We ask the industry what is most likely to happen after ASIC concludes its remuneration review.
We ask the industry what is most likely to happen after ASIC concludes its remuneration review.
John Flavell
CEO
Mortgage Choice
While the trail commission is unlikely to be banned, all parties associated with the mortgage industry will be reviewed, and we believe this is an appropriate line of enquiry. Borrowers have the right to know what their brokers are being paid by their lenders, and how that level of remuneration may differ from lender to lender.
At Mortgage Choice, we already have a similar policy in place for our brokers and believe that regardless of the outcome this will only strengthen the industry. We support the need for transparency when it comes to commissions, especially when you now consider that mortgage brokers are responsible for more than 53% of all loans written in Australia.
We look forward to the results of the review and see this as a positive opportunity for both brokers and consumers, highlighting the tremendous job this industry does for consumers each and every day.
Michael Russell
Managing director
MoneyQuest
The most likely outcome is that we won’t learn anything this year!
The sheer volume of data requested is almost certain to breach the timelines announced by ASIC to collate, interpret and provide their initial findings and recommendations. When they do, I have no doubt that mortgage brokers will be found to be operating in the best interests of their clients, with no evidence of any correlation between client lender recommendations and lender commissions.
Notwithstanding this outcome, I am anticipating a raft of additional regulation designed to provide a greater level of reforms consistency across retail financial services. This will most likely manifest in changes in lender volume bonuses and soft dollar incentives. I don’t, however, foresee any change to the overall remuneration structure of mortgage broking commissions, which continues to serve consumers well and provide for a healthy and highly competitive home loan market.
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Martin North
Principal
Digital Finance Analytics
ASIC’s ‘behind closed doors’ remuneration review will probably focus on the various ‘soft commissions’, including volume discounts and other incentives such as bonus payments, broker awards and prizes, rather than addressing head-on the question of whether commissions should be paid at all. They will also most likely insist on better disclosure of commissions at the point of first advice so consumers can be fully informed as to whether they are receiving cross-market advice, or a narrower set of possible options based on the broker-lender alignment and the various incentives in play. The current low bar of ‘not unsuitable’ advice will likely remain, rather than moving to best advice.
This is despite the fact that in the UK, for example, broker commissions have been banned in favour of a fee-for-service model. The regulator concluded there were too many inherent conflicts when advisers were paid on commission, and no tweaking of the model, or enhanced disclosures, could solve this contention.
John Flavell
CEO
Mortgage Choice
While the trail commission is unlikely to be banned, all parties associated with the mortgage industry will be reviewed, and we believe this is an appropriate line of enquiry. Borrowers have the right to know what their brokers are being paid by their lenders, and how that level of remuneration may differ from lender to lender.
At Mortgage Choice, we already have a similar policy in place for our brokers and believe that regardless of the outcome this will only strengthen the industry. We support the need for transparency when it comes to commissions, especially when you now consider that mortgage brokers are responsible for more than 53% of all loans written in Australia.
We look forward to the results of the review and see this as a positive opportunity for both brokers and consumers, highlighting the tremendous job this industry does for consumers each and every day.
Michael Russell
Managing director
MoneyQuest
The most likely outcome is that we won’t learn anything this year!
The sheer volume of data requested is almost certain to breach the timelines announced by ASIC to collate, interpret and provide their initial findings and recommendations. When they do, I have no doubt that mortgage brokers will be found to be operating in the best interests of their clients, with no evidence of any correlation between client lender recommendations and lender commissions.
Notwithstanding this outcome, I am anticipating a raft of additional regulation designed to provide a greater level of reforms consistency across retail financial services. This will most likely manifest in changes in lender volume bonuses and soft dollar incentives. I don’t, however, foresee any change to the overall remuneration structure of mortgage broking commissions, which continues to serve consumers well and provide for a healthy and highly competitive home loan market.
Martin North
Principal
Digital Finance Analytics
ASIC’s ‘behind closed doors’ remuneration review will probably focus on the various ‘soft commissions’, including volume discounts and other incentives such as bonus payments, broker awards and prizes, rather than addressing head-on the question of whether commissions should be paid at all. They will also most likely insist on better disclosure of commissions at the point of first advice so consumers can be fully informed as to whether they are receiving cross-market advice, or a narrower set of possible options based on the broker-lender alignment and the various incentives in play. The current low bar of ‘not unsuitable’ advice will likely remain, rather than moving to best advice.
This is despite the fact that in the UK, for example, broker commissions have been banned in favour of a fee-for-service model. The regulator concluded there were too many inherent conflicts when advisers were paid on commission, and no tweaking of the model, or enhanced disclosures, could solve this contention.
