Aggregators respond to Sedgwick recommendations

by Miklos Bolza21 Apr 2017
National aggregators and mortgage franchises have responded to recommendations by the Sedgwick Review into retail banking remuneration expressing some misgivings around the proposed changes.

Suggested changes to broker remuneration such as the lender flat fee structure mentioned in the report run contrary to ASIC’s proposal to merely tweak commissions, Mark Haron, director of Connective, told Australian Broker.

“A flat fee would have unintended consequences on customers who need the support and advice of a broker not necessarily getting it.”

As yet, Connective had not received any proposals from the lenders to move to a flat fee structure. Sedgwick had yet to approach the aggregators for consultation as well.

Since the core of the Sedgwick Review was focused on internal remuneration at the banks, broker commissions were just a side component which would be looked at in conjunction with the ASIC review, he said.

“Sedgwick nor the banks are the lawmakers. They’re part of the broader community and everyone needs to be consulted specifically in conjunction with the regulators to ensure that the right model and outcomes for consumers are implemented.”

The review is merely part of a debate about what changes need to be made with broker remuneration to minimise conflict of interest and drive good customer outcomes, he said.

David Bailey, interim CEO of Australian Finance Group (AFG), said suggestions relating to the third party channel were the view of a single stakeholder, providing additional commentary that feeds into a broader industry discussion.

“Ultimately the broker remuneration reforms being discussed should be the remit of the broader industry when addressing the proposals contained in the recently released ASIC Broker Remuneration Report,” he told Australian Broker.

It was pleasing to see Sedgwick reinforcing the value that mortgage brokers delivered to competition in the lending market, he added.

“The mortgage broking industry plays a critical role in maintaining a broad choice of lenders by acting as a distribution channel for lenders without a branch network. Disincentives to competition increase the risk that the lending market won’t provide for all Australians; for many rural and regional Australians, mortgage brokers are the only ones in their local communities.”

John Flavell, CEO of Mortgage Choice, told Australian Broker that the Sedgwick Review was long on anecdote and short on facts.

“It is not the brokers or the Australian Bankers Association’s role to tell regulators what to do, or what changes need to be made,” he said.

Aussie Home Loans declined to comment on the review when contacted by Australian Broker.

Related stories:

Sedgwick shoots down commissions linked to loan size

MFAA pushes for balanced, fair & equitable commission structure

ASIC voices concerns over broker commission model

COMMENTS

  • by Elvis 21/04/2017 8:51:26 AM

    No surprise Aussie declined to comment given they are owned by one of the big four. The gravy train is about to stop for them...

  • by Xavier Quenon 21/04/2017 9:03:34 AM

    It is only the view of one person indeed - for that I have to agree with John Flavell.. and it seems to me that proposing a flat fee will hurt on the little people - the small size loans & benefit the bigger loan sizes and the banks.. which is the exact opposite result to the one sought.
    Often when government reform tries to intervene in making this fairer in real life the rich benefit and the common lose.. I explain..
    If a flat fee per loan was to be adopted then the profitability for the lenders would increase on big size loans and decrease on small size loans.. it is easier to justify paying the same flat fee fee on a $3 Mil loan then it would be on a $100K loan.
    The average person requesting a smaller loan size would have to 'wear' the same fee in a proposition for the bank that generates less profit.. whenever this happens the banks compensate loss of profit with an interest rate differential - so instead of making the loan amounts proposed smaller there will probably still be an incentive to request a larger loan size to get a better rate..
    The only losers in the equation will be the brokers and the little borrowers - and the BIG winners those with bigger size loans & the Banks - akin the Sydney borrowers hence not slowing down that market but more likely the smaller towns like Adelaide or Darwin or other regional towns who are already the property markets most suffering from reforms implemented to date

    It is a little bit the same parallel in the real estate industry - commissions were deregulated in QLD because the government could not understand why commissions should be so high on luxury properties when it took the same amount of work then selling an average size property - comments were made to the effect that deregulating would increase competition and commissions would drop - we can now see in real life that indeed the luxury property owners pay less than they did before.. but the commission on the average property has increased across the board from the before prescribed 2.5% REIQ standard to now between 3 & 3.5%
    Another example of perfect ideology in a bottle turning sour on the average Australian

    The main thing that baffles me with all this is that the borrowers have already spoken... Broker market share is increasing BECAUSE borrower outcomes are better this way - so why all this changes are suddenly needed??? Why brake something that is working for the main beneficiaries?
    When banks were writing most of the business and the outcomes were not as good no government intervention was to be seen!

  • by 21/04/2017 9:40:07 AM

    Should Aussie home loan brokers be confident their franchisor has their backs?........."CAN"