Two prominent figures in the Australian mortgage industry have reacted to a new platform that claims to reward borrowers with an upfront commission for completing their entire loan process online.
Paul Francis, Heritage Bank’s general manager of retail services, told The Adviser he was originally unaware that Hero BroKer had listed the bank as a lending partner on its website, and said that Heritage has no direct agreement with the platform.
“Following a short phone conversation with the founder, my understanding is that Hero BroKer is aggregating under AFG, so the customers will use the platform to collect information themselves, and then somehow that will be processed through AFG,” he said.
“If we receive any business from Hero BroKer via AFG, we would expect to see it in the format that we normally would through our broker channel, so we’d expect to receive all the relevant documentation and so on.
“I still didn’t come out of the conversation with a clear idea of what the business model is, but it actually sounds a bit like the Refund Home Loans model that was around a few years ago.”
Mr Francis does not think Hero BroKer will significantly impact the third-party channel in the near future, but it has the potential to do so further down the track.
“There will be more of these types of operations that will be banking on the fact that this continued move to the digital age will become prevalent in this part of financial services,” he said.
“The reality is that for all the talk of digital disruption, a bit over 50 per cent of home loans are originated by brokers.”
According to founder Clint Howen, one of the unique aspects of Hero BroKer is that borrowers are rewarded for doing most of the legwork in finding the right loan by being paid the same upfront commission that a broker would receive from a lender, while Hero BroKer takes the trail as well as the administration fee.
“It’s a huge incentive for borrowers to research and apply for a loan themselves,” he told The Adviser.
However, Connective director Mark Haron said the platform may change customers’ behaviour by letting them choose a lender based on what their commission rates will be.
“It could make them biased for their own advantage, but it could sway borrowers who don’t have a lot of knowledge of and experience in lending products to select one that isn’t appropriate for them based on the commission they’ll be getting paid,” he said.
Nathan Daniell, director of Perth brokerage Simplify Your Mortgage, questioned the profitability of Hero BroKer.
"What Mr Howen has created is a lead generation website and he will need a lot of volume before he can really make some money, seeing as he is giving away his upfront commission," he said.
"When you chase volume on thin margins, there is always something that has to give, and unfortunately a lot of the time it is service, which is why consumers seek out good mortgage brokers."
Many of The Adviser's readers were quick to dismiss HeroBroKer as a legitimate threat to the third-party channel when the news broke last week, describing it as “just another ‘pie in the sky’ idea” and “opening a new platform for fraud [with] no consumer protection at all”.
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