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Broking boss dismisses channel conflict

by James Mitchell10 minute read
Michael Russell, Broker

The head of a national brokerage says channel conflict is “not a systemic issue” despite rising broker fears that lenders are increasingly targeting their clients.

MoneyQuest boss Michael Russell was adamant that banks do not actively compete with brokers. Mr Russell said that in the last decade during his time as managing director of Choice Aggregation Services and CEO of Mortgage Choice, he intervened in less than “three or four” issues of channel conflict a year.

“Under no circumstances have I witnessed any systemic channel conflict condoned by a lender," Mr Russell told The Adviser. “I just have not witnessed it."

Mr Russell said that there were sometimes “isolated issues,” which he put down to inexperienced retail staff: “It is usually due to the early appointment of a branch manager" who hasn’t been briefed on "how channel conflict is managed", he explained. 

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According to Mr Russell such instances were resolved swiftly by the bank’s third-party channel either by the payment of commission to the broker where a “rogue branch manager had misbehaved,” or in favour of the branch where the broker had “lost the confidence of the client," Mr Russell said.

Mr Russell’s comments are in stark contrast however with the sentiments of most brokers.

The Adviser recently surveyed brokers in response to a complaint from a borrower that a bank retail branch recently tried to refinance them out of their home loan promising ‘a better rate than the broker could offer’.

The survey revealed that 88 per cent of brokers were more concerned about channel conflict than they were 12 months ago. Over 93 per cent of respondents cited the major banks as their biggest concern.

Critically, 78 per cent of brokers said they had lost a client as a result of channel conflict. According to the survey, 47 per cent of brokers claimed they had lost commission through clawback as a result of a client being refinanced by their lender.

But according to Mr Russell brokers can also be at fault.

He said that clients can lose confidence in a broker during the application process, causing them to turn to a branch.

"The main thing is channel conflict is not condoned by the banks," he said. “Sometimes the branch managers do the wrong thing. But guess what? Sometimes it’s our fault — it’s the brokers fault.”

[Related: Brokers losing clients as channel conflict thrives]

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