While confident that ASIC’s review into broker remuneration will be beneficial for the third-party channel, the head of one of Australia's largest brokerages has serious concerns about the independence of the Sedgwick report.
Smartline executive director Joe Sirianni told The Adviser that both reviews have similar recommendations but could have very different consequences.
“The ASIC report in my mind was quite balanced,” Mr Sirianni said. “It provided an in-depth analysis of the market. Their recommendations were reasonably in line with what we expected as well. ASIC’s report was quite a considered, measured and overall a very balanced review.”
ASIC’s final report should be seen as a validation of the value brokers provide to customers and the competition they create in the mortgage industry, according to Mr Sirianni, who said the only major changes come in the form of “tinkering around the edges” of the current commission model: “Things like VBIs and soft dollar commissions and vertical integration.
“In my mind the ASIC review is a positive one for our industry. What we have finally is a government body coming out and saying there is no significant evidence of poor outcomes for consumers and overall brokers do a good job.
“I think the changes and recommendations ASIC put forward will actually change the industry for the better.”
However, Mr Sirianni believes the ABA-funded Sedgwick review, released last month, is a cause for concern.
“It’s a worry because he hasn’t done his research, he hasn’t done the quantitative data collection that ASIC has done. He has been commissioned to do an enquiry about bank remuneration, rather than third-party remuneration. I question the whole integrity of the whole independent status of the ABA,” he said.
“His recommendations are in line with ASIC’s to a certain degree, and that is great, but it’s within the commentary where the noise is coming from. It looks like ramblings. They are inconsistent. That’s what people are worried about.”
The question on many broker’s minds is why any recommendations have been made to change commissions when Sedgwick’s report, like ASIC’s, found no evidence of poor consumer outcomes.
“He also made it very clear that they don’t want to change the model if it is detrimental to competition in the industry,” Mr Sirianni noted.
“This is not an independent party. This was commissioned by the ABA. It reminds me of the 1960s when the tobacco industry decided to do some ‘independent’ research to prove smoking doesn’t cause cancer. That’s the same quality as Sedgwick’s paper,” he said.
The big issue now is how the banks will respond. All four majors and a number of regionals have responded to Sedgwick’s final report, with many agreeing to implement his recommendations.
“We must never forget that there is no evidence of poor consumer outcomes,” Mr Sirianni said.
“ASIC has come out and said we provide value and competition within the industry. The question the banks need to ask is why change the model when it is not broken?”
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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