NAB’s Thursday announcement of restructured broker commissions has been met with cautious approval from the aggregation industry, though there were some reservations.
While aggregation groups did not welcome commission cuts, most felt that NAB had taken a balanced approach to its restructuring.
A number of changes to commissions have been made, including a new “Star Rating” system that will see upfront commission payments for brokers shift from a flat 65 basis points to between 50-65 basis points, depending on the quality of business submitted.
Joe Sirianni, executive director of Smartline, praised NAB’s decision to align commissions with quality.
Given the current squeeze on margins, Mr Sirianni described NAB’s commissions restructure as the “only long-term solution to ensure the viability of the industry”.
“Linking commissions to value is a good approach,” he said.
From August, trail commissions will also be geared to reflect a focus on customer retention. Payment will rise from zero per cent in the first year to 0.15 per cent in the second, with a further 0.05 per cent rise each year until capped at 0.35 per cent from year six onwards.
Steve Kane, chief executive of FAST, said NAB’s changes were “indicative of a level of maturity in the industry” and said it was a good sign that broker professionalism was going to be rewarded.
“Stepped commissions are a very positive move. Putting brokers in direct control of their remuneration is certainly a good thing,” he said.
Mr Kane however was less enthusiastic about NAB’s changes to clawbacks, which he described as not “particularly palatable”.
NAB claw backs have been extended to two years – 100 per cent in the first year and 50 per cent in the second.
Mr Kane argued that in most cases a borrower’s decision to refinance in the first two years was out of the broker’s control – a sentiment shared by Choice Aggregation’s head of sales and marketing Simon Dehne.
“I’m not sure why NAB would want to penalise brokers for a loan that’s refinanced within the first two years when it’s probably out of their control,” Mr Dehne said.
He also expressed disappointment that NAB’s quality rating system had been set at an individual broker level rather than at an aggregator level.
“The service we provide our members is to ensure they achieve their metrics – with NAB we can no longer do this,” Mr Dehne said.
“NAB has missed a real opportunity here; I don’t think they recognise the value an aggregator can bring to the lending process,” he said.
Unlike St George and CBA, NAB did not include cross-selling in its remuneration criteria, instead focusing on business quality and client support.
Regional general manager of NAB Broker Matt Lawler said feedback from national consultation showed brokers wanted to be rewarded for ongoing client service, and changes to broker commissions were aligned with that.
Mr Lawler said the restructuring would ensure NAB Broker could “remain committed to the broker channel... on a basis that’s sustainable for us and our partners”.
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