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ISCOVER
One aspect of being a broker that is often overlooked in the excitement of getting started or in the grind of making a living is the need to read the fine print.
Competition has generally delivered reduced aggregation costs, fairer agreements and increased aggregation choices. This competition has driven the transfer of value from aggregators to brokers. An inevitable by-product of the reduced profitability of aggregation is vertical integration or consolidation. The choice of aggregator is often a matter of relationship and trust, assuming cost is relatively similar.
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It is, however, important to know and understand your aggregator agreement and in particular the consequences to you and your aggregator of any breach.
As a broker, you are generally not a party to the agreement between the aggregator and a lender. Your aggregator has certain obligations and responsibilities with respect to accredited brokers and, in some cases, the actions of an individual can have ramifications for all.
Do you have access to your aggregator’s lender agreements?
Do you understand when and if the lender and aggregator can and will cancel your accreditation?
Are you potentially exposed to loss of accreditation and/or trail commission if other brokers within your group breach their obligations?
If so, is there a right of remedy should an individual broker breach their obligations, or are you collectively held responsible?
I agree it’s commercially unlikely that a lender would cancel the accreditation or cease trail payments of all brokers in a group or aggregator where one or a few breach lender agreement obligations – but the clauses may exist. Fortunately, and for good commercial reasons, lenders have been known to look through an aggregator or broker group and continue to pay trail to individual brokers where an aggregator or broker group has had its agreement cancelled.
Nevertheless it is a business risk you as a broker need to understand and, where possible, seek to mitigate.
Ray Hair, general manager of sales, Homeloans
Ray Hair joined Homeloans in June 2014. Formerly the chief executive of PLAN Australia and ALI Group, Ray has 20 years’ experience in mortgage broking/management and insurance as an active industry observer and participant.
Ray led the launch of the RACV Home Loan in 1995 as a mortgage manager in conjunction with Macquarie Bank and the PUMA securitisation fund. Following three years distributing motor, home and consumer credit insurance through non-bank financial institutions, Ray joined PLAN Australia as national sales manager in 2001 and went on to become chief executive as PLAN grew to be one of Australia’s most successful aggregators.
