In a letter to 2,600 AFG brokers, AFG managing director Brett McKeon defended broker commissions amidst ASIC’s inquiry into remuneration structures in the third-party channel.
“Late last year I met with senior figures at ASIC and APRA and with two senators currently on the Corporations and Financial Services Committee,” McKeon said.
“We discussed a range of issues including industry regulation, remuneration structure, and the positive consumer outcomes driven by our sector,” he said.
“On competition, we also discussed the fact that corralling mortgage customers into bank branch networks will have an extremely detrimental impact on Australia’s remaining second-tier lending institutions.”
Mr McKeon said the loss of the broker-based distribution network would put non-major lenders at a significant disadvantage to the large banks.
“The resources required to establish a physical branch network to compete with the large banks creates an almost impassable barrier to entry,” he said.
“By undermining the broking model, the result will be a significant reduction in competition in the mortgage sector, to the detriment of the consumer. Every mortgage customer will pay for reduced competition throughout the life of their loan.”
Mr McKeon said he left regulators with the “clear message” that mortgage broking is a “professional, highly regulated industry”.
“Disclosure, trust and high-quality service are central to our industry, and are fully supported by the current regulatory regime,” he said.
“I would ask that you all take an active part in any discussions that reinforce the importance of our sector and encourage you all to ask your clients to do the same.”
Mr McKeon's comments come after Assistant Treasurer Kelly O’Dwyer confirmed to The Adviser in November that she had written to ASIC requesting that it undertake the review to help determine the effect of current remuneration structures on consumer outcomes.