Why customers should know all about clawbacks

Clawbacks have long been regarded as a make or break phenomenon when it comes to a broker’s cashflow.

With Covid-19 causing financial distress for homeowners and businesses alike, and interest rates at record lows, the risk of being hit by clawbacks has been heightened for brokers across the country.

Co-founder of Atelier Wealth, Aaron Christie-David, says he overcame this issue a few years ago by educating his clients and being transparent about remuneration.

Educating clients is key.

Christie-David says dealing with clawbacks has been one of the biggest challenges he has faced in his time as a broker.

After he and his wife, Bernadette, started their own business almost four years ago, the pair soon realised they would need to be proactive in their approach to the issue.

At one stage, he says, the business lost $10,000 in one month through clawbacks.

“You’re writing the loans but effectively, you’re just replacing the run off,” he says.

After speaking with their clients about the issue, they found out that most of them were unaware that clawbacks even existed.

They decided to tell their customers about how refinancing through a different broker within the first two years meant they would lose their commission; adding that if the customer wanted to refinance, they could help them with this.

“That education part has helped us a lot,” says Christie-David.

“The other part is, we get them to sign, what we call, a credit quote.”

This is a document that details how much the client will be liable to pay Atelier wealth if they decide to refinance to a different broker within the first 24 months of the loan.

“The customer acknowledges that if their loan leaves in the first two years, they have to pay an invoice for the commission.”

He says, the team have only had to enforce this once in the last two years because the clients sold their property as part of a divorce.

Commission is no longer a dirty word.

Christie-David says overcoming the challenge caused by clawback had a lot to do with being transparent around the way brokers are paid.

“The whole point is built on transparency around commissions.”

He says, a lot of brokers struggle with clawbacks early on in their careers because they aren’t confident in talking to clients about how they are remunerated.

“It almost became a dirty word – but the royal commission did a good job in bringing that to light, and making that conversation really open and transparent.”

Nurturing the customer is essential for retention.

In addition to educating the customer about clawbacks, Christie-David says it is important to make sure customers are well looked after.

“We’ve got a big focus on retention,” he says.

“We really actively nurture our clients so that they don’t need to look anywhere else – they come back to us.”

In light of the current coronavirus pandemic, he says Atelier wealth are doing a lot of work to communicate with existing clients and reassure them they are here to help.

“We’ve done video messages, SMSs, letter main outs, emails – just making sure they know that we’re here for them.”