Regulators investigating broker commissions are “missing the big picture” by talking to industry bodies and aggregation groups, according to a Melbourne mortgage broker.
Maria Rigoni, the former CEO of the Australian Institution of Professional Brokers, told The Adviser that ASIC's review into broker commissions is unclear.
“Is it about mortgage managers or mortgage brokers?” Ms Rigoni questioned. “Who are the aggregators really representing? Their mortgage management arm or their loan writers?”
Ms Rigoni said aggregation groups that had white-labelling agreements with banks would be looking to protect themselves against regulators overreach.
ASIC’s investigation into broker remuneration aims to identify the extent to which “misaligned incentives” may be creating conflict of interest between mortgage brokers and consumers.
Vertical integration – or bank ownership of broker groups – will also be under the spotlight, after the government responded to the FSI recommendation that brokers must disclose their ownership structures.
Ms Rigoni said many aggregation groups had been “bought up” by a “cartel of banks” that now have a competitive advantage over other lenders by gaining access to their pricing and policy information.
“If a bank owns an aggregator or broker group, then that bank has insider knowledge of and access to pricing and policy, credit, processing and turnaround times, and remuneration structures of all of the other lenders on their panel,” she said.
“You’ve got to ask: how does that affect the consumer?”
The same issue was flagged by former CUA chief executive Chris Whitehead in 2014 while the Murray Inquiry was still ongoing.
“I am concerned that there is a real potential for the majors to clone the innovative products of their competitors based on the market intelligence they are gathering,” Mr Whitehead said.
“It is simply a fact [that] they know how well those products are going,” he said.
“They get a lot more detailed data than would ordinarily be available through the visibility they are getting through those aggregation channels.
“So they see a competitor comes up with a product, they see that product is starting to do well, it’s very quick and easy for them to come up with their own version and undercut it, and direct the business that way.”
The FBAA and MFAA have confirmed they are in talks with the government about broker remuneration.
FBAA chief executive Peter White told The Adviser he is holding weekly discussions with both the government and regulators on the issue.
MFAA CEO Siobhan Hayden posted a comment on a news article on The Adviser website last week, saying she was recently in Canberra for a meeting, in the office of Minister for Small Business Kelly O'Dwyer, to discuss the matter.
“The meeting was to formerly commence discussions and outline the MFAA’s planned engagement with regulators and members during the inquiry,” Ms Hayden said.
“ASIC has advised that the ‘scope’ will be ready for industry consultation by the end of February/early March and once we have received this outline, the MFAA will engage our members for commentary and meet again with the minister’s office.”
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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