After yesterday's announcement by the government that the payment of commissions to financial advisers is coming under threat some are asking whether mortgage brokers will be next.
The Federal minister for financial services Chris Bowen yesterday announced that commission paid to financial advisers would be phased out until 2012 in order to ensure that consumers do not receive bad advice so that the adviser would receive more money.
“As ASIC found in 2006, poor financial advice is six times more likely where commissions are paid in order to get various recommendations made,” he said, adding that a similar initiative is taking place in the UK.
Financial advisers will have to use an ‘adviser charging regime’. This will be agreed between the client and the adviser upfront and the adviser will be paid either on hourly fees or fees as a percentage of funds under management.
While this is clearly aimed at financial advisers and not mortgage brokers, there are concerns that the same logic could be applied to the commission structure that brokers receive. Bowen sought to reassure brokers that there income is not under threat via these reforms.
“There's a different regime that applies to mortgage broking and that applies through our national credit reforms,” he said. “Mortgage broking is quite different to the issues that we're talking about here today but they are regulated through the national credit reforms.”
Do you think it is possible that the government may one day ban broker commissions? Would the broking industry have a future if commissions were removed from the equation?