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The Word: Commissions and experience

Emma Ryan 6 minute read

This month we ask: Should brokers' commissions reflect their level of experience?

Avoid creating an uneven playing field

I know many young brokers who work twice as hard, are more committed and are just as passionate about lifting the profi le of the industry as some of their more experienced counterparts. Why would we want to create an uneven playing field when we are already facing scrutiny over commissions? We want this industry to prosper and grow, not discourage new blood. Banks are using the segmentation model, which provides increased benefits to well-established and experienced brokers. These brokers have the capacity to set more loans and are rewarded as such - but it’s not because of experience in isolation.

Ruan Burger, Time Home Loans

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Don't punish young brokers

It would be unfair if a broker’s commission was determined by their level of experience. There are currently many requirements every broker needs to obtain in order to operate: education, licensing, industry experience and industry body membership, and insurance costs. Every broker who has completed these requirements deserves an equal amount of commission for each loan written. Where a broker has a larger level of experience, you could easily assume they would have a natural advantage both in product and bank policy knowledge, along with a greater understanding on how to generate new business. This is a natural advantage which would enable them to earn a higher income.

Mike Watts, Top Mortgages

 

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The experienced already earn more

There is no need for varying commissions based on a broker’s experience. Where would the levels be – time in broking or amount of monthly loans submitted, or both? The more experienced a broker is, the more likely they will have a healthy database and (hopefully) a good reputation. That broker will earn more income based on more volume. Also, some new brokers may already come from a financial background and could be very effective brokers from the start. Commissions need to be at a healthy level for all to be able to manage a reasonable income.

Catherine Salat, Just Imagine Finance

 

Quality, not experience quantity

Most brokers do not charge their clients for the credit advice and service they provide; they rely on being paid commission by the banks for working closely with the client, understanding their needs, matching them to a suitable bank and ultimately getting their loan approved and settled. If there was ever to be a level of commission introduced, it should be reflected by the broker’s quality of applications and performance. By that, I mean the bank or aggregator could rate the broker’s submission, scoring how effectively the application has been completed and whether all the supporting documents were attached.

Timmy Wong, Finance Achievers

 

Fine another way to reward

All brokers should be paid the same regardless of experience. Paying inexperienced brokers less is only going to stop new entrants coming into the industry, making it difficult to expand existing business. Brokers should be rewarded by the lender for retaining clients [for the] long term on the lender’s books, like some lenders are doing now with tiered trail commissions. I’d like to see all lenders bring in tiered trail, allowing the broker to concentrate on building the loan book and business income by way of trail and providing a better service to clients rather than having to always chase new up-front income.

Allan Culbertson, WMP Finance

The Word: Commissions and experience
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