Ken Hodgson, general manager of consumer banking at Westpac in New Zealand, says he doesn’t want to get into specifics because his bank has differing arrangements with the various broker groupings, largely based on the volume of loans they provide.
"It’s fair to say that, like many banks, we have reviewed our commission payments to brokers because we want a relationship that’s sustainable for both of us going forward," Hodgson says.
While Westpac is making no changes to the upfront commissions it pays, it is toughening up on its clawback conditions.
Hodgson says current industry standards are that if a loan fails to remain on a lenders books for 13 months, the entire upfront commission is repayable and that Westpac will adopt this standard in future. Until now, it’s clawback conditions were on a pro-rata basis up to 13 months.
Westpac is also reducing the trail commissions it pays brokers for the first five years a loan stays in force but it is increasing trail commissions on loans which last longer than five years.
While one idea behind the changes to trail commissions is to discourage churn, Hodgson says "there’s no evidence that tells us that loans introduced by brokers stay on our books any less time than loans from our traditional channels."
He says Westpac’s changes shouldn’t be seen as being anti-broker. "If we can’t be our customers’ first choice, we want to be our customers’ brokers’ first choice," Hodgson says.
It is clear Westpac won’t be the only bank to review broker commission structures. Earlier this month, ANZ Bank’s Australian head of mortgages, Chris Cooper, said that while an external review had determined that distribution through brokers is profitable, fees need to be restructured with an overall reduction.
