Mortgage Choice moves quickly to quell franchisee revolt

Mortgage Choice moves quickly to quell franchisee revolt
Mortgage Choice moves quickly to quell franchisee revolt

Accusations from Mortgage Choice franchisees accusing the aggregator of running a harsh business model and remuneration structure have triggered a promise to change its remuneration model.

Mortgage Choice released an announcement on the ASX yesterday in response to an investigation by Fairfax Media and ABC’s 7.30. The investigation had been looming for some time among tweets as franchisees readied to set up a fund to take legal action.

Towards the end of last year they agreed to commit $200,000, but put this on hold after Mortgage Choice said it would review the structure.

The media report outlined how the broker previously employed an up-front commission model and changed this to a performance-based model based on loan targets in the wake of the 2007-2008 Global Financial Crisis.

But it never changing back to the original structure once the crisis had passed.

The recently appointed Mortgage Choice chief executive Susan Mitchell admitted the model was “outdated.”

In the ASX statement from company secretary David Hoskins, Mortgage Choice advised it would be working closely with franchisees about a more “competitive remuneration model”.

The statement said the purpose of this would be to “increase franchisee remuneration and reduce franchisee income volatility to allow them to grow their business and assist more customers with their home loan needs”.

CEO of Mortgage Choice, Susan Mitchell, said she anticipated the changes would support the long term sustainable growth of Mortgage Choice.

“We want to continue to help Australians with their financial services needs for many years to come and having thriving, growing franchisees that have the confidence to invest in their business is critical to achieving this.”

Mortgage Choice expects to finalise a new remuneration model in this coming July and implement an opt-in basis across the network in August.

Documents suggest almost half of Mortgage Choice’s franchisees were considering legal action to get a better and fairer remuneration scheme.

Mortgage Choice saw its shares plunge 40 per cent on Tuesday after Fairfax and the ABC reported 173 of its franchisees were considering a fighting fund to take on the home loan giant. Shares were up 1 percent in Wednesday morning trade.

On ABC’s 7.30, a number of struggling Mortgage Choice franchisees spoke about having to sell their houses because of their financial struggles brought on by the business.

Franchisees are reportedly being pressured to sign $1.5 million in loans per month, much higher than the national average of any other company.

If brokers fail to meet that target, Mortgage Choice takes a greater section of the franchisee’s profit.

Melbourne franchisee Russell Chellew told the program he’s become physically sick since owning his own Mortgage Choice franchise.

Mortgage Choices advised shareholder that change in the remuneration model does not affect the FY2018 cash result.

"Market updates will include guidance on a one off adjustment to the FY2018 IFRS result based on the change in the average payout rate to franchisees once this is known."

Tags: 
Franchise Mortgage Choice

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