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Mortgage Choice overhauls franchisee payment structure

Nick Hall

Mortgage Choice is overhauling its payment structure after disgruntled franchisees voiced their dissatisfaction with the current model.

The publicly listed mortgage broker announced they would be raising the average rate of broker commissions on home loans from 65 per cent to 74 per cent under the new agreement.

Franchisees spoke out against the company’s model following a joint investigation from The Age, The Sydney Morning Herald and ABC’s 7.30 program, revealing that as many as 173 Mortgage Choice franchisees were considering legal action against the broker.

The broker commission changes signify the message is getting through, with Mortgage Choice chief executive Susan Mitchell telling analysts and investors the brand has seen its market share decline due to a broker remuneration model that is “not as competitive as it once was”.

For Mortgage Choice, the decision to re-evaluate the current remuneration model demonstrates a commitment from the brand to franchisee retainment.

The new model put forward by Mortgage Choice, which will be offered to all franchisees on an opt-in basis from August 2018 will feature;

  • an increase in the average commission pay-out rate on residential lending from 65% to 74%;
  • a unique hybrid commission structure which pays the best monthly outcome on either a flow or book basis;
  • a reduced income volatility, providing better protection for franchisees in the event of a market downturn.

Mitchell believes the overwhelming financial reward will see all of the broker franchisees likely to opt-in to the new model.

“When we commenced discussions with franchisees, it was with a view to introducing a model that allowed them to earn more so they had the confidence to invest in their business, while still supporting them under a national brand with the services they value including IT, compliance, training, marketing and business planning,” Mitchell said.

“The hybrid trail commission structure we are introducing is unique. It rewards franchisees as they grow and provides better earnings certainty through periods of investment. We believe all franchisees will adopt the new model as it caters for businesses across the life cycle spectrum, from greenfield to more established brokers.”

To further repair relationships with franchisees, Mortgage Choice has also elected to continue investment in support operations, initiating a program that aims to improve operating efficiencies.

“These changes are the product of extensive consultation with broker franchisees and the recognition we needed to rebalance our service provision with more competitive remuneration,” said Ms Mitchell.

“Franchisees will have access to the same core services, just delivered in a more efficient way. At the same time, we are investing in a new Broker Platform that will improve broker productivity and enhance their service levels to customers.”

“The demand for the services of a mortgage broker is strong and we believe these initiatives will provide the platform for a sustainable business model for Mortgage Choice and a framework for franchisees to succeed by helping more Australians make better financial choices.”