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The FBAA has thrown its support behind bank ownership of broker groups and aggregators.
Speaking to The Adviser, FBAA chief executive Peter White said that from a salesperson’s point of view, brokers should be able to stand in the marketplace and disclose their ownership structure as a “positive sell”.
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“Brokers should be able to say: ‘We are owned by NAB, CBA, whoever it may be, and that is really good because we have the strength of them as a bank governed by APRA as well as ASIC’,” Mr White said.
Brokers should also be able to tell their clients that their parent company – a major financial institution – has a strong and sizeable balance sheet and that they are in good hands, he said. “There are a whole host of things you can say as a positive reinforcement for the borrower.”
Mr White’s comments come after Suncorp CEO John Nesbitt called out a number of competitive distortions in the Australian mortgage market.
Speaking on a panel at the AFR Banking & Wealth Summit last week, Mr Nesbitt argued that Australian lenders currently operate on an “uneven playing field” that needs to be “evened out”.
“Particularly around the risk weights, around funding benefits that flow to the majors and also around regulation and transparency around [mortgage] broking,” he said.
“Many brokers today are predominantly owned by the majors and there should be transparency there.”
Mr White said that while bank ownership should be viewed as a positive point of difference for brokers, disclosure is critical, particularly around white-label lending.
“When you’ve got a large ownership by a lender and they also provide a white-label product, brokers have to be careful they don’t steer people into a product that may not be suitable for them,” he said.
“If that so happens to be a white-label product that is funded by a bank, and that same bank owns the broker group, you will be in all sorts of trouble with the law.”
Mr White said that brokers should be careful to avoid issues around responsible lending conduct and conflicts of interest.
“But by putting it on the table, and putting it upfront, it takes care of a lot of those things, as long as brokers don’t overlook other products in the marketplace that may be more suitable for their clients,” he said.
[Blog: Vertical integration is no good for brokers or consumers]
