Ottiena Ellwand| Mortgage Professional Australia| 16 May 2018
Major aggregator heads expressed their confidence last Friday at MPA’s live-streamed roundtable event that the broker commission structure is sound and likely won’t be dismantled despite it being raised by the Productivity Commission and the Royal Commission.
The aggregators said they expect the Combined Industry Forum’s fine tweaks, such as commission being based on the facility utilised, net of offset, to satisfy the concerns raised by ASIC’s remuneration review from last year.
“I think everybody in the industry is getting tired of this,” said Tanya Sale, CEO of Outsource Financial, kicking off the discussion. “I personally don’t believe fee-for-service will ever come into play into our industry. I think it’s a disaster we’re even talking about it.”
Sale referenced the industry post-GFC, when the majority of mortgages were being written through the major banks. With the Royal Commission now flagging the banks’ bad behaviour, she questioned why the government would recommend a flat fee model when that would just guarantee that all the business would return to the banks.
“That’s not what the government wants, that’s not what ASIC wants and it’s certainly not what we want in our industry, so I don’t believe that will happen,” she said.
William Lockett, managing director of Specialist Finance Group, said he understands why brokers are worried, but he said fundamentally the commission model works well.
He pointed to the fact that consumers are increasingly using brokers (55%), which suggests they have no problem with how they’re paid. “If they’re remunerated that way and the consumer votes to use their services … why are we talking about it?” he said.
“At every stage during that process, the consumer has complete choice to not use them, and part of that process is full disclosure with how they’re remunerated.”
Lockett said he’s surprised that fee for service is on the table when the general understanding is that consumers won’t, nor can they, pay brokers upfront.
“A fee for service model only supports the big major banks,” Lockett said.
Anja Pannek, CEO of PLAN, said it’s important to remember that a flat fee disadvantages competition and consumers in making some of the most important decisions of their lives.
“All of us believe that the changes we’ll make [as the CIF] are very sensible, but we need to continue to look at how we can evolve the industry, it’s very, very important,” she said.
Stephen Moore, CEO of Choice, said ASIC’s remuneration review gave the industry clear direction on what it needed to focus on, which is what the CIF is doing now. But it also found that fundamentally the industry’s remuneration practices are sound and both upfront and trail are structurally the right approach, he said.
“We know that it is a sustainable model from a lender perspective. We know that it’s fair and equitable. And the most important thing here that gets forgotten is it’s the most affordable way for Australians to get credit assistance,” he said.
Clive Kirkpatrick, general manager of Vow, noted that while financial planners are paid upfront fees for service, the Royal Commission has identified that some planners’ behaviours still haven’t changed.
“You would have to debate whether the remuneration actually drives behaviours or not. I think as demonstrated in the financial planning industry, there are still poor behaviours not withstanding changes to the way they’re remunerated.”