By: Jessica Darnbrough
Two years after the majors made the first changes to broker commissions, Citibank has announced it will restructure its own model.
The pressures of the GFC forced most banks to reduce third party commissions back in April 2008.
Citibank was the only bank that chose not to review third party commission, opting instead to slow its lending and maintain profitability by increasing its product pricing.
However, with licensing imminent, the bank has now chosen to restructure its commissions in line with the rest of the industry.
But rather than slashing broker payments, the bank has said it will take a tiered approach to commissions that rewards the top performing brokers.
The bank’s head of distribution and marketing Peter Hayward told The Adviser that from 1 July brokers will be given a score out of 100 that determines their commission payment.
“The scorecard is based at the aggregator level and our BDMs will work with the brokers to improve competency, which will improve the broker's score and commission. This new approach to commissions will not only enhance transparency, but also improve our broker relationships,” Mr Hayward said.
“We think commissions should reward the role of the mortgage broker, and I think our new tiered approach will do just that.”
According to Mr Hayward, Citibank’s top performing brokers will receive an upfront commission payment of 0.65 per cent and 0.15 per cent trail.
Brokers that fall into the bank’s second tier will receive 0.55 per cent upfront commission and 0.15 trail, brokers that fall into the third tier will receive 0.50 per cent upfront commission with a 0.15 per cent trail, while brokers that fail to meet the bank’s general competency requirements will receive 0.3 per cent upfront and no trail.
“This structure does not punish brokers that do not meet certain competency requirements, rather it rewards those that excel,” Mr Hayward said.
“There is no limit to the number of brokers who can be in our elite first tier. 100 per cent of our brokers have the ability to score 100 per cent on the scorecard, in fact, we encourage them to strive towards this.”
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