The chief executive of major mortgage franchise, Mortgage Choice
, has welcomed ASIC’s proposed inquiry into remuneration structures in mortgage broking, saying the industry has “nothing to hide”.
In its response to the Financial System Inquiry (FSI) last month, the Treasury revealed plans to address misaligned remuneration incentives by “reducing and improving the disclosure of conflicted remuneration in life insurance, stockbroking and mortgage broking.”
More specifically, the government said it will task ASIC with reviewing remuneration structures in the mortgage broking industry by the end of 2016.
Now, the chief executive of ASX-listed Mortgage Choice, John Flavell, has welcomed the probe, saying the review will only prove that mortgage brokers have “nothing to hide”.
“…[F]or all that mortgage brokers do, they are remunerated for their services. At Mortgage Choice, we support the need for transparency when it comes to commissions, especially when you now consider that mortgage brokers are responsible for almost 60% of all loans written in Australia.
“Borrowers have the right to know what their brokers are being paid by their lender, and how that level of remuneration may differ from lender to lender.
“We also support the need for a well-regulated, highly educated industry, which is why we welcome the opportunity to have informed interactions with the regulator in order to deliver the best outcomes for the end customer.
“We strongly believe the third party distribution channel has nothing to hide and an inquiry into the industry will only serve to prove this point.”
Flavell, who has a background in retail banking, says mortgage brokers have been one of the greatest disruptors in financial services.
“The third party distribution channel has done a lot for consumers ever since its inception some 24 years ago.
“When I first started in financial services, I worked in retail banking for one of the majors. Back then, the mortgage broking industry was non-existent and Australia boasted some of the highest home loan rates in the world.
“When mortgage brokers made their market debut, lenders were forced to basically drop their home loan rates overnight.
“In addition to lender competition, mortgage brokers have been responsible for driving home loan innovation and giving borrowers the right to choose the best product and lender for their needs.”