Industry leaders rubbish fee-for-service claims

by Julia Corderoy08 Sep 2014
Two industry leaders have poured cold water on the commission versus fee-for-service debate.

The debate was refuelled after financial services firm, EY stated in its submission to the Financial Services Inquiry that a fee-for-service structure would mitigate exposure to conflict of interest and bring consistency of regulation between mortgage broking and financial planning industries.

MFAA CEO, Phil Naylor told Australian Broker that the comment from EY is unwarranted as it assumes that the circumstances in the financial planning industry should be superimposed onto the mortgage broking sector.

“In fact the operations are quite different.  In financial advice the money flow is from the consumer (investor) to an investment advised by a financial adviser. In broking the money flow is from a lender to a consumer (borrower) based on the mortgage broker’s recommendation as to what is appropriate for the borrower.  

“The risk is different and should not be confused. The well -publicised events which cost millions of lost funds and life savings to consumers and drove FOFA have not occurred in broking and nor could they because of the direction of the money flow,” he said.

FBAA CEO, Peter White shared the same opinion that EY may be drawing a line that shouldn’t be drawn. He also believes that brokers haven’t done anything that would cause disclosure of interest to be an issue.

“I think the finance broking sector have come great lengths in making sure they mitigate issues that would surround conflict of interest. 

“If there is a conflict of interest, try and avoid it. But if there is a commercial reason as to why one would occur, then you need to disclose it and be very upfront with your client before things progress down that path. As long as you detail it properly and the client accepts it, then there is no problem – and brokers are doing this,” he said.

White also added that while many FBAA members choose to work on a fee-for-service structure, he doesn’t believe an industry-wide fee-for-service structure is desirable. However, brokers should always be prepared.

“Brokers should always have a ‘Plan B’ just in case. I encourage brokers to at least think about what they would do if the industry did move towards a fee-for-service structure. It is always good to have protective measures for your business,” he said.



  • by Xavier Quenon 8/09/2014 9:02:32 AM

    It is good to see some sense in this discussion that should not be in the first place. A fee for service in the long term (and commission abolished as this is the real debate right?) will only promote more 'direct' business to the banks and by the same token and lower level of expertise and advice across the board - with by the way no financial benefit to the customer

  • by Denise Brailey BFCSA (Inc) 8/09/2014 9:21:42 AM

    Commissions cause conflict of interest. Its time to look at why the high turnover of staff int his industry. Its because of uncertainty of income and claw-backs for sellers. Its only the high flyers and industry captains that disagree - and Lenders who pay commissions and want to keep it that way. The old Truck Act said clearly in 1896 for almost a century: "A man shall be paid for work done." Time for this industry to get its house in order and do whats best for customers don't you think? Ask the rank and file and look at monthly recruitment drives to replace last year's people.

  • by SIDBROKER 8/09/2014 9:36:29 AM

    No way will most consumers pay a high fee for service. Why would they. It will be the end of most brokers as they simply won`t survive. The banks would have a field day with this one. They will have no competition as they won`t be charging a fee for service. Soon afterwards there will be a weak broker presence in the market and the next step will be for banks to increase their profit margin and who will pay for that the consumer off course. People who think that fee for service is the way to go need a change of industry before they destroy this one.