The MFAA and FBAA have welcomed ASIC's Remuneration Review and say it's a positive for the industry.
The Mortgage & Finance Association of Australia (MFAA) has welcomed the ASIC Remuneration Review released last week with chief executive, Mike Felton acknowledging that ASIC’s process had been well-informed and consultative.
The Finance Brokers Association of Australia (FBAA) also responded, with executive director Peter White saying he was privileged to have viewed the key findings and proposals under confidence four weeks ago.
“In general it is a very good report and supports what I have said for the past twelve months or more in that base-line commissions are perfectly responsible in our market place and they should not change, while incentives that promote volumes risk poor consumer outcomes and must go," said White.
“Truth comes through transparency, and therefore ownerships and disclosures proves that we as an industry have nothing to hide."
The MFAA's Felton said, “The MFAA is supportive of increased transparency and clarity on regulations in the service of better consumer outcomes – this can only continue to strengthen the sustainability of our industry.
“We believe it’s appropriate to leave the current structure of commissions in place, given they are clearly disclosed to consumers and are mostly uniform across the industry, meaning they don’t incentivise brokers to recommend one loan over another. These commissions allow brokers to provide invaluable service to consumers during the process of obtaining a mortgage, and for the life of the loan,” Felton said.
However, several findings in the Report have caused the MFAA to urge caution, given that many of the findings recommended further study to see if perceived conflicts of interest were actually resulting in poor consumer outcomes.
“While this Report refers to the potential for conflict of interest with regard to some of the incentive structures in use today, we will continue to work with the Government and ASIC to determine not whether these things might cause a conflict, but whether they are actually causing negative consumer outcomes,” Felton said.
The Report also acknowledged that volume-based bonus commissions and bonus payments do not necessarily cause poor consumer outcomes, but nonetheless raised concern about these incentives.
“The Report has recommended as a general rule that the industry moves away from volume-based incentives, or VBIs, and ‘soft-dollar’ incentives. Again, we accept that some change may be needed, as long as the regulatory focus is on what behaviours the incentive is driving, rather than nature of the incentive itself,” Felton said.
“Incentives that reward strong performance are a positive element of most industries and sectors, as long as they reward the right behaviours, and do not diminish competition.
FBAA's White also said further discussion is needed around whether some of the data goes far enough to form conclusive outcomes.
“There are a couple of such matters that we have already raised and will be further discussing with Treasury.”
White said the FBAA is continuing in-depth discussions with ASIC on several fronts, and is formulating its response to Treasury in conjunction with input from members and key industry stakeholders.
“We look forward to further discussions with Treasury and we continue to be confident in the positive and sound position brokers’ value-proposition holds for borrowers.
“For now we need to absorb all that is within this paper and make informed positive responses knowing that fundamentally we have a strong, solid industry that will have every opportunity to attain over 70% origination market share in home lending in Australia.”
The MFAA is currently consulting with its members, including mortgage brokers, aggregators and lenders, before beginning the process of consulting with Government on the formulation of policy.
The Finance Brokers Association of Australia (FBAA) also responded, with executive director Peter White saying he was privileged to have viewed the key findings and proposals under confidence four weeks ago.
“In general it is a very good report and supports what I have said for the past twelve months or more in that base-line commissions are perfectly responsible in our market place and they should not change, while incentives that promote volumes risk poor consumer outcomes and must go," said White.
“Truth comes through transparency, and therefore ownerships and disclosures proves that we as an industry have nothing to hide."
The MFAA's Felton said, “The MFAA is supportive of increased transparency and clarity on regulations in the service of better consumer outcomes – this can only continue to strengthen the sustainability of our industry.
“We believe it’s appropriate to leave the current structure of commissions in place, given they are clearly disclosed to consumers and are mostly uniform across the industry, meaning they don’t incentivise brokers to recommend one loan over another. These commissions allow brokers to provide invaluable service to consumers during the process of obtaining a mortgage, and for the life of the loan,” Felton said.
However, several findings in the Report have caused the MFAA to urge caution, given that many of the findings recommended further study to see if perceived conflicts of interest were actually resulting in poor consumer outcomes.
“While this Report refers to the potential for conflict of interest with regard to some of the incentive structures in use today, we will continue to work with the Government and ASIC to determine not whether these things might cause a conflict, but whether they are actually causing negative consumer outcomes,” Felton said.
The Report also acknowledged that volume-based bonus commissions and bonus payments do not necessarily cause poor consumer outcomes, but nonetheless raised concern about these incentives.
“The Report has recommended as a general rule that the industry moves away from volume-based incentives, or VBIs, and ‘soft-dollar’ incentives. Again, we accept that some change may be needed, as long as the regulatory focus is on what behaviours the incentive is driving, rather than nature of the incentive itself,” Felton said.
“Incentives that reward strong performance are a positive element of most industries and sectors, as long as they reward the right behaviours, and do not diminish competition.
FBAA's White also said further discussion is needed around whether some of the data goes far enough to form conclusive outcomes.
“There are a couple of such matters that we have already raised and will be further discussing with Treasury.”
White said the FBAA is continuing in-depth discussions with ASIC on several fronts, and is formulating its response to Treasury in conjunction with input from members and key industry stakeholders.
“We look forward to further discussions with Treasury and we continue to be confident in the positive and sound position brokers’ value-proposition holds for borrowers.
“For now we need to absorb all that is within this paper and make informed positive responses knowing that fundamentally we have a strong, solid industry that will have every opportunity to attain over 70% origination market share in home lending in Australia.”
The MFAA is currently consulting with its members, including mortgage brokers, aggregators and lenders, before beginning the process of consulting with Government on the formulation of policy.
