NAB proposes change to upfront commission

Major bank along with Choice, PLAN and FAST reveal details of joint submission to ASIC’s remuneration review

NAB proposes change to upfront commission
NAB, Choice Aggregation, PLAN and FAST reveal details of joint submission to ASIC’s remuneration review 

NAB believes upfront commission should be paid based on the drawn down amount, not the total facility amount, executive general manager Anthony Waldron revealed yesterday.

Writing about NAB’s submission to ASIC’s remuneration review, Waldron also noted that upfront should be paid net of offset balances, whilst defending commissions: “We don’t believe that the current standard commission model has resulted in poor consumer outcomes, but we believe it is essential to manage not only actual conflicts but also the potential for perceived conflicts of interest.”

With regard to bonus payments, Waldron commented that “the time for such payments has passed” although he claimed that conflicts of interests related to soft dollar benefits could be transparently managed through gift and conflict of interest measures.

Calculating upfront commission

NAB is not the only industry stakeholder to reconsider the calculation of upfront commission. 

The first proposal of ASIC’s Review of Mortgage Broker Remuneration suggested that “lenders do not structure their incentives in a way that encourages the creation of larger loans that initially have large offset balances.” 

In its submission to the Treasury, the MFAA warned that upfront should be paid on drawn amount net of offset was ‘unlikely to be suitable’. According to the MFAA, this could lead to unintended consequences for construction loans and lead to brokers not receiving any commissions for parts of renovation and investment loans.

However, the MFAA suggested that upfront paid on drawn amount net of offset – with subsequent upfront top ups – was ‘likely to be suitable’. A complex structure would result in brokers getting a second set of upfront commissions six to 12 months after the initial payment. 
How do aggregators fit in?

NAB’s view of remunerations is particularly important as it includes major aggregators Choice (Aggregation and Home Loans), PLAN and FAST as well as white label funder Advantedge. 

Representatives of all three aggregators will be speaking about broker remunerations at MPA’s livestreamed roundtable next week and will respond to suggestions that bank-owned aggregators cannot adequately represent brokers. 

Brokers can watch the live video for free on MPA’s website, starting at 12.30 on Tuesday and you can register and submit your questions here: