ASIC commends MFAA for educating Fairfax

by Julia Corderoy31 May 2016
The corporate regulator itself has commended the head of the MFAA for “quite rightly” highlighting the differences in commission structures between the mortgage broking and financial planning industries. 

Speaking at the MFAA’s Broker 2020 Series held in Sydney on Friday, ASIC senior manager, deposit takers, credit and insurers, Kevin Foo, told brokers Siobhan Hayden rightly corrected the Australian Financial Review (AFR) after it published a column claiming standards in the mortgage broking industry continue to lag those being imposed on financial planners.

“While we have said it previously and I have been asked to say it again, ASIC has no preconceptions as to the outcome [of the remuneration review] and there is no hidden agenda. Government and regulators have previously considered remuneration in other contexts, such as financial advice and insurance, and there are significant differences between the commission structures of financial planners and those of mortgage brokers.

“Your CEO, Siobhan Hayden, came out and quite rightly pointed out to the AFR the differences in remuneration between the two industries.”

Nonetheless, Foo said it is important to understand the remuneration practices and structures in any sector, as they are often key drivers of behaviour and culture. 

“The press is always going to say what the press is going to say. ASIC bashing is what the press does as well. 

“We don’t know where this review is heading, it is a fact find. We have simply been asked by government to pull the information together so they can make a decision,” Foo said.

Defending the integrity of the mortgage broking sector against the claims made by the AFR, Hayden pointed to two “clear differences” between the remuneration structures of both industries. 

“There are clear differences between the remuneration structures in mortgage broking and those in the financial planning and life insurance industries. Crucially, brokers are paid commissions by lenders; they are not paid by consumers. Commissions are also variable and reflect the cost of a mortgage,” Hayden said, as reported in Australian Broker on Friday.


  • by Marshall Brentnall 31/05/2016 9:39:55 AM

    That's a fairly thin line that the head of the MFAA is walking there. Commissions are paid by lenders, however the cost of those is actually built into the cost of the loan, much like commissions in life insurance. I am not saying that such payment is bad, as long as there is complete disclosure and clients are able to make an informed choice. There will come a time when lenders should be able to offer naked pricing where brokers recommend loan and which to alter the remuneration downwards.

  • by Tony - South Coast 31/05/2016 10:36:19 AM

    Marshall, when a broker originates a loan to a lender, the cost of that "origination" is the commission. When the branch network or an employed mobile lender originates a loan, the cost to the lender is the wages and on-costs (including a share of rent, phone, training, car, bonuses, compliance costs, etc.).

    These costs are payable whether a loan is successfully originated or not. For the client, it is channel neutral, i.e. they will pay the same price (interest rate) through either channel.

    More importantly, the additional competition created by the broker channel has pushed the "price" of home loans down, so the client is actually better off no matter which channel they use.

  • by Brisbane Broker 31/05/2016 1:02:32 PM

    At the end of the day, no matter where the loan comes from the client will pay for the services. If the lender writes the loan they need to account for wages, holiday & sick pay super etc. Paying a commission to a broker actually works out cheaper than employing someone to write the loan for them.

    The bank will then, by rights, have more margin in the loans to offer more competitive rates for their clients in the long term.

    With NCCP the way that it is, the broker needs to disclose the amount of commission earned for the deal that they write in the Credit Guide and Credit Proposal. Clients are already making the informed choices that people who are not in the industry are asking for.