As a broker, you know how hard it is to build strong client relationships and secure the right home loan for them. But when clawback hits—demanding the repayment of commissions because a client refinances or discharges their loan within the first two years—it can feel like an unfair penalty for a job well done. You’ve done everything right, yet you’re the one left footing the bill. Clawback is a frustrating reality, but there are ways to protect your business and income from its impact.
Understanding clawback from the broker’s perspective
Broker’s receive an upfront commission and trail commission, which is a share of the revenue lender’s earn from a loan, in return for selling the loan on their behalf.
These remuneration methods create a structure where brokers are incentivised to secure loans that are both substantial and likely to remain in place over the long term, while also ensuring that they maintain ongoing relationships with their clients to receive trail commissions.
If a customer discharges a loan within 24 months, the broker may be subject to clawback, where a lender can reclaim part or all of the upfront commission paid to a broker if a loan is paid off, refinanced, or discharged within a certain period, typically the first 12 to 24 months. This period is known as the “clawback period.”
Clawback can be financially challenging for brokers. After investing time and resources into securing a client and closing a loan, the broker may be required to return the commission if the loan does not remain active through the clawback period. This can be particularly frustrating if the broker had no control over the client’s decision to refinance or discharge the loan.
Taking control with retention tools
While clawback may be out of your hands, customer retention is not. A solid retention strategy is your best defence against the financial impact of clawback. By focusing on keeping your clients engaged and satisfied, you can minimise the likelihood of them refinancing or discharging their loan prematurely. This not only protects your commissions but also strengthens your long-term client relationships.
Here’s how a comprehensive retention tool can help you take control:
- Continuous engagement: Keep your clients informed about market changes, new opportunities, and personalised advice. By staying connected, you remain top of mind and the first person they turn to for guidance.
- Personalised communication: Leverage data-driven insights to offer customised solutions that meet your clients’ evolving needs. When clients feel that you understand and cater to their unique situations, they are less likely to seek alternatives.
- Timely interventions: A good retention tool will alert you when a client may be considering refinancing or when they show interest in competing offers. This allows you to step in and offer a better solution before they make a move.
- Adding value: Offering additional services such as regular financial check-ins, exclusive deals, or insights into market trends adds value to your relationship. This makes it harder for your clients to justify moving to another broker or lender.
With a comprehensive approach to loan book management, Hound helps you to easily and conveniently understand your customer data and use it to proactively retain your customers. Our smart technology provides you with proactive opportunities and actions with insights to drive customer retention, with tools and resources to support your conversations.
Reclaiming control and building loyalty
At the heart of minimising clawback is building loyalty and trust. When clients know that you have their best interests at heart and that they can rely on your ongoing support, they are far more likely to stay with you. This means being proactive in your communications, transparent about the costs and benefits of their loan, and regularly checking in to ensure they’re satisfied.
As your volume grows, it can be harder to manage your customer relationships and keep ahead of their needs. Connecting to open banking, Hound helps you to have a clear view of your customers’ current rates and property values, with smart alerts to concentrate your efforts.
In today’s market, clients have more options than ever before, and loyalty can be fleeting. But by combining the right retention tools with a genuine commitment to client care, you can reclaim control over your business outcomes. This approach not only shields your revenue from the impact of clawback but also establishes you as a trusted partner in your clients’ financial journeys.
Work smarter not harder with Hound
Clawback may be a reality in the home loan industry, but it doesn’t have to dictate your success. By focusing on customer retention, conveniently with Hound, you can turn the tables, protect your commissions, and keep your clients coming back to you for all their home loan needs. With the right strategy, you can minimise the impact of clawback and build a business that thrives on strong, lasting relationships.
Contact Hound today to safeguard your business and reclaim control.
