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This month we ask ... Do commissions influence where brokers send their business?
Money driving minority
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For some brokers, yes. Fortunately they’re in the minority, but unfortunately they tarnish the industry, creating negative sentiment and forcing greater scrutiny of the industry as a whole. Most brokers are motivated by money not via higher commissions, but via greater volume. If anything, a broker may be swayed by ease of doing business. If Lender A is turning approvals around in 10 days, but Lender B in two days, this may have a bearing on the decision- making process.
Andrew Gooding Professionals Global Finance
GFC-disrupted circumstances
These days, commissions don’t influence where a broker places their business. Prior to the GFC, mortgage managers paid better commissions to brokers when placing business direct to them. Now, the majority of lenders pay the same commission, so it’s not as important. It’s now about finding the right lender for the right customer; the influence of commissions has become less relevant. The deal you have with your aggregator can help with what commissions are paid.
Sharon Frazer, Gow-Gates Mortgage Brokers
Brokers enhance competition
Commissions do not influence advisers’ recommendations. Mortgage brokers are selling debt, they are not giving investment advice. Advisers should not be criticised for expecting compensation for the burden of packaging up submissions for a lender, in accordance with the lender’s detailed and complex requirements. The broker’s effort creates efficiency for the lender and that effectively translates into lower consumer pricing.
James Green, Century 21 Home Loans
Short-term gain, long-term consequences
An experienced broker knows placing a deal at a lender just to receive a higher commission will almost always backfire. Why? A broker who has been around for a while will understand the highest commission loan is usually not the best fit for the customer. If other matters such as approval criteria, loan pricing and customer likes/dislikes are not given due consideration, there will invariably be issues and they will likely lose the customer. Worse still, there will be no referrals.
Michael Papadopoff, All About You finance
A challenge for lenders
I think commercially astute brokers will forsake a higher commission if the process of having the application reviewed and actioned is timely and efficient. In the eyes of a client, we’re being entrusted to manage their wishes and therefore any representation made should seek to demonstrate this. The challenge for lenders is how to incentivise brokers in a manner that reflects the time and effort expended in preparing deals for submission.
Steve Dimer, LendingConnection
