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Deloitte weighs in on commissions debate

Deloitte weighs in on commissions debate

A Deloitte partner has revealed new findings about the role of commissions in mortgage broking.

Deloitte partner financial services James Hickey has researched how much remuneration influences decision-making among mortgage brokers.

This follows a fresh round of submissions to the Financial System Inquiry that questioned the role of broker commissions, particularly among bank-owned broker groups.

“From my work across the broker market it is interesting how brokers will have their three to four lenders because they know that product, they know the processes, they have a relationship with the BDMs and can get quick turnaround times for the borrower around approvals,” Mr Hickey told Mortgage Business.

“In many cases that is not the lender that is offering the most commission,” he said. “It is not the lender who is offering the biggest volume bonus.”

In a highly competitive market where products, prices and commissions are becoming increasingly similar, the one point of difference for brokers is quality support and fast approvals for their clients, Mr Hickey said.

“I’m finding that most of the rhetoric coming from brokers in this environment with volumes being so high is actually the responsiveness of the lender, the quality of service support the lender gives to the broker and end customer to get certainty around the process,” he said.

“Provided commissions are comparable, then all the other factors are far more important.”

Mr Hickey’s comments come after a number of lenders increased commissions in recent months.

Last week CBA announced that from 1 January 2015 it will include first-year trail of 0.15 per cent.

The lender is also negotiating a second commission plan with broker groups to increase trail payments in subsequent years.

In June, NAB reintroduced first-year trail of 0.15 per cent and changed its trail payment for year six to 0.30 per cent.

But according to Mr Hickey, this may not be the best way to attract new business.

“Brokers go with the lenders that they can be certain and confident that when they go to their client they can have a turnaround in twenty-four hours, or whatever the time frame is,” he said.

“That is the main thing about it – the certainty and fewer headaches.”

Deloitte weighs in on commissions debate
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