Broker groups continue fight

by Rebecca Pike30 Nov 2018

Broker groups are continuing their fight against comments that have come out of the Royal Commission.

Aggregator Connective has said the mortgage industry “was not well served” when Commonwealth Bank’s CEO Matt Comyn appeared on the first day of the latest round of hearings.

In a letter to brokers Connective CEO Glenn Lees said a “disproportionate amount of time” was spent discussing broker remuneration.

He said the greatest concern was the line of questioning which suggested the Royal Commission believed broker pay should move to a flat fee.

Asking the question if the industry had a problem to fix, Lees said “no”.

He said, “Our submission to the Royal Commission focused on the materially lower proportion of complaints and incidents of misconduct within the mortgage broking industry relative to the entire financial services industry.

“The growth of the mortgage and finance broking industry in recent years has given rise to greater competition amongst lenders. There has also been a correlated and strong downward pressure on interest margins across the entire home loan lending market.

“As a result, banks are making materially less interest margin than they would without the competition that brokers facilitate. This is undeniably a positive outcome for all consumers, regardless of whether they use a broker or go direct to their lender of choice.

“What’s more, broker remuneration has been scrutinised in several reviews over the past two years, with none of these studies finding systemic misconduct and none advocating substantial reform. Notable amongst these is the ASIC Report which relied on the most comprehensive data set ever collected by any party for this purpose.

“Changing the current broker remuneration structure to a fee for service model would substantially hurt mortgage brokers and, in turn, all home loan consumers. It would serve to weaken the broker channel and this would be of benefit only to lenders with large branch networks.”

Lees called for the industry to stand together and ensure there was no uncertainty about what trail commission represents.

He said that consumers needed ongoing support to ensure their home loans are still suitable and competitive.

Lees added, “It was all a bit too convenient that when asked what ongoing services a mortgage broker supplies, Mr Comyn responded “I think they would be limited”, continuing upon further questioning to state “closer to none” as this aligned with the “fee for no service” theme that has arisen throughout the Royal Commission.”