The interim report of the Financial System Inquiry last week re-ignited debate about broker independence and bank ownership of third-party distribution channels.
The Inquiry posed the question of whether “vertical integration may have the potential to distort the way in which mortgage brokers direct borrowers to lenders.” Outsource
Financial CEO Tanya Sale
told Australian Broker
that bank ownership of aggregators "muddies the waters" when it comes to broker independence, but brokers were divided on the issue.
Wozza said lender inducements and bank ownership structures have yet to impact the way he does business.
"Been broking for 8 years and I can't recall any client that I have steered to any product because of incentives or additional commission."
Steve McClure responded by saying brokers can never go wrong in offering full disclosure.
"Wozza, that's perfect, and its the way of many fine brokers. But, it's all about transparency and clear disclosure. If a client ends up with a NAB
loan from a NAB
owned aggregator, the client has to be aware of that (and at the moment they aren't) so they can assess the broker's advice. Therefore, with your suitable recommendations, the client would be informed & well served. That doesn't hurt anyone's business."
Brad Oliver echoed Wozza's sentiments, and said good brokers aren't swayed by incentives.
"Lender or Aggregator incentives don't come into it when I am assessing the best place for the clients needs and I am sure most other reputable brokers share this philosophy. Look after the client's interests first and they will come back again and even send you referrals."
methinks said bank ownership could undermine the broker value proposition.
"Consumers who use brokers are time poor and in need of someone to sift thru lenders and their offerings. Bank owned aggregators don't suit the model - Hi I'm from A and we are owned by C. Over time when consumers become aware of who owns what may very well erode the trust they place in the broker. If brokering groups would switch to the independents, perhaps this needs to be done."
Peter E chimed in in agreement with Tanya Sale
"I agree totally with Tanya. The banks should not be allowed to own aggregation models at all if the system is to remain fair. We don't see NRMA offering a suite of other insurers products for sale over their counter do we? Whether the independence is relating to the aggregator or broker, both are compromised when owned by a lender in its own right."
And comment of the week goes to Tim H, who said disclosure is all well and good, but questioned how far it must go.
"Big question here is how far do we need to go with disclosure? Like Wozza and the vast majority of brokers I am not swayed by who owns my aggregator FAST
or what incentives are offered whether they be from FastLend or other lenders. I provide my clients with a list of our panel lenders and how much commission they pay and the lenders clawback policy. Do I need to put another column highlighting who owns each lender? Do I then need to include what share of ownership is owned by each organisation or individual for that matter (eg: my fellow broker down the road who tells me he has some bank shares etc). Sounds ridiculous because that is where this discussion is going. The reality is that the vast majority of brokers are doing the right thing by their clients. Those that aren't will be weeded out over time and like most other industries they will be replaced by someone else who is unethical and so it will go on. I've been a broker for 17 years and in the industry for 35 years. Do the right thing by your clients and you will receive the rewards and experience longevity in this wonderful industry."