Tag: The Adviser

CBA to cut ties with Aussie

From The Adviser.

CBA’s decision to distance itself from Aussie Home Loans via the bundled spin-off of its wealth management business has been labelled a “clean and timely exit” by CEO Matt Comyn.

Any conflicts of interest to be found in the ownership of Australia’s biggest mortgage brokerage by Australia’s biggest bank will soon be a thing of the past.

On Monday morning, CBA announced that it will demerge Aussie, along with several wealth management businesses such as Colonial First State, into a separate company known as CFS Group. That group will list on the ASX.

“Ultimately, we believe that they will perform better outside the Commonwealth Bank Group,” CBA chief executive Matt Comyn said.

“Aussie Home Loans [is] the leading mortgage broking franchise, and we have decided to put that inside the demerged group. It is a very successful business, over nearly 20 years, and we believe again that the best opportunities for growth and performance from Aussie Home Loans is inside the CFS Group, rather than inside the Commonwealth Bank Group.”

Mr Comyn said that a demerger, rather than a sale, offers a couple of important benefits.

“Firstly, it is a clean and timely exit of all of these businesses,” he said. “I think each of them are good businesses in their own right. We think the best chance for these businesses to perform at their potential, is outside the Commonwealth Bank Group. And CBA shareholders will receive a proportionate interest in the demerged entity, relative to their CBA shareholding. And that enables them to either participate in the growth of the CFS Group over time, or if should they prefer, they can also exit and sell on market.”

While there has been no mention of conflicts of interest or vertical integration in Mr Comyn’s statements about cutting ties with Aussie, there has been plenty of criticism over the bank’s ownership of the brokerage that no doubt weighed on an already heavily saddled CBA.

Representatives from both Aussie and CBA appeared as witnesses during the first round of the Hayne royal commission. Bank ownership of brokerages was also brought up by the Productivity Commission in its draft report on competition in financial services. The PC report concluded that the mortgage broking revolution, which disrupted the major banks in the 1990s, has failed and many brokers now act in the best interest of the banks that own them and not consumers.

“The early 2000s was the last time Australia’s financial system saw a period of fierce competition,” PC chairman Peter Harris said. “If we are to see its like again, we will need a series of policy shift, and a champion to own them.”

CBA’s decision this week may foreshadow some of the policy shifts the PC chairman has suggested, which could see changes to bank ownership of broking businesses. The PC will deliver its final report on Monday.

Meanwhile, it’s business as usual at Aussie Home Loans, according to CEO James Symond.

“Aussie Home Loans confirms CBA Group’s announcement about the planned demerger of its mortgage broking businesses along with its wealth management operations into a new, independent and separately ASX-listed company to be known as [the] CFS Group,” Mr Symond told The Adviser.

“As has been the case since we started, Aussie is committed to providing the best, independent service to our customers, ensuring they get the most suitable home loan tailored to their needs.

“While important in terms of our ultimate ownership, CBA’s announcement will not change this commitment to our customers or have any impact on the service we provide them. As a larger part of a smaller group, this opens greater opportunity for Aussie.”

This week’s announcement is the end of an era for Aussie, which sold its first 20 per cent stake to CBA back in 2008. In August last year, founder John Symond received 2.1 million of CBA shares — worth nearly $164 million — for his remaining 20 per cent stake in the brokerage.

Credit squeeze hits elite brokers as lenders scrutinise expenses

As banks continue to tighten their home lending policies in response to regulatory pressure and the negative press surrounding the royal commission, Australia’s top brokers are finding it increasingly difficult to help their clients; via The Adviser.

ANZ has become the latest lender to tweak its credit policy for home loan borrowers. Late on Friday, the major bank notified aggregators that it has made changes to minimum living expense values.

It is now common for lenders to ask for 29 fields of expenses when assessing a mortgage application. Some banks that previously required no bank statements from applicants are now asking for up to six months’ worth of transaction account information to verify living expenses.

In many instances where banks find that an applicant’s living expenses for a certain item are higher than declared, brokers must go back over their client’s records to explain “one-off” expenses to the lender, such as a renovation cost or an overseas holiday. This process is creating significant delays in the settlement process.

Some of the industry’s most successful brokers have told The Adviser that the environment has become extremely tough, but most believe the credit squeeze will be short-lived.

“As a broker running a business that settles over $200 million a year, we don’t normally get declined by lenders,” one award-winning broker told The Adviser. “But I’m getting declined now.”

Refinancing has become particularly difficult in the current climate, with many borrowers failing to switch to a different lender and a better rate.

Last week, The Adviser ran an editorial that highlighted how Australia, like the UK, is beginning to see a number of “mortgage prisoners” shackled to home loans as a result of tighter credit policies and increased regulation.

One broker told The Adviser that he has started repricing loans for clients through their existing bank when they are unable to refinance.

“I’m doing a lot of that. I go back to the lender and negotiate a better rate. There is nothing in it for me in terms of remuneration, but the customer is getting a better deal,” the broker said

RC hearings too short to cover ‘breadth’ of cases: Ombudsman

From The Adviser

The Small Business Ombudsman has called for another set of royal commission hearings to investigate more cases of inappropriate practices pertaining to small business loans.

Speaking with The Adviser, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), Kate Carnell, said that the “dilemma” with the third round of royal commission hearings (which focused on the provision of credit to small businesses) was too short, resulting in only a limited number of cases being investigated.

“The royal commission was called on because of a huge amount of agitation from many small businesses, a joint parliamentary inquiry, a range of cross-benches that indicated they might cross the floor because they had small business constituents, who believed that they hadn’t had an opportunity to have their cases heard,” Ms Carnell told The Adviser.

“I believe that they need to do another two weeks [of hearings] or another set of cases.”

She added that the few cases heard in the third round of hearings is “[not] representative of the breath of cases that exist”, though noted that the next round, which will focus on the provision of finance to customers in regional and remote areas, could bring to light further issues experienced by small businesses.

Ms Carnell cited cases where the banks had dragged out a loan’s sign-off process, then decided against the loan as little as 24 hours before it was expected to roll over, thereby not giving enough time for the business to find an alternative solution.

“Small businesses [are] getting very mixed messages… In a number of the cases that we saw, the bankers were telling [the small businesses] ‘no problem, we’ll refinance you’ and then two weeks (or in one case, 24 hours) before the rollover was due to happen, the bank said they changed their mind,” the ASBFEO said.

“There’s no capacity to refinance, to find another bank… and so the business ends up going into default, at which stage their interest rates double or even triple in some circumstances.

“The [cases] where banks actually told people one thing and then did something totally different and where timelines for businesses were just far too short to allow [them] to reorganise their operations… I don’t think were brought out nearly enough.”

Another issue that Ms Carnell argued didn’t get enough airtime at the last royal commission hearings is the nature of the relationships between banks and third-party valuers, administrators, and liquidators, which she said are frequently problematic.

“The small business pays for the liquidator or the valuer or the investigative accountant… but they have no input into the appointment in many cases,” the ASBFEO said.

“In our inquiry, we found it interesting and concerning that regularly the investigative accountants that gets sent in to have a look at the business to determine what should happen is then appointed as a liquidator, [which we thought] certainly didn’t look right.

“You could argue [that] an investigative accountant ends up financially benefitting from recommending a liquidation if they’re going to end up with the job… [This] isn’t an occasional scenario; it’s very regular.”

She also questioned whether banks are getting “friendly valuations” that work in both the bank’s and valuer’s favour.

“I’m not suggesting valuers and administrators aren’t professional people, but if their livelihood depends on bank work, there are some questions to be asked,” Ms Carnell said.

“Is [the] motivation for what you do in the interest of the consumer, who is paying you, or is it in the interest of the bank, who you rely on for work?

“In situations like that, transparency is really important… You’ve got to really know whether there are any kickbacks, any real incentives for people to act in particular ways [such as] provide a low valuation or a high one, or recommend a liquidation or not, recommend a particular loan product or not.”

Ms Carnell concluded that transparency around the banks’ relationships with third parties needs further exploration by the royal commission.

Tic:Toc boss calls out HEM issues and ‘questionable’ third parties

From The Adviser.

The CEO of online mortgage lender Tic:Toc Home Loans says that no human judgement need enter the equation when it comes to assessing the expenses of a mortgage applicant.

With the first weeks of the banking royal commission now behind us, Tic:Toc founder and CEO Anthony Baum believes it has become clear that there is an opportunity for the mortgage industry to reconsider how customers are assessed for finance.

“One key flaw that’s been exposed is the failure to conduct basic checks and balances on the applicants’ household expenses. This includes instances where judgement on a customer’s borrowing capacity has been handed to a raft of questionable third parties,” the CEO said.

“The truth is, no human judgement need enter the equation when it’s possible to check up to a year of personal expenses at the click of a button. There’s no grey area for the vast majority of cases.

“It really is that simple — and quick. For the exceptions, a combination of digital and human assessment is the most efficient and responsible way to assess a customer. Plus, automated assessment makes the whole approval process far cheaper, and faster, for a bank than the current process.”

Tic:Toc Home Loans is one of a growing number of new entrants aiming to simplify the mortgage process by harnessing digital technologies and online channels.

Unlike some fintech players looking to disrupt the home loan market, Mr Baum has extensive industry experience, having led Bendigo and Adelaide Bank’s third-party business for close to four years.

The threat of digital disruption has increased for brokers in recent years. However, many still believe that face-to-face contact with a mortgage professional will continue to be the preferred choice for Australian borrowers.

“My opinion is home loans are not actually as complicated as the industry makes out,” Mr Baum said. “They are really a means to an end, which is more a utility-style product.

“As the CEO of an online home loan company that bases its work on the latest financial technology, I find it hard to get behind the idea that generic reference points, such as the Household Expenditure Measure, and personal judgement are being used as an integral part of the approval process, especially now we are hearing about the true cost for those on the receiving end of the so-called ‘Liar Loans’.

“The royal commission is looking at historical banking issues. And while it is vitally important we expose nefarious practices to sunlight, my concern is that there will be no industry-wide visionary leadership and legislative framework as an outcome. This is the industry’s opportunity to create a future strategy that leverages the data and technologies available to the benefit of the customer, increases the relevance of Australian financial services globally, and protects everyday Australians in the process.”

Mr Baum believes that the onus is on industry players, banks, technology providers and the government to ensure real change is enacted.

“I may make myself deeply unpopular for saying this, but that needs to include far tighter compliance, regulation and independent oversight,” the CEO said, adding that Tic:Toc would like to see legislation around data capture, storage and usage within an institutional environment.

“Data is the new cash in a banking environment, yet, other than privacy, there’s limited regulation to guard it in the same way as we do a vault. Plenty of companies are doing the right thing, but until there’s a compliance structure in place, many players, large ones included, will continue to flaunt the guidelines for their own gain.”

Non-banks winning prime mortgages as majors tighten

From The Adviser.

A credit crackdown among the big four banks has been a blessing for the non-ADI sector, with lenders seeing a significant boost in prime mortgage flows. We discussed this a few weeks back.

 

Credit has been tightening since 2014 and a raft of measures have been introduced to stem the flow of investor loans, interest-only mortgages and foreign buyers.

“A lot of that is narrowing what is prime credit for a bank,” Fitch Ratings’ head of APAC, Ben McCarthy, told the group’s 2018 Credit Insights Conference in Sydney on Wednesday.

“As the bank prime market gets smaller, things that were prime last year will end up in the non-bank space.

“Talking to some of the issuers just recently, some of them have commented on the potential outcomes for them as an individual lender. Non-banks are telling me that their volumes are increasing, but not in the areas that you might think. Interest-only volumes are falling and investor loans are relatively stable.”

Australia’s RMBS market is dominated by the non-banks, which rely on securitisation and warehouse funding to grow their books and continue lending.

In 2017, securitisation issuance was at its highest since the GFC. Last year saw $36.9 billion of RMBS issuance, of which $14.7 billion came from the non-banks. Only $8 billion of issuance was made up of non-conforming loans.

The strength of the non-bank sector has attracted US investors. Last year, KKR snapped up the Pepper Group, Blackrock purchased an 80 per cent stake in La Trobe Financial and private investment firm Cerberus Capital Management, L.P. acquired the APAC arm of Bluestone Mortgages.

With a bolstered balance sheet, Bluestone was recently able to edge closer to the prime mortgage space by introducing a new product and lopping 225 basis points off its rates.

Last month, the non-bank lender entered the near-prime space and made significant rate cuts to the Crystal Blue portfolio, which comprises full and alt doc products geared to support established self-employed borrowers (with greater than 24 months trading history) and PAYG borrowers with a clear credit history.

Speaking of the move, Royden D’Vaz, head of sales and marketing at Bluestone Mortgages, said: “The recent acquisition of the Bluestone’s Asia Pacific operations by Cerberus Capital Management has enabled a number of immediate opportunities to be realised — most notably the assessment of our full range of products and to ensure they fully address market demands.

“We’re now in an ideal position to aggressively sharpen our rates based on the new line of funding and pass on the considerable net benefit to brokers and end users alike.”

With many anticipating a significant slowdown in bank credit growth, driven by the evidence given during the Hayne royal commission, non-banks look well positioned to capture a greater slice of the prime and near-prime markets.

“Non-banks are becoming a bigger part of the market,” Fitch Ratings’ Mr McCarthy said. “That trend will increase.”

Fintech Athena Home Loans Direct Model Funded

From The Adviser.

A new fintech Athena Home Loans founded by two former NAB executives has received $15 million from major investors to facilitate its entry into the Australian mortgage market. This was reported in the AFR on Monday.

Cloud-based digital mortgage platform Athena Home Loans has closed a Series A raise of $15 million with investment backing from Macquarie Bank, Square Peg Capital, Apex Capital and Rice Warner.

Athena, founded by former NAB executives Nathan Walsh and Michael Starkey, pulled in a $3 million seed round in June 2017 and has now set its sights on disrupting the $1.7 trillion Australian mortgage market.

Speaking to The Adviser, co-founder and CEO Nathan Walsh noted that Athena plans to bypass the banks, offering super fund-backed mortgages directly to borrowers through its cloud-based digital portal.

“We know that the big banks are very constrained by customer pain points that are caused by ageing technology in the manual, paper-based processes, and we know there’s a real opportunity to improve on that,” Mr Walsh said.

Chief operating officer Michael Starkey claimed that Athena’s super fund-backed investment model would also allow it to offer lower interest rates than its competitors.

“By investing in home loans directly with Athena, super funds can cut the spread between what mortgage borrowers pay and investors receive,” Mr Starkey said.

“In countries such as the Netherlands, where pension systems are similarly advanced, the impact of this model is already evident.”

Mr Walsh added: “The potential savings for a typical Australian family switching from the big four banks to Athena could be as much as $100,000 over the life of the average loan.”

Mr Walsh also noted that Athena aims to settle $100 million in home loans this year, which the CEO said equated to approximately 200 home loans.

The Athena chief went on to say that the online lender plans to ramp up its offerings once it is established in the marketplace.

“We see a big opportunity [for brokers] here,” Mr Walsh continued.

“Next year, [it’s] game on; we really see a big opportunity. It’s a big market and we’re very keen about giving all Australians access to a better deal on their home loan.”

No immediate plans for the broker channel

Mr Walsh revealed to The Adviser that while Athena has no immediate plans to originate home loans through the broker channel, it could be an option in the future.

“[We’re] a direct model, so consumers are going direct to [Athena] and opening accounts directly, but we do know that, clearly, mortgage brokers are an important part of the market and we’ll consider that in our roadmaps for the long term,” the CEO said.

“[We] are considering those options, so I think those are probably things for future discussions.

“At this stage, we’re really focusing on our launch, which is targeting our direct channel.”

Compliance with responsible lending obligations

Mr Walsh also insisted that Athena would ensure it’s complaint with responsible lending obligations, saying that a “huge part” of the build phase has been “the ongoing process of design, legal and compliance review, to really make sure that we’re stepping through each stage of that journey.”

The CEO said: “[We want to] make sure we’re providing those really important protections, but at the same time, managing the complexities so it is a process that borrowers feel comfortable using digital channels. And that’s a really big part of the design thinking that’s gone into building that.”

Square Peg co-founder joins Athena board

As part of Square Peg Capital’s investment, co-founder Paul Bassat is set to join the Athena board.

“We are thrilled to be joining Athena’s journey,” Mr Bassat said.

“This is a great example of the type of team we love to back — smart, driven and focused on solving an important problem.

“The win-win model that Athena offers to investors and borrowers has huge potential to disrupt the way home loans are originated, serviced and funded in Australia.”

MEBank Apologises for Failing to Adequately Warn of Rate Change

From The Adviser.

MEBank has apologised to customers and said that it is working to reimburse around 2,500 mortgagors affected by a “system error” that led to some borrowers being charged a higher interest rate without adequate notice.

On 17 April 2018, Members Equity Bank (ME) announced that it would be increasing its variable home loan interest rates.

Under the changes, ME’s standard variable rate for existing owner-occupier principal and interest (P&I) borrowers with an loan-to-value ratio (LVR) of 80 per cent or less increased by 6 basis points to 5.09 per cent p.a. (comparison rate of 5.11 per cent p.a.).

Variable rates for existing investor principal and interest borrowers increased by 11 basis points, while rates for existing interest-only borrowers increased by 16 basis points.

According to ME CEO Jamie McPhee, the changes were brought in as a result of increasing funding and compliance costs.

Speaking last month, Mr McPhee said: “Funding costs have been steadily increasing over the last few months primarily due to rising US interest rates that have flowed through to higher short-term interest rates in Australia.

“In addition, ME continues to transition its funding mix to ensure the requirements of the Net Stable Funding Ratio will be met, and this is also increasing our funding costs.

“At the same time, industry reforms and increasing regulatory obligations are increasing our compliance costs.”

He continued: “This was not an easy decision, but rising costs have forced us to reset prices to maintain a balance between borrowers, depositors and our industry super fund shareholders and their members, all while ensuring we continue to grow and provide a genuine long-term banking alternative.

“We will continue to assess market conditions and make changes to prices to maintain this balance if necessary.”

While the bank did publicise the rate change two days before it was due to take effect, usual practice is for a mortgagor to be notified 20 days in advance of an interest rate change.

According to the bank, however, a “system error” led to customers being charged the new rates on 19 April without the adequate time warning.

A ME spokesperson said that the “proper process” is for ME to write to customers to notify them their repayments are going up “but not to increase their repayments until at least 20 days after they get that notification”.

“Unfortunately on this occasion, due to a system error, we increased the home loan repayments immediately for about 2,500 owner-occupier and investor customers — about 1 per cent of our home loan accounts.”

The bank reportedly detected the “error” the following day (20 April) and “immediately intervened to ensure no additional customers were affected”, the spokesperson said.

“We are now working on reimbursing and communicating with those impacted customers as a matter of urgency. We are clearly very sorry for the error and the impact it has had on customers,” the CEO said.

The way banks have been disclosing interest rate changes and remediating customers for bank errors has been thrown into the spotlight recently, thanks to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Advantedge requires paper copy signatures in NSW

From The Adviser

NAB’s wholesale funder and distributor of white label home loans – Advantagedge –  has announced that, as of today, it will require NSW mortgagors to sign mortgage documents on paper.

They said that until relevant legislation regarding the need for wet signatures on mortgage documents is amended in NSW, it would send a paper copy of the mortgage documents to customers to be wet-signed and witnessed.

NAB-owned white label provider Advantedge has said that it is updating its digital mortgage process for NSW customers, and is now requesting that mortgage documents be wet-signed by customers and witnesses.

Formerly, Advantede could accept electronically submitted mortgage documents without a paper copy. However, from Monday, 7 May, it will require NSW-based customers to sign mortgage documents issued in NSW on paper and to be witnessed.

It has said that it will post (or send by encrypted email to print depending on customer preference) mortgage documents for customers to sign with a witness, and return to its settlement agents, MSA National.

Despite this, Advantedge will continue to issue NSW mortgage documents electronically so there will be no delays with settlement.

It added that should the mortgage documents be submitted electronically, Advantedge would still process these “as normal” but would also send a paper copy of the mortgage documents to customers to be wet-signed and witnessed.

Advantedge clarified that the following documents can still be sent and signed electronically:

  • Letter to Borrower(s)
  • Loan Contract
  • Loan and Settlement Authority
  • Direct Debit Request
  • Business Purpose Declaration
  • Loan Terms and Conditions Booklet
  • Credit Guide
  • Borrower’s Guide to Construction Loans
  • MSA National’s Estimated Costs Statement

NSW mortgage documents issued prior to Monday, 7 May 2018, will be accepted without a wet signature.

Those issued after this date may still be submitted electronically but will need to be accompanied by a paper-signed and witnessed mortgage document.

Advantedge told The Adviser that, until relevant legislation regarding the need for wet signatures on mortgage documents is amended in NSW, it would send a paper copy of the mortgage documents to customers to be wet-signed and witnessed.

It added that this change only applied to Advantedge (and not NAB), as it involves the execution of mortgages.

Indeed, NAB announced just last week that it had launched DocuSign in the broker channel, allowing customers to sign their mortgage documents from anywhere and on any device.

NAB general manager of broker distribution Steve Kane said that this is another example of NAB’s ongoing commitment to improving the customer experience and to supporting brokers.

“By giving brokers the ability to have customers digitally sign their upfront documents, we are making the home loan process simpler, easier and more convenient,” Mr Kane said.

“We have eliminated the delays that can come with requiring a physical signature, for example, and we are confident this new tool will go a long way to help create a more streamlined process for brokers and for customers.”

Scrutiny, Regulation and the Looming Credit Crunch

This from the excellent James Mitchell at the Adviser.

I’ve said before that the next downturn will, ironically, be triggered by regulation. Recent developments show this could soon play out.

This we week we’ve seen ANZ chief Shayne Elliott and RBA governor Philip Lowe both admit that lending is becoming more difficult.

On Tuesday, Elliott said that tighter controls around customer living expenses — an issue given extensive coverage during the first week of the Hayne royal commission – would slow lending down.

Later that day, the RBA governor issued a similar warning following its decision to leave rates unchanged for the 21st consecutive month.

“It is also possible that lending standards in Australia will be tightened further in the context of the current high level of public scrutiny. We will continue to watch these issues carefully,” Mr Lowe said.

These comments follow APRA’s decision to remove the 10 per cent investor lending speed limit in favour of debt-to-income curbs.

Exactly what these will look like remains to be seen, but the banking regulator expects ADIs to develop their own portfolio limits on the proportion of new lending at “very high” debt-to-income levels.

The problem with things like forensic evidence of customer living expenses and tighter restrictions on mortgage lending is that they will reduce credit availability.

About 10 months ago I wrote that “mortgages are the second largest pool of assets in Australia after superannuation. Messing with that could have serious implications. Particularly at a time when property price growth is moderating.

“The risk is that measures designed to strengthen the system could inadvertently weaken economic growth, consumer sentiment and the propensity for Australians to continue spending.”

That observation was made following the 2017 budget, when it was revealed that APRA’s powers would extend to the non-banks.

Former Pepper CEO Patrick Tuttle told me that such action would “accelerate a credit crunch” and a sharp correction in house prices.

But the stakes are higher now and the risks to mortgage growth have intensified. Customer living expenses are at the centre of this, but I doubt common sense will prevail when it comes to regulation and tighter policies.

Over the last few weeks I’ve spoken to a number of mortgage brokers, head groups and lenders about this issue.

On the record, they see more granular data around living expenses as a positive development. Off the record, they can’t stand the idea and anticipate a significant drop in volume.

One broker put it to me plain and simple: when a person gets a mortgage, they change their living expenses accordingly. They stop spending on rent, reduce their entertainment budget and work harder for that job promotion. In other words, they adapt to their new financial position.

Australians have a solid track record of paying down their mortgages. Arrears rates range from 0.76 per cent (ACT) to 2.5 per cent (WA).

While there have been no systemic problems in the Australian mortgage market, the banking royal commission is doing a great job of promoting a financial services industry rife with misconduct and risky behaviour. Which it is, to some extent, but how risky are the mortgages currently being written?

Are the banks tightening their lending policies because of risks, or is it simply a PR play to appease the regulators and the royal commission?

Either way, we can expect a reduction in credit availability and brace ourselves for what the knock-on effects of that will be.

Bank West Announces Broker Commission Changes

From The Adviser.

CBA subsudary Bank West has announced that it is implementing changes to its broker commission payment model, including changes to trail and the adoption of CIF recommendations, effective from 1 July.

 

Bankwest has said that it is bringing in the changes to “align itself with evolving industry practice and regulator expectations”.

The changes, which will be effective on settlements from 1 July 2018, include:

  • The reintroduction of Year 1 trail commission
  • The reduction of trail commissions in Year 3 to 0.15 per cent and from Year 5 and onwards to 0.20 per cent
  • The adoption of the Combined Industry Forum (CIF) recommendations on paying commissions on utilised funds and net of offset

There will be no changes to the upfront commission rate.

Commenting on the industry recommendations, Bankwest general manager for third party Ian Rakhit said: “Bankwest has been a very long-standing supporter of the broker industry, going back to the very start some four decades ago, and we remain committed to brokers as a channel of choice for customers.”

He added: “We support the current upfront and trail model as well as the improvements to the model outlined in the ASIC review and the Combined Industry Forum (CIF) recommendations.

“We understand the lack of Year 1 trail has been outstanding for some time and we are pleased to reintroduce this to bring us back in line with the market.

“Our contract stipulates that trail commissions represent payment for continuous customer maintenance and services, and we believe trail remains warranted for brokers to ensure ongoing support is provided to customers they refer to Bankwest.”

The bank is the first lender to make major moves to change broker remuneration following the ASIC remuneration review, Combined Industry Forum package reforms and the ongoing commissions.

The Adviser has asked Bankwest’s parent company, CBA, if similar changes will be made by the major bank but has not yet received a response.