Mortgage Choice introduces new broker remuneration model

Key features of the new model, which will be offered to all franchisees on an opt-in basis from August 2018, include: 

• an increase in the average commission payout rate on residential lending from 65 per cent to 74 per cent; and a
• a "unique hybrid trail commission structure" which pays the best monthly outcome on either a flow or book basis.

In a statement, the ASX-listed brokerage said the improved remuneration model aims to enable brokers to invest in their businesses as well as help Mortgage Choice to attract new, high quality franchisees and loan writers to the network.

The new remuneration structure, which will be offered to all franchisees on an opt-in basis from August 2018, is designed to reduce income volatility and provide better protection for brokers in the event of a slowing market.

Mortgage Choice CEO Susan Mitchell said all of the broker franchisees are likely to opt-in to the new model as they will be better off financially.

“When we commenced discussions with our franchisees, it was with a view to introducing a remuneration structure that allowed them to earn more so they had the confidence to invest in their business, while still supporting them under a national brand with the services they value including compliance, IT, training, marketing and business planning,” she said.

“Upfront payment rates will be higher and an upper tier has been added which will pay out at 90 per cent on flow. The main increase is in the hybrid trail structure, which we believe is unique in our industry. This structure pays brokers the best outcome on either a flow or book basis, calculated monthly. The flow option will reward franchisees that are growing while the book option provides greater stability to those businesses that are more established. Wider trail tiers ensure brokers are better protected when markets are less buoyant or they are investing in their business,” she continued.

To partially offset the impact of a higher average payout rate to franchisees, Mortgage Choice has reportedly initiated a program to improve operating efficiencies across its business. It is changing the way it delivers some of its core support services to franchisees as it moves to a "more centralised, online and phone-based model". 

It has commenced a program of implementing operational efficiencies across the business. This will result in an approximate 10 per cent reduction in its operating expense base. 

The company also revealed that it will also be rolling out a brand new, purpose built online broker platform that is expected to significantly reduce data entry. The new platform will be tested via a pilot program in July, ahead of its formal roll-out from August 2018.

“These changes are the product of an extensive consultation program with our franchisees and the recognition we needed to rebalance our service provision with better remuneration,” Ms Mitchell said.

“Franchisees will have access to the same core services, just delivered in a more efficient way. We are also investing in new systems and are getting ready to roll out our new Broker Platform, which significantly reduces data entry across multiple systems and provides a smoother loan submission process.”

Ms Mitchell also commented on the positive outlook for the broking industry, supported by the fact consumers are increasingly turning to brokers for advice and support when choosing a mortgage.

“The process for selecting and applying for a mortgage is becoming more complex and onerous, and customers are increasingly relying on professional experts to help them make the right decisions with their money," the Mortgage Choice CEO said.

"We remain focused on ensuring our customers have local, professional experts they can turn to. We believe the initiatives announced today will provide a sustainable business model for Mortgage Choice and the framework for franchisees to succeed by helping more Australians make better choices for a better life,” she concluded.

The brokerage has been in the headlines recently, after hitting out at media criticism regarding a high-sales culture and poor remuneration structures for franchisees, saying that it is working closely with franchisees to assist them in growing their business.

It becomes the third player in the mortgages sector to change its broker remuneration structure, after both Macquarie and Bankwest did so.

[Related: Bankwest announces broker commission changes]