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‘Proof’ needed in ASIC remuneration claims

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Reporter 6 minute read

The CEO of a brokerage and sub-aggregation company has voiced “extreme concern” with some of the recommendations in the Sedgwick and ASIC reviews, stating that some claims have “no proof”.

Writing in a response to Treasury’s consultation on ASIC’s Review of Mortgage Broker Remuneration, the CEO of Loans Actually, Glenn McKissack, revealed that he felt compelled to write a submission directly as his aggregator (PLAN Australia) had incorporated its submission into that of its parent company, National Australia Bank.

Stating that he was therefore “concerned that this [response] will be tainted” by NAB, he added that he was submitting his own response as “there clearly needs to be a view from a mortgage broking business”.

The CEO said that while he had “no issue” with moving away from soft dollar payments, volume incentives and clearer disclosure of ownership structure, he had a “number of issues” with changing commission structures and with some of the conclusions drawn in the Sedgwick and ASIC reviews.


Mr McKissack wrote: “[ASIC] were extremely positive about the role mortgage brokers play in our current competitive lending marketplace, yet they have also grouped us in with the banks as if the way we are paid is responsible for poor customer outcomes. Where is the proof?

"To draw the conclusion that the payment of commissions based on loan size to mortgage brokers causes poor consumer outcomes is both incorrect and unproven.... The size of the loan is only important in the fact that it directly correlates with the client’s needs.”

He continued: “My business and the majority of my industry associations focus on the solution for the client, not on the commission we are paid. We know that under the current commission structure we will be suitably compensated for the many hours we spend working with the client, although there are often occasions when this is not the case when dealing with loans of a small monetary value (e.g., for top-ups).”

After going into detail of “what a broker does”, the Loans Actually CEO said: “To suggest a set value of time, skill and expertise can be placed on a loan based on the LVR, product or customer type, or complexity, shows a complete lack of knowledge in the industry in which we operate. As mentioned ... there is a huge amount of work and time we put into every application, no matter the amount, and sometimes the supposedly 'easier loans' take the most work. And who decides if a loan is complex?”

He added that his sub-aggregation business takes a clip of member commissions, which “allows [the company] to offer ongoing elevated levels of service to [its] members and any change to the commission structure [would] seriously undermine [its] ability to do so”.


“I [could] see this side of my business grinding to a halt,” the CEO said.

Mr McKissack also said that while the payment of commissions based on the loan amount “does not stop mortgage brokers from fostering a consumer-centric culture, changing how payments are calculated and how much [brokers] are paid clearly will”.

He added that he believed “many of the further measures of the reviews are unnecessary and will seriously affect the competition and viability of the mortgage broking industry.”

He concluded: “Our industry has gone through enormous changes associated with increased compliance and licensing over recent years, and essentially, we have accepted these because of our belief that it continues to make our industry stronger. Increased costs in time and money have needed to be absorbed within our businesses, but with the changes recommended, this cannot be case in the future.

“Our goal, as it should be for all in a customer-service-type industry, is for good customer outcomes and to be suitably rewarded as a result.”

Mr McKissack’s call for ASIC to provide more clarity around some of its findings and proposals echoes those from aggregator Connective, who wrote in its submission: “[W]e do not understand exactly what amounts to a 'good consumer outcome' and, similarly, what is a 'bad consumer outcome'. This is problematic as, without a clear understanding as to what these concepts mean, the findings in the review are essentially based on the subjective opinion and supposition of the author.”

Connective’s group legal counsel Daniel Oh later told The Adviser: “One of our big fears is that some people could think a good consumer outcome is the lowest rate, or the lowest amount paid. That is very dangerous because you're overlaying someone's view of what 'good' means into a test where there are different individual circumstances.

“So that's why, in our submission, we go back to the general principles: the loan must not be unsuitable, meet all the regulator guides that ASIC has already released ... and [industry should] really be making sure they're enforced, that everyone is focused on supervising that and ensuring they are complied with. If they are, we would hope that 'good' (whatever that means) consumer outcomes flow as a result.”

[Related: ASIC suppositions ‘dangerous’ and ‘problematic’, says aggregator]

‘Proof’ needed in ASIC remuneration claims
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