Consumers don’t want to pay fees to brokers, says banking head

When asked about his thoughts on broker remuneration, a topic currently being considered by Treasury following an extensive review, Mr Carter said: “Firstly, we are big supporters of intermediary channels — broker channels — across all of our business and we’d like to see the broker channel remain viable.

“We think customers want choice and we respect that choice, so we are supporters of a strong and professional mortgage broking industry. Professionalism carries with it some requirements.” 

Noting that the financial advice sector had been through a “pretty tough period of review” recently, Mr Carter said that he did not believe that the broking industry would have the “same extremity of outcome”, but added that “some things will have to change”.

Mr Carter elaborated: “Hopefully, mortgage brokers recognise that there is an advantage to being self-regulated, rather than being hard-regulated. So, with the question of remuneration, I don’t think consumers are wanting to pay fees to get mortgage broking advice, and I suspect politically no one is going to ask for that to happen either, given the desire to see more competition in banking, not less.

“That said, I think there are some forms of remuneration that need to be checked and looked at, particularly around transparency of ownership structures of aggregators and soft dollar.”

Mr Carter gave the example of an aggregator waiving its broker fees if they write a loan to the aggregator’s parent company.

“That sort of stuff just doesn’t feel like it’s ticking the box of professionalism and [there is] that perception of conflict. It might be a terrific solution for that client, but how do you ensure that no one thinks afterwards that it was influenced by the wrong thing?

“There needs to be good transparency and professionals just need to avoid the risk of people perceiving them to be unduly influenced in any recommendation they make (even if they weren’t)… If something goes round down the track, fighting that off is very hard. 

“So, I think commissions will remain, but I think it just need[s] to be tidied up a bit at the edges.”

Mr Carter added that he believed that upfront and trail commissions will “keep evolving” as the margin of mortgages tighten.

“I don’t know which way [commissions] will end up going,” the CEO said, “but what I do know is that margin in mortgages aren’t going up, so you have to get the equation right in how you share value.”

The combined industry forum, which comprises members of the mortgage broking, banking and consumer group sectors, is expected to submit its response to government in November (which the government has said it will take into consideration when forming its response), with an interim response expected from government in 2017 and a final response in the new year.

[Related: Banks to develop individual approaches to remuneration]