Amidst much uncertainty around how broker remuneration structures will be changed, Cynthia Grisbrook, chair of the Mortgage & Finance Association of Australia (MFAA), has very clear views on what the next phase should look like.
“The MFAA’s position is it has to be balanced, it has to be fair and it has to be equitable,” she said on a panel at the Australian Securities & Investments Commission (ASIC) Annual Forum 2017 in Sydney yesterday (20 March).
On the panel, Grisbrook was joined by Brett McKeon
, managing director of aggregator Australian Finance Group
(AFG), Erin Turner, head of campaigns & policy at consumer advocacy group CHOICE, and Anthony Waldron
, executive general manager of broker partnerships at National Australia Bank (NAB).
Being three days into the consultation process, Turner said there was no easy answer on what the final commission structure would be.
“I do think it needs to address the clearly identified problems with standard commissions,” Turner said. “Product strategy conflict, lender choice conflict – any solution needs to address those two conflicts and it probably needs some standardisation.”
Grisbrook pointed to Paragraph 432 in ASIC’s Review of Mortgage Broker Remuneration
which states that trail commission is beneficial as well as Paragraph 439 which states that “trail does not directly lead to poorer outcomes” for consumers.
“This indicates that ASIC is not seeing any systemic problems in there,” Grisbrook said. What any ‘tweaking’ to the standard structure means though will require consultation over the next few months with members, aggregator partners and lenders, she added.
Waldron said there have been numerous commission structures which have waxed and waned throughout the industry over the years.
“It talks in the report about LVRs. It talks about paying, not just on the total loan facility, but on drawn down amounts. I think those are the types of discussion we’re going to see and the report itself hints at where those discussions should start.”
However, there is a need to represent and be fair to all the work that is done by the broker community, he said.
Panel moderator Stephen Sedgwick, head of the retail banking remuneration review by the Australian Bankers’ Association (ABA), added that all stakeholders in the debate would not disagree that competition in the sector needs to be preserved.
“The issue is to find a less conflicted remuneration model that fairly remunerates the broker. One issue for me is that a payment that is related to value of the loan necessarily reflects the inherent complexity of the work required to do that. Maybe part of the debate can be around the fact that this complexity tends to rest with the borrower and not necessarily the loan size. It’s not an easy issue to resolve this one.”
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