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.