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Commission increases on the horizon: Hewitt

by Michael Masterman10 minute read

Brokers should expect more commission increases as lenders compete for greater broker market share, according to the head of a leading aggregation group.

After Australian First Mortgage (AFM) announced an increase in trail commissions, Mark Hewitt, general manager of sales and operations at AFG, said he expects more lenders to follow suit as they search for ways to compete for broker business.

“If you look at what a lender has at its disposal in terms of levers to generate market share, they have service, customer’s price- interest rates and they’ve got lender commissions. They are trying a variety of those different things to win market share,” Mr Hewitt said.

“I think we will see more lenders looking at remuneration and seeing how they can amend that to generate more business,” he added.

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While funding remains relatively inexpensive, Mr Hewitt said lenders have margin to work with to increase payments to brokers.

“I think some margin has returned to home lending and that is evident by the fact that they are all very keen to lend. You’re not keen to lend if it’s not profitable, so definitely, I think there is room to see remuneration increase,” he said.

While announcing the changes to AFM commissions, managing director David White also hinted at future interest rate reductions as the lender strives to bolster its competitive position.

“We are always working on improving our program to provide our brokers with the most flexible product range at great rates coupled with our excellent service,” Mr White said.

Along with the commission increase, AFM is offering an alternative commission structure of 0.7 per cent upfront and 0.15 per cent trail, as opposed to 0.5 per cent upfront and 0.25 per cent trail, allowing brokers to choose their remuneration based on their business needs.

Mr White said the move was in response to feedback from AFM’s broker partners.

“Feedback from our brokers was to provide a product with varying commission, without the rate for the client changing,” he said.

Leading broker Ian Simpson from Smartline told The Adviser that while brokers don’t recommend products based on commission alone, the flexibility in remuneration could be a great thing for brokers new to the industry who are trying to build up their businesses.

“It probably has more of an impact for newer entrants into the market,” he said. “Getting more upfront helps them to get their business up and running [with] more income in the immediate future.”

 

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