Despite the potential backlash from brokers, Bankwest has been the second* bank to move after Macquarie on adopting the CIF’s reforms around remuneration being calculated net of offset.
The changes to commission, which began 1 July, are the first of three changes that Bankwest plans to make in the third party channel. The next two changes apply to new accreditations and mentors to allow Bankwest to continue onboarding new-to-industry brokers and new-to-lending brokers.
Ian Rakhit, Bankwest’s general manager, third party, told MPA the move to align with the CIF recommendations “is a reflection of the importance the bank places on its relationship with its broker partners— quite simply we were ready to go”. The CIF recommended that this change be implemented by the end of 2018.
Upfront commission, which has been maintained at 0.70%, will now be paid on the value of the loan limit disbursed and utilised by the customer, minus the value of any offset account balances.
Six months after settlement, the bank will conduct a review where it will reassess the value of the loan utilised. If the figure has changed by $100,000 or more from the initial upfront calculated at disbursal, commission changes may be applied— either with a top up or clawback. The loan balance net of offset at the review will be calculated using the highest average monthly loan balance, minus the average daily offset balance.
In an announcement in April, Bankwest also reintroduced Year 1 trail at 0.15%, but reduced it in Year 3 to 0.15% from 0.20%, and in Year 5 and onwards to 0.20% from 0.25%.
“At Bankwest, we see more requests for additional lending, changes in product type, changes in term, etc., a few years into the loan. We pay trail as stated in our agreement for the ongoing maintenance and servicing of customers, so we feel this is a just reward for that work,” Rakhit explained.
To prepare for these changes, Rakhit said brokers should continue to understand customer needs and ensure their loan value and term is suitable for those needs.
“The many brokers I have met have always put their customer at the heart of the decision,” he said.
The CIF was established in mid-2017 by the mortgage broking industry in response to the recommendations of the ASIC report and the Sedgwick review. It is made up of industry associations, aggregators, lenders, brokers and consumer advocacy groups.
*Correction: In an earlier version of this article, MPA incorrectly identified Bankwest as the first bank to implement the CIF reform on commission. It was actually Macquarie.