the adviser logo

NAB says brokers are a ‘force for good’, backs trail

by Tas Bindi6 minute read
nab mortgage broker renumeration

A major bank executive has told the Productivity Commission that mortgage brokers “are a force for good” and should be remunerated for the ongoing care of their customers.

Appearing before the Productivity Commission last week, National Australia Bank’s COO, Antony Cahill, said that given the vast majority of mortgages globally are “still sold on a face-to-face basis”, the broker proposition remains relevant.

To continue reading the rest of this article, create a free account
Already have an account? Sign in

“The digital origination of mortgages is still very immature compared to what you might consider to be a simple product, such as a transaction account, personal loan [or] credit card. That may well change over time and you may see more of that product being originated through digital channels, but the physical channels at the moment — in terms of the ability for a customer to sit down and have a conversation with somebody — is still the predominant way that product is distributed around the world, not just [in] Australia,” Mr Cahill told the PC.

“So, I think brokers play an important role in the marketplace.”


Productivity Commission chairman Peter Harris said that it’s difficult for the advisory body to accept the statement that trailing commissions help “stop churn”.

“Churn is a competitive opportunity potentially for a customer… It’s almost like confessing the conflict,” the chairman said.

Agreeing with Mr Harris, commissioner Stephen King said that the rationale that trail commissions are necessary for ongoing engagement with mortgage customers “doesn’t make a great deal of logical sense” because if the broker advises the customer to switch to a different lender with a more suitable offering, then it’s not stopping churn.

Mr Cahill pointed out that the issue is a lot more complex than that, because if brokers were solely paid an upfront commission, then the question that could be put forth is whether such an arrangement would drive brokers to switch their customers’ home loans as a way to generate revenue from different lenders.

Conversely, if they were just paid trail commissions, the question that could be posed is whether such a structure would incline brokers to continually acquire customers to build their ongoing trail book, without necessarily looking out for their interests over the course of their home loan.

“That’s just the pure economic argument,” Mr Cahill said.

The COO noted that NAB expects brokers who receive trail commissions to have an ongoing relationship with their customers, and that Anthony Waldron, the bank’s executive general manager of broker partnerships, is currently looking at ways to ensure that is taking place.

When questioned about NAB’s ownership of aggregators, Mr Cahill explained that although NAB does own three aggregation businesses, they don’t operate on franchise models. As such, the argument that brokers who process loans through bank-owned aggregators face conflicts of interest does not apply, according to Mr Cahill.

“None of the brokers who aggregate under our three brands are employed by National Australia Bank, so [it’s] quite a different model to, for example, Mortgage Choice or Aussie Home Loans,” the COO said.

Mr Cahill also posed the question of how the industry would go about “[validating] what constitutes the consumers’ best interests”.

“Is it prices or other factors? How would you work that though? I think the idea of requiring brokers to put the customers’ interests first is appropriate, and I think the vast majority of brokers within Australia would absolutely argue that they do put their customers first,” the COO said.

According to Mr Harris, conflicts of interest could have always been addressed by establishing contractual agreements between brokers and clients, but he noted that the commission cannot dictate how brokers should run their business.

The chairman confirmed that the issue of conflict will be addressed in some form.

[Related: Industry to defend trail commissions]

NAB says brokers are a ‘force for good’, backs trail
nab home loans
TheAdviser logo
nab home loans

Tas Bindi

Tas Bindi


Tas Bindi is the features editor for The Adviser magazine. 


You need to be a member to post comments. Register for free today


Anja Pannek CEO PLAN

Anja Pannek named MFAA CEO

The board of the Mortgage & Finance Association of Australia (MFAA) has confirmed that Anja Pannek will be the...

mike felton mfaa ta jdayl5

Aggregator heads reflect on Mike Felton’s legacy

Following on the news that Mike Felton is to retire next month and step down as chief executive of the Mortgage &...

melanie kiely afg ta mzh8zm

AFG non-executive director steps down from board

Australian Finance Group Ltd (AFG) has advised that Melanie Kiely will be stepping down from the AFG board to...

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more