In a shock announcement, first-year trail commission has been reintroduced by one of the big four banks.
NAB has today announced that it will pay a first-year trail of 15 basis points on all new loans written by brokers from October.
This is part of a major repositioning of the bank, with Homeside HomePlus and Homeside Peak Performance loans to become known as NAB HomePlus and NAB Peak Performance from August 18.
As part of the new incentive, NAB has also restructured its stepped trail, with fifth-year trail to be reduced from 35 basis points to 30 basis points from October.
General manager of broker distribution Steve Kane said the bank was committed to continually evolving its offer for brokers and their clients.
“As well as a clearer proposition through the rebrand, brokers will receive the added benefit of first-year trail,” he said.
NAB’s executive general manager of growth partnerships, Anthony Waldron, said brokers are crucial to the bank’s success.
“The broker channel is integral to NAB’s strategy, and our number one goal is to be the lender of support for brokers,” he said.
“We are continually looking at ways we can improve and will continue to support our brokers with our market-leading products and rates, professional development support and enhanced service capabilities.”
Outsource Financial chief executive Tanya Sale told The Adviser last week that NAB and Commonwealth Bank might reintroduce first-year trail in 2014.
NAB’s move is likely to strike a chord with brokers across the board. The universal reduction of upfront commissions and the removal of first-year trail by some lenders in 2008 was a costly blow to brokers and aggregators.
As profitability in mortgage lending has returned over the past few years, however, speculation has been mounting that a number of banks have been gearing up to increase commissions, with Commonwealth Bank cited as the most likely to move first.
NAB’s dramatic surprise announcement is expected to spark other lenders into action.
Mortgage Choice chief executive Michael Russell was quick to recognise the broader ramifications that NAB’s decision will have for the industry.
“This decision emphasises just how important the third-party distribution channel is to the banks and their businesses,” he said.
“The introduction of first-year trail will also offer brokers a much-needed lift in revenue that they can use to reinvest in their business to further enhance their customer service proposition.”
Mr Russell said he is confident that other lenders will follow suit.
“We have been working with a number of lenders to enhance and tweak their commission structure in a bid to support the growth and evolution of the channel, and it is great that we are finally starting to see dividends from these conversations,” he said.
“I think there are a lot more positive commission movements to come in the weeks and months ahead.”
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