Adelaide Bank, ING and MyState Bank all announced changes to broker remuneration last week, as more and more lenders take up the recommendations put forward by the ASIC Broker Remuneration Review, Sedgwick Report and recent reforms agreed to by the Combined Industry Forum (CIF).
Fons Caminiti, national manager for broker sales and distribution, wrote to brokers last week outlining that Adelaide Bank would change the method by which upfront commissions are calculated.
Effective from 17 January 2019, the upfront commission for new Adelaide Bank loans will be calculated based on the drawn amount less any offset balance as at the end of the month the loan settled, subject to a minimum payment of $400.
For credit increases to existing facilities, commission payment will be a flat fee of $250.00.
The bank said that there would be no change to its clawback structures.
“While recognising the high calibre of our broker network, we also acknowledge the need for our industry to evolve,” Mr Caminiti said.
“These changes will ensure that customers obtain affordable loans that meet their objectives and are appropriate in terms of structure and amount, and that we and our partners meet all compliance requirements.”
He concluded: “We remain fully and proudly committed to the mortgage broker industry as we have been for over 25 years and thank you for your ongoing support.”
Earlier in the week, both MyState Bank and ING had also announced similar changes.
Acknowledging the “important work” done by the CIF, the Tasmania-based bank said it would calculate broker commissions on both new home loans and loan increases based on the drawn down balance (utilisation) on the 10th calendar day of the month (instead of the initial total approved loan amount).
The changes will come into effect from 1 January 2019.
MyState Bank group executive of broker distribution Huw Bough said that the bank was totally committed to supporting independent mortgage brokers and to adopting reforms in a proactive and timely manner.
“This is the right thing for brokers, the right thing for aggregators, and the right thing for the customer,” Mr Bough said.
“Brokers are critical to the health of the Australian mortgage market, with 55 per cent of Australians now choosing to access lenders and their products via mortgage brokers. They provide an invaluable service and guidance to people as they navigate the home loan process.”
The bank highlighted that more than 50 percent of its loan book has been originated by the mortgage broker channel.
Mr Bough commented: “Our consistent service experience has proven to be a major drawcard for brokers and customers around Australia. Not only do our clients get to talk to someone onshore, they are treated as an individual and not just another number.
“At MyState Bank, we will continue to work in partnership with our aggregators, brokers and regulators to ensure we are at the forefront of initiatives that seek to reinforce positive customer outcomes and strengthen the position of the broker channel well into the future,” he concluded.
Likewise, ING has also said that it would be calculating the upfront broker commission for residential loans determined on total net loan balances, five calendar days following settlement.
Speaking of the changes, Glenn Gibson, ING’s head of third party distribution and direct mortgages, said: “We have two main objectives to achieve here: the first is to clearly deliver on the industry’s reform package and the second is to keep the commission structure simple.
“To that end, we’ve taken a straightforward approach to ensure the change is easy to understand and operationalise for all parties.”
The move, which also takes effect from 1 January 2019, comes as more and more lenders commit to the recommendations from the ASIC and Sedgwick reviews, which were backed by the CIF package of reforms.
Three of the four major banks have already announced that they would be moving to the new commission structure, with a similar announcement from ANZ expected imminently. However, ANZ CEO Shayne Elliott recently suggested that a flat fee paid by lenders to brokers is “worth looking at” and is “not an unreasonable proposition”.
When asked by counsel assisting the financial services royal commission Rowena Orr QC about his view on broker remuneration, Mr Elliott said that a flat fee paid by lenders is a “credible alternative” to the current commission-based model.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.