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Trail commissions are not 'money for nothing' – adviser

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Ksenia Stepanova | 15 Feb 2019, 12:48 p.m. Agree 0
Mortgage adviser says Hayne's statement around trail commissions does not apply to New Zealand
  • Noel Bowl | 15 Feb 2019, 01:09 p.m. Agree 0
    Well said- you are making really good sense hopefully FMA and RB are listening and taking note.

    Hopefully Aotearoa- New Zealand will stand on it own two feet but the fear is the BIG boy Aussie own banks will have to tow the party line.

    Far too early to speculate- wait and see.
  • Tony Hall | 15 Feb 2019, 03:42 p.m. Agree 0
    Just for the record the Aussie proposal is NOT to replace trail with borrower paid fees. The proposal is to ban trail altogether (virtually a done deal) and replace up front commissions with borrower paid fees (this is the part that is subject to further review).

    Banks in Australia do not pay 'refix' fees or any other ongoing fees to brokers other than trail. Trail is effectively a management fee to fund the ongoing cost of servicing the client and it is essential for brokers to stop their clients going back to the bank for any service as the banks attempt to refinance or restructure the loan to cut the broker out. I have seen commission claw backs on loans refinanced internally by the banks as well as lost trail.

    Protecting trail can be quite onerous as most of the work required is nowhere near paid for by the trail of that particular customer. Trail is a little like insurance where the trail of many clients is pooled to help fund services to those requiring it. Most brokers in Oz conduct annual reviews and are available without charge whenever a client needs assistance.

    'What if' scenarios are frequent and can be very time consuming but usually not charged for even if they don't progress. Small top ups of say $20k on a Line of Credit might be worth < $100 in commission and yet full applications required and similar amount of work as a $500k application. This also happens in NZ and is why we need trail here. Current lenders offering trail pretty well fund the first couple of years trail by reducing the up fronts so debatable whether of serious benefit until year 3 or later.
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