Questions, page-4

Hi Portfolio,

Commissions on Asset Finance transactions are completely different to Mortgage broking. Here's an example:
You are a truckie and contact me, a broker to arrange finance for a new prime mover purchase price $200k. The best rate I can get for you (which is my job) is say 4.5% from one of the banks. I set the commission usually a max of 4% of the purchase price- but in this case a more practical comm is 2% - that is 2% of $200k = $4,000. The $4k is added to be the amount financed so the customer pays back $204k plus interest over a term of say 5 years. nil balloon So using a fin calculator the effective rate to the customer is 5.34%.

Of that 4k comm the individual has to share it with COG- with many brokers on comm only, or possibly a very small base salary.- each broker might have negotiated different structures with cog who knows what they are??

Now the broker and bank work out what brokerage works for both, but if the customer shops the deal directly to a bank it may get a better rate- however the is a cumbersome process for the customer, a good broker knows what bank to put the deal to - If another broker gets in on the deal gets the same base rate from the bank and only charges 1% the rate will be cheaper- however as I mentioned customers just want the truck to get working and many are loyal to the good brokers.

Note this is completely legal and these contacts are not governed under consumer credit code (UCCC).

A few months ago I listened to an interview with Alan Kohler and an "analyst" who was directly asked if COG's commissions were trail the same as mtge brokers and he answered yes. For me that confirmed that many of these analysts do not research companies correctly, and in fact was a catalyst for not renewing a couple of subscriptions.

There is another company ECX who are similar but do fleet leasing also.

Now if COG start writing their own deals with their own money they will get better returns, but higher risk as they wear defaults.

Yes acquisitions will result in higher volumes and may lead to more volume bonus income from the bank, so scale will be an advantage. I do admire that they have not proceeded with a couple of acquisitions meaning they are not growing for growth's sake.
Rental (operating leases) are not ideal for many clients like you the truckie, so I can't comment on how this will flow to COG's rental book.

Cheers.