Heat turns up on bank-owned aggregators

by Miklos Bolza26 Sep 2017
A joint statement by five leading non-major banks has called for policy reform around brokers and aggregators which are owned by the major lenders.

In their submission to the Productivity Commission’s Inquiry into Competition in the Australian Financial System, AMP Bank, Bank of Queensland, Bendigo and Adelaide Bank, ME, and Suncorp highlighted these bank-owned aggregators as a “fundamental” area which must be addressed “if we are to realise a truly competitive sector”.

They proposed that any aggregators and brokers owned by the major banks publicly report on the proportion of loans directed to their owners.

“While we do not suggest that major banks should be restricted from owning broker networks, we do believe that where this occurs, it should be managed in an open and transparent way to ensure customers are able to make fully informed decisions.”

They pointed to findings in the Australian Securities & Investments Commission (ASIC) Review of Mortgage Broker Remuneration which said that major bank ownership of broker platforms influenced the proportion of loans the owner received from their brokers.

“This is a regulatory concern because mortgage brokers are obligated to ensure consumers get the most suitable loan product,” the banks wrote.

With smaller physical branch networks and a dependency on unbiased distribution channels, “regional banks support strong regulation in this area, including effective ownership disclosure obligations”.

New heights with vertical integration

In a separate submission to the Productivity Commission, National Australia Bank (NAB) said that vertical integration (VI) of banks and aggregators provided benefits to both consumers and brokers.

The three NAB-owned aggregators – PLAN Australia, Choice Aggregation Services and FAST – represent around 30% of brokers in the market and offer access to approximately 40 lenders and their products, the bank wrote.

“NAB’s continued investment in aggregator systems and processes supports brokers to run their businesses.

“This VI model offers significant benefits to consumers, provided the appropriate remuneration, compliance and governance structures are in place. NAB, and each owned aggregators, has rigorous processes to manage conflicts, including perceived conflicts, to protect the interests of customers and brokers.”

By offering support through technology, professional and business development, and assistance with licensing and compliance, NAB helps brokers deliver good consumer outcomes, the bank wrote.

Related stories:

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Brokers assisting smaller ADIs: APRA

COMMENTS

  • by 26/09/2017 9:22:10 AM

    “This VI model offers significant benefits to consumers, provided the appropriate remuneration, compliance and governance structures are in place. NAB, and each owned aggregators, has rigorous processes to manage conflicts, including perceived conflicts, to protect the interests of customers and brokers.”

    The facts are that the NAB owned aggregator BDM's have KPI's and remuneration incentives linked to volume of home brand sales. These BDM's roles should be to support the brokers not drive the sales of home brand products. The Home brands also have their own BDM's to do this....a two pronged approach! NAB also offers its brokers aggregation fee discounts linked to volume of home brand sales. How does this benefit the consumer? Vertical integration is purely about major banks shoving their own products down the throats of their brokers and their brokers clients!

  • by Cubeman 27/09/2017 9:46:47 AM

    I find it hard to believe that any broker would put a loan to a certain lender as they own the aggregator (I am with Connective so I think that there is a nominal Macqaurie ownership and it certainly has no impact on what deals we place with them) - are there any stats to suggest otherwise as I just can't imagine any broker caring less either way as to what lender owns some or all of their aggregator when it comes to where to place a loan for the client.

  • by Chris 12/10/2017 10:56:39 AM

    The majors want to dominate the Australian loan market and the Gov't in wanting to maintain a strong banking platform in this country (since the GFC) helps them through various legislations to do this. Major Banks of course control their own Bank (and hold shares in each other) and in some non-banks, aggregators, broker platforms right down the chain. Not saying Brokers support their owners' Banks at all but by having Bank members on boards across all levels of finance within the market, dictating policy at the high end remains a major control position within the finance markets. I have said for many years this should be likened to a conflict of interest and they should not be allowed to hold these positions that are their competition.