Combined industry forum proposals include remuneration based on drawdown net of offset, and ability to withhold trail for poor loan outcomes
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Combined industry forum proposals include remuneration based on drawdown net of offset, and ability to withhold trail for poor loan outcomes
The Combined Industry Forum (CIF) has made public its recommendations on broker commissions to the Treasury.
In a significant move, the CIF, made up of broker associations, banks, aggregators and others, proposes amending the standard commission model. The objective is to “avoid financial incentives that encourage consumers to borrow more than they need or will use, for example by basing commissions on facility draw down net of offset.”
Amending the standard commission model was the first of six principles developed by the CIF. Also notable is the second principle, which concerns volume-based and campaign based-commissions, which “are expected to cease.”
Non-monetary benefits, including conferences, lunches, and other perks “will only be given based on a balanced scorecard and good customer outcomes, and benefits given by lenders will be capped.”
Brokers could have their trail withheld if a loan is more than 60 days in areas, was calculated using inaccurate and fraudulent information or is refinanced or restructured. The CIF has also attempted to define a ‘good customer outcome’ and today communicated that definition to brokers.
Furthermore, The CIF has also attempted to improve clarity within the industry, with brokers and aggregators disclosing ownership above 20%, providing better information to ASIC and consumers and introducing a Governance Framework.
What happens now?
Speaking to MPA, CIF chairman Anthony Waldron of NAB and deputy chairman Mark Haron of Connective (pictured) confirmed that changes to the standard commission model would take place by the end of 2018.
The delay, explained Haron, was partly due to the need for lenders to bring in new software to handle the change.
The ability to withhold trail will be introduced by 2020. More immediately, Volume-related bonuses and campaign-related bonuses will be phased out by the end of this year.
Whilst it had previously been assumed that the CIF would deliver two further reports to the Treasury in 2018, Waldron indicated the CIF would be “continually reporting” to Government, including proposing additional changes if necessary.
Significantly, these reforms are not dependent on Treasury approval to move forward, according to Haron and Waldron. ASIC would be consulted about becoming part of the proposed governance framework at a later date.
What wasn’t proposed
Just as significant as what was proposed by the CIF is what wasn’t.
ASIC’s suggestions that commissions could be based on the LVR of the loan, for instance, was rejected by the CIF, as was a flat fee system. Suggestions by consumer groups that trail commissions should not be paid were also rejected.
As Connective’s Haron told MPA, brokers would see “no immediate changes” although there would be changes throughout 2018, with more of a focus on understanding customer’s financial positions. Haron said that the CIF had worked to “to preserve the current competitive marketplace” that brokers had created.
The Combined Industry Forum (CIF) has made public its recommendations on broker commissions to the Treasury.
In a significant move, the CIF, made up of broker associations, banks, aggregators and others, proposes amending the standard commission model. The objective is to “avoid financial incentives that encourage consumers to borrow more than they need or will use, for example by basing commissions on facility draw down net of offset.”
Amending the standard commission model was the first of six principles developed by the CIF. Also notable is the second principle, which concerns volume-based and campaign based-commissions, which “are expected to cease.”
Non-monetary benefits, including conferences, lunches, and other perks “will only be given based on a balanced scorecard and good customer outcomes, and benefits given by lenders will be capped.”
Brokers could have their trail withheld if a loan is more than 60 days in areas, was calculated using inaccurate and fraudulent information or is refinanced or restructured. The CIF has also attempted to define a ‘good customer outcome’ and today communicated that definition to brokers.
Furthermore, The CIF has also attempted to improve clarity within the industry, with brokers and aggregators disclosing ownership above 20%, providing better information to ASIC and consumers and introducing a Governance Framework.
What happens now?
Speaking to MPA, CIF chairman Anthony Waldron of NAB and deputy chairman Mark Haron of Connective (pictured) confirmed that changes to the standard commission model would take place by the end of 2018.
The delay, explained Haron, was partly due to the need for lenders to bring in new software to handle the change.
The ability to withhold trail will be introduced by 2020. More immediately, Volume-related bonuses and campaign-related bonuses will be phased out by the end of this year.
Whilst it had previously been assumed that the CIF would deliver two further reports to the Treasury in 2018, Waldron indicated the CIF would be “continually reporting” to Government, including proposing additional changes if necessary.
Significantly, these reforms are not dependent on Treasury approval to move forward, according to Haron and Waldron. ASIC would be consulted about becoming part of the proposed governance framework at a later date.
What wasn’t proposed
Just as significant as what was proposed by the CIF is what wasn’t.
ASIC’s suggestions that commissions could be based on the LVR of the loan, for instance, was rejected by the CIF, as was a flat fee system. Suggestions by consumer groups that trail commissions should not be paid were also rejected.
As Connective’s Haron told MPA, brokers would see “no immediate changes” although there would be changes throughout 2018, with more of a focus on understanding customer’s financial positions. Haron said that the CIF had worked to “to preserve the current competitive marketplace” that brokers had created.
