Ex-broker head tackles clawbacks, vertical integration

by AB19 Feb 2014
Multiple brands, misleading advertising and clawback provisions are stifling competition in the industry and causing confusion amongst consumers, says the former CEO of a broker association.

As part of a submission to the Senate, Maria Rigoni, broker and former head of the Australian Institute of Professional Brokers has taken aim at the lack of competition in the industry which she says disadvantages both brokers and their clients.

“The major players operate under so many brand names it is difficult for experienced financial service operators to keep up with who is owned by who and which major player's product they are selling to the unassuming and trusting general public,” writes Rigoni.

As an example, Rigoni quotes a recent Bank of Melbourne advertisement, stating the regional bank will “match the Big 4 on price” and “beat them on service”.

“Is this not misleading and deceptive as Bank of Melbourne is a brand name of Westpac?” asks Rigoni. “And how can it be profitable for Westpac to compete against itself? How can they beat their own service and why do they feel they have a need to?”

“Vertical integration in the financial services industry has resulted in the major players buying up all the distribution channels and pretending not to be themselves in the market place.”

NAB’s significant share in the broker market though PLAN, Choice, FAST and Advantedge was also raised as a potential barrier to competition.

Rigoni also labelled the system of broker accreditation through lenders as “a masqueraded employment contract”.

“The Australian Credit Licence was designed to cater for the large number of self-employed working as mortgage brokers however many obviously believe that it is easier to be a credit representative rather than a credit licence holder.

“Is this a result of scare mongering, lack of effective NCCP training and aggregators influence suggesting over compliance rather than what the legislation requires?”

Rigoni asks the Senate to consider whether “the personal accreditation, aggregation and the concentration of major players is stifling competition not only between mortgage brokers themselves but at a retail level in the selling of home loan products to borrowers”.

Clawbacks were also targeted by Rigoni, with the ex-broker calling the arrangements ”unconscionable”.

“Brokers are tied to contracts they have no power to negotiate the terms of as they are with a third party; banks have the absolute power to use the ‘take it or leave the industry’ attitude”.

NAB, Choice, FAST, PLAN, Advantedge and Bank of Melbourne declined to comment.