The general manager of third-party distribution at Bankwest has said that he welcomes broker feedback on the bank’s recent commission changes, adding that some aspects of the changes are “open to review”.
Last week, Bankwest brought in changes to broker remuneration relating to the adoption of the Combined Industry Forum (CIF) recommendations.
Speaking to The Adviser following the commission changes, Bankwest’s general manager of third-party distribution, Ian Rakhit, said: “We had one opportunity on our project plan to make changes to our commission model in line with CIF and that also allowed us to reintroduce Year 1 trail which we have done for settlements from 1 July.
“Knowing that [the] CIF required all lenders to have net of offset in by December, our view was that as we had the proverbial hood up on the car, let’s do both changes at the same time — so we did Year 1 trail and net of offset at the same time.”
As such, Bankwest has become the second lender to update its broker commission (after Macquarie made changes earlier this year) and has announced that settlements from 1 July 2018 will receive an upfront commission of 0.7 of a percentage point on the value of the loan limit disbursed (utilised by the customer) minus the value of any offset account balances (excepting construction and equity loans).
A review period will be introduced six months after settlement has occurred. This will assess the value of the limit disbursed (utilised by the customer) minus the value of any offset account balances.
If this figure changes by more than $100,000 from the initial upfront commission calculation, then changes may be applied. For example, where the reassessed value of the loan is higher by more than $100,000 than at disbursal, then the bank will pay a commission top-up. Where the reassessed value is lower by more than $100,000 than at disbursal, then the bank will claw back the difference in commission already paid.
The loan balance net offset at the review period is being calculated using the highest average monthly loan balance minus the average daily offset balance.
Meanwhile, trail commission for Year 1, 2 and 3 will be 0.15 of a percentage point, ramping up to 0.2 of a percentage point in Years 4, 5 and beyond.
“Absolutely open to further discussions”
Mr Rakhit elaborated: “If you apply and are approved for $1 million but only need to draw down $800,000 initially (because you might be keeping the remaining $200,000 for furnishings or an extension or sometimes even as a rainy day) because we have physically lent you $800,000, we will pay the broker 0.7 [of a percentage point] on the $800,000.
“If the remaining $200,000 is used the first six months, then 0.7 [of a percentage point] will be paid at the end of the six months on whatever is used. So, if all $200,000 is used, then it will be paid on that. That is if you do it as a redraw.”
Mr Rakhit continued: “If the customer says to us, however, that they will settle the $800,000 now and then come back to us for a top-up — let’s say in month three — then we can pay the broker the top-up of 0.7 [of a percentage point] immediately.”
The GM of third party said that the bank believed the six-month review was a “reasonable time frame” and that the whole premise of the change centred on “the customer repays to the bank and the bank pays the broker for the introduction”.
He added that should a customer draw the money in month seven, then the upfront commission could still be paid, but that would be done under the bank’s discretion rather than as an automated payment.
However, this would not apply to offset.
“What we’ve been able to do is we can check the daily balance of the offset account during that six months and we will then make an assessment at the end of the six months of the average daily balance of the offset,” Mr Rakhit said.
“If the offset balance of the daily average balance has moved than more than $100,000, then we will make a clawback.”
Mr Rakhit told The Adviser that some aspects of the changes were “open to review”.
He said that as other lenders announce their changes, it will give Bankwest a way to understand how they have “looked at the guard rails”.
“As the other lenders come up with their equivalent changes, I am very open to looking at whether we have done it right and whether it is resulting in the right outcomes for the broker, based upon the customer behaviour.”
Mr Rakhit elaborated: “Being second to market means you put in place what you believe to be the right guard rails, but I’m very open to see how others will approach it.”
For example, Mr Rakhit noted that Macquarie had put in place a limit of $50,000 in six months, but that Bankwest had chosen the $100,000 limit in six months.
“If everyone else does $50,000 in six months, then it would be open to review,” Mr Rakhit said.
“If the way Bankwest has built its changes is either out of step with others or gives different outcomes that are unintended to our broker partners, then absolutely I am open to further discussions on this.
“But what is not open to review is the Combined Industry Forum recommendations; those have been set in stone.”
Mr Rakhit emphasised that he was “very happy” to be directly contacted should any brokers wish to talk further about the details of the changes (highlighting that his number is available through aggregator software), adding that brokers could also contact their BDM for further discussion.
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