Charities gain commissions

Imagine getting a loan for a house and being able to direct what charity the lender will pay part of that commission, and also the trailing commission the financial institutions pay to the loan writers.

That is what Perth company VaultOne has been able to arrange.

VaultOne director Phil Wade has entered into an arrangement with Choice Home Loans which has agreed to give up 30 per cent of its up-front loan commission and 30 per cent of the trailing commissions to a charity that the loan recipient nominates.

A trailing commission is the sum of money financial institutions pay to loan writers on the outstanding amount of a loan.

That trailing commission is paid even when the loan writer is one of the financial institution’s branches.

With most homeloans that is an annual commission of about 2 per cent on the outstanding portion. That money is paid monthly to the loan writer.

Under the VaultOne arrangement, 39 of Choice’s loan writers have agreed to take part.

Money from the commissions is paid to VaultOne. VaultOne then pays that money on to the charity of the customer’s choice.

More than 50,000 loans are being written nationwide each month and Mr Wade said that gave charity and community groups access to an industry that generates fees of more than $100 million a month.

The company is now targeting solicitors, financial planners and the like to recommend Choice to their clients who are looking for loans.

Mr Wade said he had declined to enter into agreements with other loan writers out of loyalty to Choice.

So what is in it for Choice?

Mr Wade said the main benefit was word of mouth referrals and the marketing benefits that the offer brings.

He admitted VaultOne was handling a lot of the word-of-mouth referrals for the program but anticipated that would change as more not for profit organisations became involved.

"We offer training seminars and marketing packs to help the loanwriters," Mr Wade said.

"One thing we’ve found is that when the customer is asked to recommend the charity they would like the commission money paid to, most tend to stop and think about it for a while."

Understanding has proved to be the biggest challenge for plan.

"I explained it to my Dad and he said it ‘smelled’," Mr Wade said.

"He said the deal looked too good.

"Getting over that has been the hardest thing.

"This doesn’t cost anyone anything. The money that is being paid over to the charities is already being paid."

Mr Wade said he had come upon the idea after years of helping his partner Karen organise fundraising events for various charities.

"I realised there must be an easier way," he said.

"We are giving people a choice.

"Taking out a loan doesn’t have to be a single transaction where the only organisation benefiting is the bank."