Blake Buchanan, eChoice's general manager of aggregation, said if there is to be any meaningful outcome from the ASIC review, the corporate regulator must compare “apples with apples”, instead of comparing commission models in the financial planning sector to those in the mortgage industry.
“We welcome this review because it will finally remove speculation around commission payments, and we can get on with the business of what we do best, and that is providing exceptional service to the borrowers of Australia,” Mr Buchanan said.
“In general terms, there is not a great deal of difference in the value of upfront commissions offered by lenders. Present remuneration structures are considered appropriate, and there is absolutely no doubt that the service and system is working for the consumer as well as the industry. The fact that brokers write in excess of 50 per cent of all new loans is clear evidence of the success.”
Mr Buchanan said potential changes to commissions could play well into the hands of the larger banks.
“The potential for the competitive mortgage marketplace to be impacted is very real and could play to the strengths of the big four delivering in an oligopoly,” he said.
Mr Buchanan added that the inquiry should be presented with a study of clients who have used a broker, as opposed to staying with their retail finance provider, to discover the “positive impact this has had on a client’s overall financial position”.
“Inquiries that welcome industry input and representation are certainly a positive step and there is no doubt this particular one will be comprehensively considered from all angles as there are so many layers of organisations and business owners involved,” he said.
Meanwhile, FBAA chief executive Peter White, who recently attended the ASIC stakeholder roadshow, said brokers should be heartened by the “open” and “consultative” approach the corporate regulator is taking with its commissions review.
“From the discussions, it was clear the regulator has no preconceived outcomes in mind and they asked pertinent questions relating to the parameters and relevance of the proposed scoping of this review, and input relating to the influencing factors and structures of commissions in the home loan sector,” Mr White said.
“More importantly, this was an opportunity by the industry to ask and submit questions relevant to last year’s financial system inquiry, which among [other] things, probed remuneration structures and the similarities, or lack of, with other instruments like insurance or financial advice.”
Mr White said the ongoing discussion around remuneration models continues to be high on the agenda but he believes ASIC is keeping an open mind regarding any changes to the current commission structure.
“We’ve seen the outcomes with what happened to financial advisers with the Future of Financial Advice (FOFA) reforms but it must be said again, the two industries are worlds apart,” he said.
“As long as everything is transparently and legally disclosed and upfront, there should not be an issue with the outcome of this review.”
[Related: NAB throws support behind brokers]