Connective director Mark Haron has outlined how remuneration reforms will impact brokers and why banks have “a lot of work to do” to accommodate the changes outlined by the Combined Industry Forum.
The newly released reform package from the Combined Industry Forum (CIF) has outlined changes to remuneration structures, including changes to upfront and trail commissions.
The first of six proposals will see the standard commission model avoid financial incentives that encourage consumers to borrow more than they need or will use — for example, by basing commissions on facility drawdown net of offset.
CIF deputy chair and Connective boss Mark Haron said that some mortgage brokers won’t be affected by these changes while some will be significantly impacted, depending on how they approach their practices and lending with customers.
“How the net payment is done will be based on how each lender approaches it,” Mr Haron told The Adviser. “There have been no hard or fast rules around that. From a competition law perspective, we can’t put those rules in place.”
Mr Haron explained that some lenders may pay on the actual amount that was drawn on settlement, with further payments down the track.
“We have already seen a lender bringing in a utilisation clawback, which does to a certain extent achieve a similar result,” Mr Haron said.
“But there is a fair bit of work to be done around those models, and there is a lot of work for lenders to do to update their software systems and platforms to enable them to achieve this, too.”
The CIF expects these changes to be phased through in 2018. However, Mr Haron said that he doesn’t expect any lenders to be “travelling out of the gates” in January, given the software and platform adjustments required.
[Related: CIF proposes package of commission changes]
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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