Incentive-based commissions are also likely to face the axe under ASIC’s remuneration review, the FBAA has told brokers.
Speaking at the FBAA National Tour in Sydney yesterday, the FBAA’s Peter White told brokers that special bonus commissions or volume-based commissions are likely to come under a lot of scrutiny by the regulator, and could even be banned.
“There is nothing fundamentally wrong with commissions that are paid to brokers today. The baseline commission is perfectly commercial,” White said.
“One thing I will say is that there are probably some commissions in the industry which are paid which are incentive based to drive volume that probably will get ruled out or challenged.
“If you get a one-off special which is all about volume, that could be problematic as the outcome of that is not necessarily the best interest of the borrower. It’s not to say it [isn’t], but it may not be. The risks of that are potentially negative outcomes.”
White’s comments are in addition to concerns expressed by mortgage industry veteran
and former CEO of Mortgages at Barclays in the UK, Steve Weston, who also told brokers at the FBAA National Tour yesterday that the future of trail commissions could be a shaky.
“We need to be very, very clear about what it is we do to justify trail,” he said.
According to Weston, Australia is one of the last markets in the world to pay trail commissions to mortgage brokers.