Leading aggregator AFG has revealed extensive data to ASIC and brokers that shut down claims mortgage broker commissions are a form of conflicted remuneration.
Speaking at AFG’s Masterclass in Sydney yesterday, which was open to all brokers industry-wide, AFG’s general manager of sales and operations, Mark Hewitt
, revealed telling data the aggregator submitted to ASIC as a part of its mortgage broker remuneration review – which Hewitt said proves it is “incomprehensible” to assume brokers are incentivised by commission.
“We had a look at our highest payer on our panel and the lowest payer on our panel and we worked out that the differential between the average [rate of commission] and the highest paid works out to be $2.10 a week,” Hewitt told brokers.
“Who is going to make a recommendation to a client based on commission when the net benefit for you before tax is $2.10?
“Further, the difference between the highest payer on the panel and the lowest payer on the panel, again over the cycle of the loan, is $4.57 a week. It is just incomprehensible to think someone is going to be incentivised to make a decision based on $4.57 or, in Perth, about a cup of coffee a week.”
The data presented by Hewitt was based on commission paid across AFG’s 15 primary funders on a typical loan of $450,000, with an LVR of 65% and a run-off rate of 18%.
“You are just not going to do it,” Hewitt said. “You are not going to put your business at risk or your clients at risk.”
But whilst the data is very telling, AGF managing director Brett McKeon, told brokers at the Masterclass that the industry needs to be more assertive about highlighting their value to politicians, not just clients.
“I don’t believe we have been telling our story well enough over the last four or five years. As a consequence of that, you get all this negative press… We need to do more work to educate people about what we do and the service we provide,” he said.
“In fact, I think that the media [coverage] is not so much aimed at mums and dads in the street and our customers, but it is aimed at the regulator and the politicians to influence them. I do think there is a very negative campaign going on.
“I did have one minister about six months ago who I sat down with who was quite supportive of where we stand and the value we add, but he did say we have got to be out in front of politicians more regularly because they have got people in front of them continually with other positions. If you are not out there regularly enough then they quite often do defer to the loudest voice,” McKeon said.