“[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.
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