UBS commission calls “utterly wrong,” says FBAA

by Miklos Bolza31 Jul 2017
Statements by global financial services firm UBS around broker commissions have been slammed by the Finance Brokers Association of Australia (FBAA) as “false and misleading”.

In an interview with Australian Broker, FBAA executive director Peter White said that UBS analyst Jonathan Mott who made the comments had a “bee in his bonnet” which was distracting from the truth.

“The reality is that this is another level of garbage from UBS which is really disappointing as they’re an international investment bank. They actually can’t get their facts right.”

Comments that broker commissions had pushed mortgage rates up by 16 basis points were the “biggest load of bullshit on the planet”, he said.

“You get the same rate through a brokerage that you get through a branch. The cost of acquisition for a bank is factored into the interest rate – we know that – and what they have for the bank branches is the same as they have for the brokers.

“If anything, the banks make more money out of the brokers than they do from the branches. If a branch doesn’t perform, the cost to run that branch is still there. They can’t get away from it. Whereas if a broker doesn’t perform, they don’t pay him any money.”

Without brokers, consumers would walk into the bank branch and pay the exact same rate, White said. However, he pointed out that this would not be for long as banks would push up rates over time thanks to the lack of competition.

Taking the margins from the 1980s when there were no brokers and putting them in today’s marketplace, the average home loan would cost between 6.5% and 7%, he noted, adding that the lower rates of today were due to the competition that brokers brought with them.

There are just over 26,000 consumer brokers in Australia, including ACLs and ACRs, according to the latest figures from ASIC, White said.

“When you divide total commissions by these 26,000 brokers, it’s not like they’re all earning $1m a year. The way they report these figures grossly distorts what’s actually happening.”

“The thing that people forget is that the actual commission paid to brokers today is less than what it was 15 years ago. When the GFC hit, broker commissions were pared back and clawbacks were introduced.”

As well as this, “gross generalisations” also ignored the varying workloads that brokers did, White said.

“Some brokers do a lot, some do very little. Average it out and you’re only talking about one to one and a half mortgages per broker per month. At the end of the day, the average active broker – those who are proactive in their business – are settling three to four loans per month minimum.”

A lot of brokers probably only managed $70,000 while also running their own businesses, he said.

White continued, saying that Mott’s comments comparing brokers with financial planners were “garbage”.

“Financial planners make a hell of a lot more money than what brokers do. He’s just talking all up numbers without looking at what the individual earns at all. And there are huge differences between mortgage brokers and financial planners. At the end of the day, brokers cannot influence the finance markets. Financial planners do.”

White concluded saying that reports such as this were “self-serving”.

“This is them trying to push something back themselves. These numbers are skewed. You can take any data you like and twist it however it may suit your benefits. This is all that’s happening here.”

“It distorts the market and I’m really disappointed that UBS keeps playing these things. It’s not for the benefit of anything bar themselves to try and create their own self-importance where it must be lacking today.”

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