Keep calm, ASIC has no biases, says association head

by Julia Corderoy03 Mar 2016
ASIC has no preconceived biases heading into the mortgage broker remuneration review, the head of the Finance Brokers Association of Australia (FBAA) has assured brokers.

The regulator has recently held its stakeholder roadshows in Sydney and Melbourne, where lenders, aggregators, associations and brokers all had the chance to consult ASIC regarding its upcoming review. 

Peter White, the CEO of the FBAA says that from these stakeholder meetings – and the several discussions the FBAA has had with the regulator – it is clear that ASIC is going into the review with no preconceived biases stemming from FoFA or the changes to commission structures in life insurance advice.    

“From the discussions, it was clear the regulator had no preconceived outcomes in mind and they asked pertinent questions relating to the  parameters and relevance of the proposed scoping of this review, and input relating to the influencing factors and structures of commissions in the home loan sector,” White said.
 
“More importantly, this was an opportunity by the industry to ask and submit questions relevant to last year’s Financial System Inquiry which among other things probed remuneration structures and the similarities, or lack of, with other instruments like insurance or financial advice.”

The general manager of aggregation for eChoice, Blake Buchanan, says commission structures in mortgage broking are fairly equal across the board anyway.

“In general terms there is not a great deal of difference in the value of upfront commissions offered by lenders. Present remuneration structures are considered appropriate, and there is absolutely no doubt that the service and system is working for the consumer as well as the industry. The fact that brokers write in excess of 50% of all new loans is clear evidence of the success,” he said.

However, he did say it’s possible that the review may look to set parameters for maximum commissions for brokers, inclusive of any incentives. He also added that a fee-for-service option may also be high on the agenda for discussion.

“We know the fee-for-service proposition can work in conjunction with normal commissions for some brokers - particularly when it is an engagement fee which can be refunded after settlement, and whilst this may not be the perfect solution, it will no doubt garner attention.”

But ultimately, according to Buchanan, any far-reaching changes could further bolster the big bank oligopoly, which would have negative impacts on consumers and the economy. 

“The potential for the competitive mortgage marketplace to be impacted is very real and could play to the strengths of the big four delivering in an oligopoly.”
 

COMMENTS

  • by Annoyed Broker 3/03/2016 8:59:08 AM

    Fee for service? So a client can go to a bank for free but a broker will have to charge. So that will mean broker share of business may dramatically reduce which I guess is good for banks. ASIC, keep out of our lives, you are not needed. Try running a business and working 100 hours a week to be told your income is about to be smashed by those that know little about it.