The head of a major franchise has hosed down concerns that bank ownership of aggregators or franchises distorts mortgage brokers’ lender recommendations, claiming there is “far too much misreporting on this issue”.
Chief executive of Mortgage Choice, Michael Russell has spoken out after some of Australia’s regional lenders called for greater disclosure of bank ownership.
“While it is true that a number of bank and non-bank lenders do have a stake in several aggregators and franchisors, in most cases they do not own the individual broker businesses that operate under these head groups. These individual broker businesses take great pride in always acting in the best interests of their clients, irrespective of who owns their aggregator or franchisor,” he said.
Russell maintains that the reason this issue keeps rearing its head has nothing to do with any alleged cases of broker bias anyway, only a ‘perception’ of bias.
“The perception that bank ownership distorts a broker’s recommendations often arises when the bank on the register of the head group elects to pay a higher level of commission, or lowers their aggregation fees, as an inducement for business.
“While this practice does not guarantee brokers will send more business to that particular bank, especially given the value brokers place on their professional advice, it does place them in a perceived conflict.”
Although, Russell says Mortgage Choice, which is partly owned by the Commonwealth Bank, has taken deliberate steps to ensure that they don’t come in the firing line.
“While the Commonwealth Bank of Australia has a 17 per cent stake in Mortgage Choice, we believe the only choice that matters is the one that is right for the customer and that is why our brokers are paid the same rate of commission no matter which home loan the customer chooses, as long as it is a residential home loan with one of the 28 lenders on our panel,” he said.