Franchise head claims bank ownership debate is 'misreported'

by Julia Corderoy19 Sep 2014
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.

 

COMMENTS

  • by MYRR 19/09/2014 9:01:31 AM

    Not sure the same can be said of those aggregators whose commission structure is based on how much of the parent company's white lable product is sold - I still don't understand how ASIC & ACCC have not yet investigated this. It is a model set up to create bias rather than provide the most suitable product to the client.

  • by Country Broker 19/09/2014 9:33:32 AM

    Great Comments . I felt the commentary Made by the head of the small bank was simply misinformed and showed a lack of understanding of how brokers MUST work under the NCCP .

  • by Martial Peter 19/09/2014 10:05:22 AM

    To avoid false accusations, I suggest that all aggregators provide full disclosure on volumes received by the banks on their panel.