The founder of an alternative mortgage broking platform has slammed calls for the removal of trail, but is prepared to reform his remuneration model nonetheless.
Speaking to The Adviser, founder of Hero Broker Clint Howen said that the Productivity Commission (PC) recommendation to ban trail commission was “odd”, and criticised consumer group CHOICE for its campaign in support of the proposal.
“I think it’s a bit odd. I don’t think they’re right in saying that it’s not in the consumer’s best interest,” Mr Howen said.
“It’s a little bit funny for them to point out mortgage brokers. I wrote a tweet to CHOICE, who I think have turned into an activist group rather than an actual consumer group.
“One of [CHOICE’s] points was that there’s no evidence to show that trail is paid for ongoing service by the broker. [In my tweet] I said, ‘Why does the bank earn interest? The interest that they charge is the same as trail. All that the broker is doing is getting a profit share in the business that they brought in’.”
However, Mr Howen noted that he would be prepared to alter his platform’s remuneration model if trail commission is removed.
As it stands, Hero Broker is predominately funded by trail commission, with upfront commissions of 0.25 of a percentage point paid to borrowers that successfully lodge an application through the online platform.
“At the end of the day, our model is to reward the consumer, but if that needs to change and it’s not working, then we’ll change it — it’s not set in stone,” the founder continued.
Mr Howen added that Hero Broker plans on introducing a “flat” monthly rate paid to consumers.
“We’re looking to something that might be $29–$30 a month, that’s a flat amount that the bank pays for every customer that we’ve got on our platform that has a loan with us,” Mr Howen said.
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