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Brokers have predicted the other major banks will follow Westpac’s lead and raise commissions.
Westpac announced yesterday that its new structure will allow aggregators to earn a commission of up to 0.65 per cent, compared to the current upfront standard base commission of 0.50 per cent.
The position of the other three majors is unclear. The Adviser sought comment from ANZ and NAB, but they had not replied by press deadline.
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Commonwealth Bank’s general manager of broker sales for third party banking, Sam Boer, said the bank welcomed competition, but declined to reveal whether the bank was planning any changes to its own commission structure.
“We are very happy with our broker value proposition and are continuously working hard to improve every aspect for the betterment of customers and brokers and for the sustainability of our businesses,” he told The Adviser.
Yarra Finance director Manuel Manias said Westpac’s move looked like an attempt to win new business, but that any commercial advantage was unlikely to last for long.
“It’s a temporary thing and within the next month or two you would expect the others to follow suit, and they may provide a more attractive offering,” he said.
Mr Manias said Westpac’s commission increase was probably too small to influence many brokers. Increasing trail commissions might have been a more effective strategy, he added.
Intelligent Finance managing director Justin Doobov also predicted that other lenders would raise commissions.
“If they start seeing that Westpac gets traction from it – and I’m sure they will get some upswing – then I’m sure other lenders will do it,” he told The Adviser.
However, Mr Doobov said lenders like Westpac were “missing the mark” by focusing on upfront payments over trail commissions.
He said brokers should be incentivised to manage clients over the long term rather than “churn” through new business.
Inovayt mortgage advisor Jason Pogorelec said he was surprised by Westpac’s decision to increase commissions but that he now expected other lenders to follow suit.
“I think the lenders are starting to see more value in dealing with brokers. So I think they will follow each other in that trend in terms of incentives, simply on the basis of trying to grow their share amongst the brokers,” he said.
Mr Pogorelec also told The Adviser that Westpac’s commission increase was unlikely to tempt many brokers to add Westpac to their pool of preferred lenders.
Aggregation giant Australian Finance Group welcomed yesterday’s announcement: “Given the targets are aggregator-based, it is very important for brokers to ensure they are with the right group and that their results are not being dragged down by non-performers in their group,” said general manager Mark Hewitt.
“From an AFG perspective, I am very confident we will hit the targets and that our brokers will receive the full benefit of the uplift.
“I also have no doubt that other lenders are considering their remuneration model and more changes will follow,” he told The Adviser.
