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The banks have been quick to respond to the suggestion that trail commissions may soon become a thing of the past following comments recently made by the FBAA.
ANZ, NAB, CBA, Westpac and St. George all confirmed to The Adviser that there are no plans to cut trail commissions within the next 12 months, with some lenders pledging to leave commissions unchanged for the long term.
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The banks first cut broker commissions in April 2008. Since then there have been growing concerns among the industry that further cuts could follow.
This fear was resurrected last month when the FBAA’s president Peter White told delegates at a Sydney seminar that trail commissions could soon become extinct, pointing to trends in overseas markets as an example.
NAB Partnerships executive general manager Matt Lawler said that while discussions about cutting commissions was understandably concerning for brokers, Homeside could confirm that it has no intentions of changing its commission structure.
“Major structural changes to commission and remuneration models are not taken lightly and not made every few years but rather as part of a cycle, every 5 to 7 years. Given that the recent changes to commissions were significant and only made in the last 18 months we would not be anticipating any further changes for a number of years,” Mr Lawler told The Adviser.
“The discussion about the role of trail is an important one. Remuneration models should reflect the value that is being created by the work being done.
“At NAB and thus Homeside we have used the principle of 'sharing margin where we make margin' to influence the structure of our commission model.
“The industry to this point has been very focussed on the 'product sale' however the value is actually derived from clients remaining with the lender over many years and from them purchasing multiple solutions i.e. credit cards, transaction accounts, insurance and possibly even investments.
“We believe that brokers play the primary role in maintaining relationships with and advising their clients over the duration of their loan so therefore trail commission is a sensible way to share that margin,” Mr Lawler said.
St George's general manager of intermediary distribution Steven Heavey echoed Mr Lawler’s sentiment and said trail commissions were vital to the strength of the broker proposition.
“St.George is constantly measuring all aspects of our home loan business including broker commissions.
“We do this to ensure we have a business that is sustainable over the longer term. That said, we have no plans to change our current structure in the future,” Mr Heavey told The Adviser.
