The chief executive of major mortgage and wealth franchise Mortgage Choice says the industry would benefit if ASIC’s forthcoming commission review suggests the mortgage broking industry adopts the Mortgage Choice commission structure.
Answering questions after the franchise’s FY2016 half year results presentation, CEO John Flavell
told Australian Broker
that he welcomes the upcoming regulatory review into mortgage broker remuneration – and brokers should too.
“We welcome it. We think that an industry where there is continuing lifting of the bar in terms of education – both upfront and on an ongoing basis is good. It is solid and it is healthy,” Flavell said.
“As far as commissions are concerned, I think realistically the shape of the commissions that we have within the mortgage broking industry… and the quantum of commissions, I think is appropriate. If you actually have a look at the delta or the differences in the rates of upfronts and trailing commissions between lender A, B, C and D, there is not much difference between them. There is not a significant financial incentive for brokers to divert business one way or the other.”
However, Flavell said if the regulator has an opportunity to improve the remuneration structure, he said the industry would benefit from following Mortgage Choice’s lead.
“Actually I think if there is any opportunity to improve in terms of commissions then I think the industry would benefit if they adopted the approach that Mortgage Choice takes – that is, regardless of which lender the customer goes to the broker receives the same amount of commission. It is a weighted average commission.
“So we welcome [the review] – we think it is positive, we think the industry has delivered great value to consumers and we think that these proposed changes or the dialogue that may come off the back of that can only be good for the industry and actually add value to our business.”
In the first half of FY2016 Mortgage Choice announced its strongest ever interim profit, with net profit after tax on a cash basis up 12.4% year-on-year to $10.1 million.
Home loan settlements increased 8.5% over the six months, bringing the group’s total loan book to $50.7 billion, up 4.7% from the first half of the 2015 financial year.