Australia’s aggregators have warned that cuts to broker commissions could impact lenders’ volumes through the third party channel.
Recent media reports indicate that the banks are reviewing commission payments as liquidity issues continue to impact profitability.
William Lockett, managing director of aggregator Specialist Mortgages, isn’t surprised to see commissions in the headlines once more.
“Commissions have always been a raging debate,” he said.
But instead of a straight attack on upfront commissions, Mr Lockett believes a more likely outcome would be a shift towards a results-based rewards system.
“The banks would probably look to reward those [brokers] that reach their benchmarks. Those that under perform, or whose processes slow the banks, would receive lower commissions,” he said.
While a two tier system may solve some of the banks’ cost issues, it is unlikely to be met with enthusiasm by brokers.
“Brokers’ views on commission cuts will always be unfavourable – regardless of how logically the banks present it,” he said.
AFG’s general manager of sales and operations Mark Hewitt believes the banks may also review the brokers they distribute through.
“The banks could start to take a closer look at who they distribute their loans through – instead of taking such a broad brush approach,” he said.
Mr Hewitt is not expecting to see a change in commissions anytime soon however.
“To the best of my knowledge none of our lenders have looked at changing their up-front commissions [structure],” he said.
A change to commissions structure through the third party channel would be expected to materially hurt the banks’ market share.
“A lot of bank products are quite homogenous. Brokers will look to do the right thing by their customer, and if they can earn a higher trail at the same time then naturally this will influence their decision,” he said.