Recent media reports claiming that the major banks are planning to scrap broker commissions have been slammed by a prominent figure in the third-party channel.
On Friday, the Australian Financial Review’s StreetTalk column reported that “Several of the big four banks have canvassed controversial moves to scrap commission payments paid to mortgage brokers”.
This is at odds with the views of one major bank, which recently told brokers that it fully supports the current remuneration model.
“NAB’s view is that upfront and trial is the proper way in which to remunerate brokers for the services they provide to the community and to their customers,” NAB’s general manager of broker distribution Steve Kane told brokers at The Adviser’s Better Business Summit in Brisbane.
“Providing it is transparent and everyone knows who is getting paid when and why, then that is perfectly reasonable,” he said.
“That has been our stated position and remains our stated position in our discussions with the regulators.”
The FBAA’s Peter White responded to the AFR report, telling The Adviser that it is ‘highly unlikely’ the big four banks are planning to scrap commissions.
“The reality of that happening I think is extraordinarily low. If that were to happen the banks’ share of the home loan market through brokers will be all power to the second-tier and non-banks,” Mr White said.
“The big problem if a major bank was to turn around and shaft the broker industry is they are going to have to answer to their shareholders. Most of the big banks are heavily invested in broking networks. They would have a major shareholder problem if they were to do something like this. I think they would be ludicrous to do it. There would be many questions to be asked."
The FBAA has completed extensive research of mortgage broking in other jurisdictions such as Canada, the US and the UK. The industry association recently submitted its findings to ASIC.
“The reality is we have proven through our global research paper that brokers in Australia are among the lowest paid in the world and we are the only ones in the world who have clawbacks,” Mr White said.
In the UK, mortgage brokers do not receive trail commissions. However, with fixed-rate mortgages the preferred choice among British home loan customers, UK brokers receive regulator upfront commissions when the fixed-loan term expires and the customer refinances.
“The whole purpose of paying trail is about minimising and mitigating churn, so that brokers can service clients in a better fashion and do a whole lot of work on behalf of the lenders, which they do for their upfront to get a loan to settlement and they continue to do post-settlement,” Mr White said.
ASIC is expected to submit the findings of its remuneration review to the federal government within the coming days.
[Related: Major bank delivers broker commission update]
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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