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The Broker versus The Bank

Conflicted interests are abundant in the finance industry.

Commissions are widely used in sales roles in most industries to encourage the desired outcome - the sale.  The 'conflict area' relates to the remuneration earned from a successful sale.  The potential 'conflict' relates to the sale of inappropriate products motivated by the sales person's financial interest in the sale.

 

Helping to mitigate a conflict of interest

Just as mortgage brokers normally receive commission for their role in selling mortgage products, bankers also generally receive performance based remuneration for selling their employers products (home loans, credit cards, personal loans, insurances etc). 

There are important distinctions between the broker and the banker which help to mitigate the broker's potential conflict of interest.

We believe that offering choice helps to mitigate the potential conflict. 

 

The conflict of interest

 Broker Banker
Remuneration includes sales component Green Tick Green Tick

Mitigating the conflict

 Broker Banker
  • Able to offer more than one bank's products
 Green Tick Red Cross
  • Regularly place business among many lenders
 Green Tick Red Cross
  • Match customer needs to competing lenders products
 Green Tick Red Cross
  • Access to specialist lenders for specialist purposes
 Green Tick Red Cross
  • Able to assess suitability of one lender vs another
 Green Tick Red Cross
  • Motivated to reduce dependence on high margin products (e.g. credit cards)
 Green Tick Red Cross
  • Remuneration returned to the bank if customer profitability fails to meet targets
 Green Tick Red Cross

 

Summary

Red Cross

The banker is conflicted when it comes to providing objective advice on what is best to help you to achieve your goals.
Red Cross

Bankers are not able to mix-n-match products from various sources and can only discuss his or her employer's products with you.
Green Tick

Brokers are well qualified to consider alternatives and offer solutions from a wider pool of resources.  This helps to ensure that our customers receive well considered solutions designed to assist them achieve their financial goals.