BankWest has moved to boost third-party market share through guaranteeing broker commissions until the end of the year with six major aggregation groups.
The announcement follows Westpac’s shock decision to slash broker commissions, fueling fears other major banks would follow.
According to Michael Russell, managing director of Choice Aggregation Services – one of the aggregators to secure the commissions guarantee – BankWest has sent a clear message to lenders that are considering major commission reductions.
“BankWest has been a strong supporter of the broker channel for 15 years and the latest announcement bears testament to the long-term view the bank has taken,” he said.
Compared to the BankWest strategy Mr Russell described Westpac’s commission cuts as “short-term and knee-jerk and not in the spirit of a long-term partnership”.
Westpac’s commissions cut equates to a 30-40 per cent reduction in payment.
In an increasingly competitive market many aggregators are ramping up services to members – including compliance, software and training. Commission cuts are therefore a cost few will be able to absorb.
“Westpac’s new commission structure is not where the watermark is,” he said.
According to Mr Russell, there are alternatives to simply cutting broker commissions.
Choice Aggregation Services is among a number of aggregation groups working with lenders to look at how they can help reduce the impact of higher funding costs through improving efficiencies, cross selling other products, embracing online lodgement as well as discussing commissions structures.
“We’re doing what we can to work with lenders. We very much see them as partners and we’ll do everything possible to help them alleviate some margin pressure,” Mr Russell said.
While increased funding costs have no doubt piled pressure on the banks, it is clear from BankWest’s move that some lenders will look to reinforce their third-party relationships at the expense of short-term profits.
The nature of the BankWest commission guarantee may give an insight into the future of the evolving relationships between lenders and aggregators.
Westpac’s current chief digital and marketing officer and forme...
Australian Finance Group has revealed its brokers lodged more loa...
Comparison website iSelect launched a new business loan offering ...