It prevents her from reducing her 18-hour workdays
.jpg)
The changes to broker remuneration have created a system which negatively impacts the cashflow of brokers, and creates an administrative nightmare, according to Zippy Financial principal broker Louisa Sanghera.
Last year, the industry began adopting the Combined Industry Forum’s recommendations that broker pay be based on loan size and the funds drawn down and used by customers. While it was recommended and subsequently implemented to improve customer outcomes, not everyone has been happy with it.
“Brokers cannot track what is going in and out of people’s offset accounts,” Sanghera told MPA. “We are completely blind to people’s actual loan balances and offset balances and are relying on banks to get this right.”
The system has caused a significant amount of loss to Sanghera’s income this year. And while some of the losses were repaid later, Zippy Financial still wonders if they can still retrieve the rest.
“It is really difficult to keep track of cashflow, with money coming in and out of the lenders. We trust them to get their systems right and repay us later once they can see funds have come back out,” she said.
More work and stunting growth
According to Sanghera, Zippy Financial has never drawn down funds for a client that’s a dollar more than he or she needed. Regardless where the money goes, or if the borrower spent it all at once, her team’s earnings depend on clawbacks and repayments, and she is not seeing much of the latter.
"Unless I call clients, I have no idea of knowing if I am being paid correctly. And we’re not going to start calling clients to see what they have in their offset," she said.
According to Sanghera, for a small business owner like her, “losing big chunks of income” from clawbacks is awfully hard. She had already lost significant earnings from high-income earners looking to purchase an investment property.
“I am trying to grow my business and when I see steady cashflow, it gives me confidence in taking the next step to bring on more staff to help with my workload and reduce my 18-hour workdays,” she said. "But then to take on additional staff and keep losing income and paying it back does cause big cashflow issues."
Because of clawbacks, Sanghera is not able to bring on another credit manager her team desperately needs. As a result, each of them must take on extra work while Sanghera tries to build a clawback fund that needs to be constantly topped up.
Although reclaiming clawbacks from customers is an option, it’s something Sanghera’s team is not comfortable in doing. They find it difficult to execute — whether the cause of the clawback is divorce, interstate migration or a deliberate wrongdoing — as it could end up damaging their offset accounts and brand.
Working together
To stop clawbacks, Sanghera suggests that banks and aggregators could perhaps work together to monitor brokers who appear to be churning by tracking the lives of their loans in their entire book.
She suggests that banks could question clients who have not used their borrowed money, and that banks could work with aggregators to deal with brokers who allow customers to borrow above what was needed. She added that banks and aggregators need to look at IT systems to monitor and fix broker-related issues.
“With brokers providing banks with 60% of their business, perhaps it’s time for banks to analyse the actual losses they make from clients moving under 18 to 24 months,” she said.
“Is it really necessary to pass these losses onto brokers, knowing the impact this will create on their business? Is the system really servicing its purpose of protecting clients from over borrowing?”
“There must be a better way.”
