Preferred lender lists and Best Interest Duty: the conflict nobody talks about.

Since 1 January 2021, Australian mortgage brokers have been legally required to act in their client's best interest when recommending a credit product. This is the Best Interest Duty (BID), codified in the National Consumer Credit Protection Act. It's not optional. It's not aspirational. It's the law.

And yet many brokers operate under aggregator structures that create a direct tension with this obligation. The mechanism is simple: preferred lender lists.

What is a preferred lender list?

A preferred lender list is a subset of an aggregator's full lender panel that receives priority treatment. Lenders on the preferred list typically pay the aggregator higher commissions, volume bonuses, or marketing contributions in exchange for being ‘recommended’ or ‘featured’ to the aggregator's broker network.

The mechanics vary. Some aggregators explicitly incentivise brokers to use preferred lenders through tiered commission structures — you get a higher split if you lodge with a preferred lender. Others are more subtle: preferred lenders get prominent placement in the CRM, faster processing queues, or dedicated BDM support that non-preferred lenders don't receive.

Where the conflict arises

The Best Interest Duty requires brokers to recommend the credit product that is ‘not unsuitable’ and is in the client's best interest — considering interest rate, fees, features and the client's circumstances. The duty explicitly states that the broker must not be influenced by the broker's own interests or the interests of the licensee (the aggregator).

If an aggregator earns more when you recommend Lender A over Lender B, and that financial incentive flows through to you via a higher commission split, how do you demonstrate that your recommendation was purely in the client's best interest?

This isn't a hypothetical compliance question. ASIC has made it clear that they will scrutinise arrangements where broker recommendations correlate with aggregator commercial interests. The burden of proof is on the broker to demonstrate that the recommendation was made independently of any financial incentive.

The documentation problem

Even if a broker genuinely believes the preferred lender's product is the best option for the client, the existence of a financial incentive creates a documentation burden. The broker must be able to show that they considered non-preferred alternatives and that the preferred lender was selected on merit, not incentive.

In practice, this means more paperwork, more detailed file notes, and more compliance risk — all because the aggregator's commercial structure creates an appearance of conflict that the broker must actively disprove.

What ASIC has said

ASIC's Report 736 (published in 2022) examined the mortgage broking industry's compliance with the Best Interest Duty. The report found that while most brokers were making genuine efforts to comply, there were ‘areas of concern’ around the influence of aggregator commercial arrangements on broker recommendations.

“We observed instances where the commercial arrangements between aggregators and lenders may have influenced the range of lenders that brokers considered when making recommendations to consumers.”— ASIC Report 736

That is the regulatory signal that preferred lender arrangements are firmly on ASIC's radar.

The simple solution: remove the conflict

The cleanest way to comply with the Best Interest Duty is to remove the structural conflict entirely. If your aggregator doesn't have preferred lender lists, doesn't pay tiered commissions based on lender selection, and doesn't receive volume bonuses that influence which lenders are promoted — then there's no conflict to document your way around.

This is ExBanqi's approach. Every lender on our 70+ panel is treated equally. There are no preferred lists, no volume incentives, no tiered splits. You recommend the best product for your client, and you keep 100% of the commission regardless of which lender you choose. Your BID compliance file note becomes straightforward: ‘I selected this lender because it was the best product for my client. No financial incentive influenced this recommendation.’

What brokers should ask their aggregator

If you're currently with an aggregator that uses preferred lender lists, here are five questions worth asking:

• Does the aggregator receive volume bonuses or marketing contributions from specific lenders?
• Does my commission split vary depending on which lender I use?
• Are certain lenders given priority placement in the CRM or processing queue?
• How does the aggregator's commercial relationship with lenders affect the products available to me?
• Can the aggregator provide written confirmation that no lender receives preferential treatment?

If the answers reveal any form of preferential treatment, you have a structural compliance risk that no amount of documentation can fully eliminate.

The bottom line

The Best Interest Duty exists to protect consumers. Preferred lender lists exist to protect aggregator revenue. These two objectives are fundamentally in tension. As a broker, you can either spend your career documenting your way around this conflict — or you can remove it entirely by choosing an aggregator that doesn't create it in the first place.