Australian Broker magazine Issue 8.16

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ISSUE 8.16 August 2011

AFG to lift clawback veil

Mark Hewitt

 Aggregator to go head-to-head with ‘evil’ of industry

Australian Finance Group will soon commence calling 1000 clients of its national broker network in an effort to combat the now widespread “evil” of lender commission clawbacks. After seeking the permission of its broker members, AFG has indicated it will begin calling clients who have been the cause of a lender clawback, to understand why those individual clawback cases have occurred. AFG general manager of sales and operations, Mark Hewitt, said the aggregator is conducting the client research in an effort to minimise clawback impacts.

“We want to get a better understanding of why they are occurring so we can put in place some action plans to prevent this occurring going forward,” Hewitt told Australian Broker. “We just want to get a bit more information and a bit of research on why they are occurring so we can have a more considered approach. We are going into it with a pretty open mind.” Hewitt said the aggregator was against passing on the cost of the channel to consumers via a Finance Broking Contract clawback clause, which could be enforced to recoup upfronts. “We fundamentally don’t agree with it and we haven’t had a member request yet to do it [alter a contract to include a clawback clause], so we’d rather tackle the

whole issue of why they are occurring in the first place,” he said. “I think that approach is a very defensive strategy, and that has never been our way of conducting business; we prefer someone to get on the front foot and prevent things occurring rather than try to react once they do occur.” Mortgage Choice recently issued a policy document to its franchisees, following publicity around the viability of FBC clawback clauses. In the document, the franchise ruled out imposing a fee on clients in the event of a clawback, due to potential impacts on its brand image. Despite the move, Hewitt said AFG still saw FBC clawback clauses as a “non-issue”. “What we are actually more focused on is the reason why the clawbacks are occurring,” he said. “Clawbacks are regarded as an evil of the industry – no one likes clawbacks. But they appear to be here to stay, so we have to learn to live with them, and I suppose put in place plans to try and minimise them or make them work to our advantage if we can.” The key to preventing clawbacks is “getting closer to your customer”, Hewitt said, and that apart from unforseen circumstances, many brokers can manage clawbacks effectively. “The brokers that are close to their customers understand what their customers’ plans are, and have the ability to pick up the next loan – they don’t lose the refinancers to other banks,” he said. Brokers from AFG will be able to opt out of the research, Hewitt said. “We respect the right for them to not want us to contact their customers if they don’t like. But if they do want to be involved we’ll go ahead and we’ll share the general feedback with our membership base.”

Degree heat University education plan given passionate defence Page 2

Firstfolio fracas Lender volume hurdles cause broker outrage Page 4

St.George’s Sulicich New third party head to preserve small soul Page 6

Inside this issue Analysis 20 Pundits clash over low-docs Viewpoint 22 The fixed rate outlook Forum 23 Brokers on 80% conversions Insight 24 The qualification question Market talk 25 Shane Oliver gives insights Toolkit 26 Know your lending market Insider 30 Big brother gets smaller


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Australian Broker magazine Issue 8.16 by Key Media - Issuu