2014 01:37 Comment Link

    Due to systemic collusion and price fixing , the vast majority of lenders invariably pay the same so this is not really an issue.

    However having said that , I avoid Westpac like the plague due to their poor GFC behaviour , and I also won’t be a part of Aggregator volume hurdles in order to be paid fair market rates as that is just not fair play to the individual Broker.

  • Scratch
    Scratch Friday, 08 August 2014 01:37 Comment Link

    we get bank "A" who pays .65 and bank "B" who pays .65 plus a volume bonus, and is cheaper rate and virtually same products & similar service...
    You as a broker go to sell your business or get it valued to borrow against - the value of your book and trail get measured. So lower trail can affect your asset value. The guy buying it or the bank lending against it doesnt care that you're a great guy they're looking at your business as an asset or liability to them.
    So to say brokers dont look at that stuff ever... well others sure do.

  • Andrew Hunter
    Andrew Hunter Friday, 08 August 2014 01:36 Comment Link

    Westpac hasn't had one new client from me since they started the commission cuts post GFC.
    I carry a grudge!

  • David
    David Friday, 08 August 2014 01:02 Comment Link

    How lender treats client, when does not value a broker?
    If there are two similar products, and one pays better commission - which one do you feature?!
    If product is poor, and commission lousy,
    do you even mention it to client?(It goes with my first statement!)


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