Brokers have nothing to hide, says Mortgage Choice

by Julia Corderoy19 Nov 2015
The chief executive of major mortgage franchise, Mortgage Choice, has welcomed ASIC’s proposed inquiry into remuneration structures in mortgage broking, saying the industry has “nothing to hide”. 

In its response to the Financial System Inquiry (FSI) last month, the Treasury revealed plans to address misaligned remuneration incentives by “reducing and improving the disclosure of conflicted remuneration in life insurance, stockbroking and mortgage broking.”

More specifically, the government said it will task ASIC with reviewing remuneration structures in the mortgage broking industry by the end of 2016.

Now, the chief executive of ASX-listed Mortgage Choice, John Flavell, has welcomed the probe, saying the review will only prove that mortgage brokers have “nothing to hide”. 

“…[F]or all that mortgage brokers do, they are remunerated for their services. At Mortgage Choice, we support the need for transparency when it comes to commissions, especially when you now consider that mortgage brokers are responsible for almost 60% of all loans written in Australia.

“Borrowers have the right to know what their brokers are being paid by their lender, and how that level of remuneration may differ from lender to lender. 

“We also support the need for a well-regulated, highly educated industry, which is why we welcome the opportunity to have informed interactions with the regulator in order to deliver the best outcomes for the end customer. 

“We strongly believe the third party distribution channel has nothing to hide and an inquiry into the industry will only serve to prove this point.”

Flavell, who has a background in retail banking, says mortgage brokers have been one of the greatest disruptors in financial services.

“The third party distribution channel has done a lot for consumers ever since its inception some 24 years ago. 

“When I first started in financial services, I worked in retail banking for one of the majors. Back then, the mortgage broking industry was non-existent and Australia boasted some of the highest home loan rates in the world. 

“When mortgage brokers made their market debut, lenders were forced to basically drop their home loan rates overnight.

“In addition to lender competition, mortgage brokers have been responsible for driving home loan innovation and giving borrowers the right to choose the best product and lender for their needs.”
 

COMMENTS

  • by jack the hammer 19/11/2015 9:09:40 AM

    You would think this bloke would be more concerned about the MOC share price that has halved since he has been in the chair rather then having an opinion on every second matter on AB.

  • by Broker 19/11/2015 9:29:57 AM

    Very refreshing to see some leadership in this industry for a change.

    Maybe, just maybe, if the FBAA, MFAA and a few leading Aggregators sat down with these financial geniuses at ASIC and spent as long as it takes, to explain in explicit detail, just how brokers are paid from each lender, then there would not even be a need for a tax funder paid, waste of money enquiry into the fact that we are paid fairly for the job that we do.

    I noted that this enquiry is scheduled for late 2016 – seriously is it that big of a job?!

    One can only think that the big 2,3 or 4 are driving a push for commissions to be abolished altogether , and for the industry to become fee for service , now that’s progress!

  • by Worried 19/11/2015 10:02:04 AM

    As 10+ year Mortgage Broker, I have seen many changes mostly for the good over this time. As I am also a financial planner I can also say the same thing on the planning side... Wait for it... BUT the recent LIF 'inquisition' that was completed on the life industry should have all brokers and aggregators on their toes.

    Word of warning, don't rely on the MFAA or FBAA, banks or any other industry body - just ask a life writer about how they were stitched up by the so call fin planning bodies and life companies. Lifies were asked to trust the life companies and industry bodies to sort out the government reforms - so most did and the outcome was a 40-50% drop in commission, in effect the government has told the industry what they are allowed to pay even thought the government's own report clearly stated they knew that the reduction in comms would make placing risk business uneconomical - yes they acknowledge that the reduction in comms would make writing risk not profitable in most cases! They acknowledge this and still completed changes!

    In short do not rely on the banks to help us - they will tell us one thing and say something else behind closed doors. The outcome will be a government mandated reduction in commission structure which they will take with open arms just like the life companies (i.e. big banks) did. Come on aggregators, it is totally up to you!