Login
ISCOVER
There is often debate about the portability of a broker’s trail commission entitlements or loan book.
While there is little doubt who found the customer, provided the advice and originated the loan, there is also little doubt that your aggregator is entitled to the trail commission from the lender.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
Your entitlement – initially and on an ongoing basis should you leave that aggregator – is subject to the terms and conditions of your agreement with your aggregator.
Contractually, your entitlements begin and end with the aggregator agreement you signed.
Over the years, some lenders have facilitated the transfer of a broker’s loan portfolio and therefore the entitlement to trail commission. However, this has generally been at the request of the broker when the broker was previously accredited directly with that lender and they now want to consolidate their loan portfolio under their current aggregator.
The most common reason I have heard for lenders not facilitating a transfer related to the administrative cost and, more importantly, the potential disclosure requirements. No one wants to write to hundreds or thousands of borrowers simply to tell them that trail commission on their loan is now being paid to a different aggregator or broker than the parties disclosed on the original loan contract.
The argument for commission portability makes sense where the aggregator is paying 100 per cent of the commission to the broker, in return for a service fee. It does not make sense where the broker has willingly and knowingly entered into a contract to split commission with an aggregator. Any opinion formed in hindsight about the ongoing value of the aggregation services provided and fairness of the original contract is irrelevant.
For commission portability to work, there needs to be a separation of commission from aggregation fees and transparency of commission flows from lender to broker, notwithstanding payment being channelled through an aggregator for administrative efficiency. I can’t see the various stakeholders coming to a consensus on the need and benefits of changing the existing arrangements.
Sadly, far too many brokers do not or did not read and review their aggregation agreement fully before commencing business.
Unless you begin the relationship understanding that it may change over time and have an agreement that reflects such, you are more than likely going to find some unpleasant surprises.
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.
