“It’s not like commission is a dirty word”: FBAA

by Miklos Bolza17 Mar 2017
“[Brokers in] 90% of countries in the world pay commission so it’s not like commission is a dirty word. There’s no reason why brokers here shouldn’t be paid commission,” said Peter White, executive director of the Finance Brokers Association of Australia (FBAA).

Speaking in response to an Australian Financial Review article published a few hours prior to the release of ASIC's broker remuneration review, White said the current structure combining upfront and trail supports best practice and best outcomes for consumers.

Australian brokers were some of the lowest paid in the world as far as commissions are concerned, he added, citing an upcoming global research paper from the FBAA. This showed that brokers were not ripping anybody off, he told Australian Broker.

“Where they don’t do this in other countries, they have problems with churn. Consumers have a whole heap of other products pushed onto them to make up income revenues. So our structure globally is actually very, very sound and very, very appropriate for the style of outcomes we’re trying to achieve.”

ASIC also had a parallel thought process between broker commissions and its recent announcement banning flex commissions, White said.

“ASIC have just said that in the motor sector, the lender’s going to set the rate and the commission will bring in the rate. This is the same as what happens in home loans. The lender sets the rate and the commission is in the rate. It’s the same animal.

“What ASIC have just done is said ‘Hey, there’s nothing wrong with that. In actual fact, we’re supporting that and this is how the car game needs to play going forward’.”

In principal, the regulator is already supporting paying commissions to brokers, White said, similar to what they’ve done in the car industry. The current structure is already providing the right outcomes, he added.

“Paying trail ensures that the broker continues to do ongoing service for the client and looks after the client going forwards. Also, brokers professionally also review the home loan for borrowers on a regular basis to ensure that the product hasn’t become unsuitable. People’s circumstances and life needs change, so that way the broker is on top of them to keep ensuring that the loan they’ve got continues to meet their needs.”

For the moment, the focus is on ensuring that the broker community doesn’t lose what it currently has, White said.

Related stories:

ASIC reveals six proposals in broker remuneration review

ASIC briefs O’Dwyer on remuneration review

“Don’t be shy about putting your voice forward,” says Suncorp

COMMENTS

  • by Smoking Gun 17/03/2017 10:08:57 AM

    Item 1 is the smoking gun - linking commissions to LVR's & not loan amount.
    This is not viable for banks or brokers.
    Paying less for a high LVR loan (which takes more work); will simply mean Brokers may start charging first home buyers who predominantly require high LVR loans, resulting in them needing more deposit again - not sure how this will have helped consumer outcomes?
    Those of us that can, may simply choose not to write first home buyer loans - which will be my business decision.
    By the time I weigh up that many are construction loans; with high LVR; take more hands on client time; require more processes/time eg FHOG etc etc, and will now be paid less income...then they may push towards being unviable to write (income divided by hours worked) time - not sure how this would help consumer outcomes.

  • by what a joke 17/03/2017 10:21:47 AM

    Agree it is a completely idiotic idea and goes to show the care and thought asic put into this review was minimal. I think they essentially just needed an item to put in the report which would elude to limiting broker commissions. Make no mistake this review was asked for by the minister at the request of the big 4 and this will be used as a sledgehammer to reduce broker commission

  • by Broker 17/03/2017 11:18:38 AM

    This review ( ordered by an ex NAB executive) has always been about amount that Brokers are paid by lenders and nothing else- the rest is just white noise.

    Amazing the level of respect that ASIC has towards the fake content contained bank ordered (and seriously conflicted Sedgwick review) - makes you want to throw up!