The head of a major aggregator has refuted claims made by CBA CEO Matt Comyn, and has issued a call to action aimed at thwarting “maneouvring” designed to undermine the broking industry.
In a statement to The Adviser, executive chairman of Loan Market Sam White responded to remarks made by Commonwealth Bank of Australia (CBA) CEO Matt Comyn who, in his appearance before the financial services royal commission, noted his support for a Netherlands-style fees-for-service model, whereby consumers are charged a fee for mortgage advice.
Mr Comyn also revealed that CBA had sought to introduce a “flat fee” commission-based model in January 2018, before choosing not to go ahead with the change in fear that the rest of the sector would not follow suit.
In response, Mr White said that he wasn’t surprised by Mr Comyn’s comments and expressed his disappointment with what he believes to be a concerted effort to undermine the broking industry.
“We expected Mr Comyn to say what he said, but what we are most disappointed in is that he has the royal commission and journalists — both of whom have been so critical of bankers — appearing to have swallowed his message hook line and sinker,” Mr White said.
“[Before] the commissioner decides to make a blanket ruling that will affect tens of thousands of Australian businesses, there should be consultation with the industry outside the big banks.”
Mr White also expressed his disappointment with what he has perceived as misdirected attention by the royal commission on the broking industry rather than banker misconduct.
“What is alarming is how the banks have maneouvred the royal commission to centre around broker remuneration instead of their own misconduct,” Mr White continued.
“It has been a masterful move. Banks will win, competition will suffer as we return to a banking oligopoly and clients will be left to fend for themselves again.”
Further, while giving evidence to the royal commission, Mr Comyn suggested that a flat-fee model would have generated savings of $197 million over five years for the bank, which he claimed would have been passed on to customers through lower interest rates.
However, Mr White rejected Mr Comyn’s assertion, stating that Mr Comyn’s proposition was “laughable”.
“Is Mr Comyn seriously asking us to believe that for a bank expecting to make $50 billion in profit over the next five years, that somehow saving $197 million in broker commissions over that period will enable them to reduce rates?” Mr White said. “Does he take us, and tens of thousands of small Australian businesses, for mugs?”
Mr White called on the broking industry to promote the positive consumer outcomes delivered by brokers and noted Loan Market’s #brokersworkforyou campaign.
“Unfortunately, what we’ve seen in the last 24 hours has shown how serious the situation has become for our industry. It is clear that our story is not being told,” Mr White said.
“In Loan Market’s submission to the royal commission’s interim report, we pleaded with the commissioner not to take the banks’ word in redesigning broker remuneration and we compared it to allowing ‘the fox to redesign the henhouse’.
“Unfortunately, it appears those pleas have fallen on deaf ears.”
Mr White added: “I believe we need to ask our customers to tell our story around the great outcomes brokers provide every day. The entire industry needs to share these awesome customer testimonials with the hashtag #brokersworkforyou.
“Because brokers work for the customer — always have, always will. We need hundreds, if not thousands, of customer stories to make a difference and to start being heard by mainstream media, the consumer and the politicians.
“This isn’t over yet and we need our customers’ voices to be heard.”
Also speaking to The Adviser, the CEO of CBA-owned brokerage Aussie Home Loans James Symond said that he wasn’t surprised by Mr Comyn’s remarks and expressed support for the current broker remuneration model.
“In the lead-up to [Mr Comyn’s] comments at the royal commission, I think that the industry was hearing the bang of the CBA drum quite loudly with reference to wanting material change to broker commissions,” Mr Symond said. “It wasn’t a surprise, although I have not had that conversation directly with anyone from CBA, ever.”
He added: “We maintain our position that the current commission structure presents the best outcome for our customers and our brokers.
“We are working with the [Mortgage and Finance Association of Australia] and government to put our points across in this important debate.
“Make no mistake — we will fight for no change to the current remuneration system.”
Mr Symond concluded: “The broking industry has been built on customer satisfaction. There may be some industry reform, but we will continue to fight for mortgage brokers, who provide an incredible service to Australians. We have grown from zero to 55 per cent of the market and will continue to grow.”
CEO of the Australian Finance Group (AFG) David Bailey also expressed his disappointment with Mr Comyn's remarks, and highlighted the positive contribution of the broking industry.
Mr Bailey told The Adviser: “The Productivity Commission has recognised that a move to a consumer pays model would result in weaker competition in the home loan market. Consistent with the concerns expressed by the Commission, it is also AFG’s belief that a fee-for-service model paid for by consumers would result in the major banks with large branch networks increasing their oligopoly powers to the detriment of all Australian borrowers.
"Mortgage brokers strengthen the entire Australian mortgage lending industry by fostering competition and therefore supporting all Australian home buyers. Let’s not forget that the introduction of the mortgage broker channel has contributed to a fall in lenders’ net interest margins of more than three hundred basis points over the past 30 years.
"The last thing Australian borrowers can afford is to see the jettison of this competitive experience.”
Loan Market. Aussie Home Loans, and AFG's responses follow statements from the Finance Brokers Association of Australia (FBAA) and the MFAA, in which both industry bodies refuted Mr Comyn’s claims and reiterated their support for current arrangements in the broking industry.
[Related: Industry slams ‘self-serving’ CBA]