Brokers failing to disclose conflicts of interest could derail commissions

by Adam Smith02 Jun 2014
A major aggregator head has taken aim at bank-owned aggregators pushing their own products, saying the resulting conflict of interest could have serious ramifications for the industry.

Speaking to the Independent Finance Brokers Forum on Friday, Connective principal Mark Haron said some bank-owned lenders are pushing their parent companies' products on their broker networks.

"We have lenders that own aggregators and they're pushing their own products through that aggregator to the point where they're conflicting the broker and creating a situation where they're giving that broker reduced aggregation fees or no aggregation fees for writing more of that particular owner's business," he said.

Haron said so long as products met the NCCP's not unsuitable test and the broker disclosed potential conflicts of interest to clients, this was unlikely to cause problems. But he argued that many brokers are not effectively disclosing such conflicts.

"If that broker doesn't disclose it effectively, that's a breach of the NCCP. Disclosures of conflict of interest are a huge issue in the industry," he said.

If potential conflicts of interest are not adequately disclosed, Haron said the mortgage broking industry could find itself subject to the same fate as the financial planning industry.

"We've gone to all this hard work to get lenders to pay more commissions, but there are a few brokers in this industry not disclosing conflicts of interest effectively, they'll come in and they'll do exactly what they did with financial planning. They'll take the commissions away because they'll say, 'We can't trust you with them.' The reasons that happened in the financial planning industry are, who owns all the big dealer groups? The major banks. The major insurance companies. It's all about how can they distribute more of their product," Haron said.

"You've got to look at the aggregators. If that's what they're forcing then are they an aggregator or are they a lender?" he added.

COMMENTS

  • by Bottom Line 2/06/2014 9:29:09 AM

    And he wouldn't be just trying to undermine his competitors either....Maybe he should concentrate on lenders on his panel, that insist on volume requirements to maintain accreditation. If ASIC & APRA & others are happy with that, then they should have no problems with his issue, which is less of a conflict.
    New definition of a conflict of interest..."anytime something works in favour of the Broker".

  • by Regional Broker 2/06/2014 9:38:05 AM

    I am a broker with a bank owned aggregator and I can say I have NEVER had any pressure to pish a white label product or use one of the lenders that own.

    For me ( other may have a different opinion) , the assertions in the article are not applicable to me.

  • by SanityPrevails 2/06/2014 9:38:23 AM

    Wow Mark, reduced aggregation fees....Are you seriously complaining? Connective was built on the premise of reduced aggregation fees, full stop! Someone comes out with a product, that's cheaper than yours and you cry foul. Don't get me wrong, fundamentally your agreement is sound, your just the wrong business to start the discussion!