The general manager of a boutique aggregation group has explained how the ASIC and Sedgwick reviews have prompted aggregators to stand united in the face of looming remuneration changes.
Speaking to The Adviser, eChoice general manager Blake Buchanan explained how aggregators have been working “shoulder to shoulder” more frequently in the last six months than he has ever seen before.
“Aggregators should have more of a consultative approach with each other so that we can, as a united front, come to the industry with our solutions,” Mr Buchanan said.
“The aggregation groups need a stronger voice. What I have noticed over the last six months is that aggregation groups are coming closer and closer together so that we can form combined opinions that are good for the industry and good for consumer outcomes. We are at the early stages of those consultations,” he said.
Mr Buchanan said that, by-and-large, the aggregation groups he speaks to are of the same opinion as him when it comes to remuneration. While he believes that the current remuneration structure could be changed, Mr Buchanan said that, if anything, brokers and aggregators are paid “just adequately” for their services. He says a number of proposed remuneration changes should not be made.
“It shouldn’t be changed because of loan size. In other words, you shouldn’t be capped because your loan is larger than someone else’s. One of the rationales for that is quite simple: if you have an office in the city, your overheads are much more expensive and your loan sizes are going to be larger. So why should you be paid the same amount of money as someone who is originating loans out of Blackheath, for example, where the average loan size might be three times smaller than it is in the city?”
According to Mr Buchanan, this is inconsistent with other commission-based professions such as real estate, where an agent is paid a based on the value of the property at the time of sale.
As brokers continue to discuss the Sedgwick review, Mr Buchanan stressed that it is important to remember no action has yet been taken by the banks.
“News reports have noted that the banks are going to look to implement all of the recommendations by 2020. But when we talk to the big four banks they say that they’ve never actually said they are going to implement all of them. They will implement some of them and then consult with their partners in the industry around some of the proposed changes. We are at the beginning of that stage now,” he said.
The Sedgwick review has stolen some of the spotlight from last week’s Senate economics references committee inquiry into consumer outcomes.
The FBAA’s Peter White was asked to appear before the committee, where he defended the current broker commission model and warned that switching to a flat fee model could lead to extremely poor consumer outcomes.
“The reason why the Senate hearing was so important is because the committee, at the end of the day, are going to be the ones judging the outcome of the ASIC remuneration review,” Mr Buchanan said.
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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