Trade-offs test Mortgage Choice
Settlement volumes have slumped by around 10 per cent this financial year at Mortgage Choice, heightening the need for measures to pacify cranky franchisees, announced yesterday.Mortgage Choice spelled out "a new broker remuneration framework" five weeks after a series of joint reports by Fairfax and ABC aired details of conflict between the company's origination network and head office. That included claims that, at the time, an estimated 50 per cent of franchisees were labelled as "low performers" that did not make their monthly targets.Key features of the new model, "which will be offered to all franchisees on an opt?in basis from August 2018", include an increase in the average commission payout rate on residential lending from 65% to 74% and a "hybrid trail commission structure which pays the best monthly outcome on either a flow or book basis".Susan Mitchell, CEO of Mortgage Choice, said all of the broker franchisees were "likely to opt?in to the new model, as they will be better off financially. The company said it "initiated a program to improve operating efficiencies across its business," but the bottom line is that it's profits will be much lower.Top level profit guidance yesterday for the year to June 2018 broadly matches the 2017 profit. But, and it's a big but: "As a result of the changes being introduced, there will be a one?off, non?cash, negative adjustment of approximately $30 million," Mortgage Choice said.In 2019 the profit may be "approximately $16.5 million." The company's results will be released to the market on 21 August 2018.