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Mortgage Choice earnings hit by new rem model

susan mitchell new ta susan mitchell new ta
Charbel Kadib 6 minute read

An increase in commissions paid to the group’s broker network has driven a 16 per cent slide in earnings, offset by a 7 per cent year-on-year increase in settlements.

Mortgage Choice has published its full-year results for the 2020 financial year (FY20), reporting a cash net profit after tax of $11.7 million, down 16.4 per cent from $14 million in FY19.

This was despite a 7 per cent increase in home loan settlements, from $9.4 billion to $10 billion, which lifted the total value of commissions received from $157.7 million in FY19 to $160.7 million in FY20.

According to Mortgage Choice CEO Susan Mitchell, the earnings result was underpinned by an increase in commissions paid to the group’s broker network following the introduction of a new franchise remuneration model.  

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The share of both upfront and trailing commissions paid to brokers increased by 3 per cent, from $115.5 million to $119.1 million.

As a result, net core commissions retained by Mortgage Choice fell from $42.2 million in FY19 to $41.6 million.

Despite settlement growt, Mortgage Choice's loan book contracted, falling to $54 billion as at 30 June, with run-off exceeding new business. 

Ms Mitchell told The Adviser that she’s confident the group would improve its revenue performance over the course of FY21, despite the ongoing challenges posed by the COVID-19 crisis.  

“We’ve laid a lot of ground work over the last two years, and I think we’re set to take advantage of that and grow our business,” she said.

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“First of all, we’ve rolled out some great software and we continue to improve it, so our brokers are getting much more efficient, and it will make them efficient in complying with the best interests duty.”

Ms Mitchell said the group would also ramp up its recruitment efforts amid a decline in both the number of franchisees (391 to 385) and credit representatives (562 to 554) operating under the Mortgage Choice brand.

“We’re putting a lot more of our resources towards growing our revenue by recruiting, regenerating our network and retaining the talent that we do have,” she said.

When asked how the brokerage was working to attract more brokers to the brand, Ms Mitchell pointed to the group’s educational platform and digital proposition, which helped generate a record number of leads in the second half of FY20.  

“We believe that our brokers can grow bigger businesses, and bigger businesses will make more money for the broker,” she added.

Looking ahead, Ms Mitchell said the group would continue to invest in improving efficiency across its network.

“We’ll be focusing on growing our revenue, continuing to roll our software that’s focused on a great digital customer experience and continue to ensure our platform and processes are very efficient, and they’re able to grow their businesses,” she said.

On clawbacks

Earlier this month, co-chair of the Combined Industry Forum (CIF) Mark Hewitt revealed that a working group had been established to review existing clawback arrangements in the broking industry.

Mr Hewitt, AFG’s general manager of industry and partnership development, said the working group has been tasked with addressing potential impediments to compliance with the upcoming best interests duty.

Ms Mitchell told The Adviser that she looks forward to assessing the proposals canvassed by CIF members, adding that she would support the Mortgage & Finance Association of Australia’s proposal to limit clawback periods to 12 months.

“I would support anything that means the brokers would get paid for the really great work they do for their customers,” she said.

“It’s such a shame for the brokers to do this great work and put the customers into a great product and they don’t get paid for their work.”
“I want our brokers to get paid for all the great work that they do.”

[Related: Broker market share hits annual high]

Mortgage Choice earnings hit by new rem model
susan mitchell new ta
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susan mitchell new ta
Charbel Kadib

Charbel Kadib

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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