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Do I really need to pay this clawback fee?

Laura used a mortgage adviser to help her arrange a home loan when she moved in 2020. The adviser found her a suitable loan and Laura moved into her new home with no issue.

A year later, Laura decided to buy an investment property and refinance her home loan. The mortgage adviser told Laura that the banks had recently made a change, meaning she would need a higher deposit than previously thought. It was suggested to Laura that she gather all her financial information and come back to the adviser for them to look at options.

Disappointed with this, Laura turned to a different adviser to help her with her loan application. The second adviser obtained financing for Laura and Laura bought her new property.

A couple of months later, Laura received an invoice from her original adviser for $2,500. The adviser told Laura that, because she had refinanced her mortgage within 24 months, the bank had required the adviser to pay back their commission, so the adviser was entitled to recover the commission from Laura by charging her a clawback fee. 


Laura said that she was not expecting to receive the invoice and was not made aware that if she went to another adviser, she would be charged a clawback fee.

Laura was upset that she was being made to pay because the original adviser had been unable to secure her new financing. Laura thought that if the adviser had gone further to retain her as a client she wouldn’t be in this position. Due to their failure to secure her funding, she was the one paying the price.


We spoke with the mortgage adviser and said that, although they were entitled to charge a clawback fee, the wording in the terms of service was ambiguous and unclear. The wording failed to give an indication of how the clawback fee would be calculated.  The clause simply said that, if the client fully repaid their loan within 24 months, the adviser would be entitled to charge a clawback brokerage fee of 0.85%. It was unclear what amount 0.85% would apply to. For all Laura knew, the fee could have been $25, as opposed to $2,500. 

Laura was unaware of what she was committing to, and the terms of engagement did not show that Laura had meaningfully agreed to the fee amount before engaging the adviser’s services. 

On the other hand, Laura had been happy with the adviser’s service to begin with, and she had acknowledged that their terms of engagement included a clawback fee. She also agreed that the adviser had offered to try and get her finance, but she had looked elsewhere anyway. After some negotiation, Laura offered to pay $900 towards the clawback fee.

The mortgage adviser accepted our comments and made changes to their terms of engagement to make the clawback fee easier to understand. Hoping that this will stop similar complaints from occurring in the future.


The adviser agreed to accept $900 in settlement and, as this cost was unexpected, the adviser also agreed to Laura paying the $900 back in instalments, which really helped with her cash flow.

Insights for consumers

Clawback fees are a common way for financial advisers to protect themselves from not being paid for their work.

When a bank loan is refinanced within the first two years, the bank will usually clawback some or all the commission that they paid to the adviser.  The adviser will then pass on some of this cost to their client by way of a clawback fee. The adviser needs to be able to show however that the client agreed to the fee before engaging the adviser’s services. 

It is important that the contract relied on by the adviser, usually their terms of engagement, is very clear about how any fees will be calculated, and when the fees might be incurred.