Head to head: What does the future hold for trail?

Two brokers and a franchise director say there's no reason to be concerned despite the scrutiny

On 11 December 2017, representatives of Australia’s mortgage broking industry publicly released a landmark reform package in response to ASIC’s review into broker remuneration. The industry has agreed on six principles that aim to improve consumer outcomes and confi dence in mortgage broking. The six principles encompass changes to commission structures, addressing bonus commissions and volume-based payments, implementing changes to tiered-service models and eligibility of non-monetary benefits, and implementing a new ownership disclosure, as well as new public reporting and governance frameworks.

Justin Barnes

“I think there is definitely a place for trail commission. Brokers work very hard at sourcing financial products that are inaccessible to many people. There are many options in the marketplace that families or businesses wouldn’t be able to enjoy without professional assistance. Removing commission may push some brokers out of the market and could ultimately lead to less competition in the lending market.

“I understand there is a lot of noise in the market and a lot of press at present regarding trail commissions, but ultimately, more competition in the market is better for consumers and business operators.”

Janine Leafe
Credit adviser
Approved Financial Planners

“Trail commission will remain for the time being. We just need to sit it out until the heat disperses. Without it, we may see a number of diligent and ethical brokers/firms remove themselves from the industry, and this will have a detrimental effect on consumers.

“The royal commission can dismiss those who do not belong in the industry, and the remaining will continue to service their client books with care. Their debt plans, regular contacts and trail income are reflections of their workload.

“The issue, as I see it, is a small portion of ‘bad brokers’ slipping through the cracks due to lack of monitoring and compliance checks.”

Michael Russell
Managing director

“Normally I’d provide a stock standard response, but given the sensitivity with the Sedgwick, Productivity Commission and royal commission reports, I’ll be a little more circumspect.

“Mortgage brokers are paid an upfront commission to originate a mortgage loan. Brokers are then paid a trail commission for providing a ‘life of loan’ service to mortgage customers post-settlement. This service includes, but is not limited to, making a six-week post-settlement call, providing opt-in annual reviews, and submitting pricing requests and loan variations. Mortgage brokers provide this service willingly in consideration for receiving trail commissions. I foresee no change, but brokers must live up to their obligations.”