The Word: What do you think of the current clawback structure?

The model is broken

I think the current model is broken and well overdue for a rethink. We do the work upfront, meet our compliance obligations, and put the client into the right loan. Then, if that client sells 14 months later because they got a job transfer, went through a separation, or their circumstances changed – we hand back commission we’ve already earned and often already paid tax on.

Once you factor in the cost of writing the deal, there are files where you end up working for free or actually out of pocket. No other profession gets paid for completed work and then told to give it back two years later because the client’s life changed.

If a lender wants to protect itself against churn, fair enough, but a client selling their home or having a life event is not churn. The lender also has other revenue opportunities that they can use to hedge against clawbacks – we, the brokers, don’t.

Clawbacks shouldn’t punish brokers

I believe the industry should move towards a more balanced and consistent clawback framework across all lenders:

No clawback where the loan is repaid due to genuine life events such as property sales, death, relationship breakdown, financial hardship, or relocation.

A shorter clawback period overall, with a consistent industry standard rather than different policies across each lender.

Recognition that where a broker has acted appropriately and in the customer’s best interests, they should not be financially penalised for circumstances beyond their control.

Ultimately, clawbacks should be designed to discourage poor behaviour, not punish brokers who have done the right thing.

Two steps forward and one step back

Unfortunately, life circumstances can change unexpectedly, and brokers are often financially impacted despite having done everything right.

We are a team of six brokers, and although we actively stay in contact with our existing clients regularly and reprice them often, we do still have our fair share of clawbacks, and the majority are out of our control. It’s hard on all brokers, however, particularly for young brokers who don’t have a trail book that can absorb these clawbacks. It’s like two steps forward and one back.

However, I like that some banks give you the heads-up when clients are looking to refinance or discharge, so you can try and intervene and see what is going on.

Clawbacks should reflect broker behaviour, not customer life events

The current clawback model is fundamentally unbalanced. It places almost all of the commercial risk onto us as brokers, despite having little or no control over many of the events that trigger the clawback.

Once a loan has settled, factors such as divorce, financial hardship, job loss, lender repricing, or the sale of a property are often entirely outside our influence. I am sure lenders already price these commercial risks into their business, yet brokers are still expected to absorb the entire financial consequences.

A fair system should see that risk shared. Brokers should only be exposed to clawback where there is evidence they have contributed to an early loan exit through inappropriate advice or conduct.

Clawbacks should reflect broker behaviour, not customer life events.