Lenders will continue to make small changes to broker remuneration in 2018, but a Deloitte partner believes that the “real question” will be how the industry will handle any significant changes to commissions.
The major banks are well aware of the problems associated with making any major changes to the way they pay mortgage brokers.
The third report from the House of Representatives Standing Committee on Economics, released last month, suggests that Sedgwick’s recommendations to reform broker remuneration were not readily accepted by the big banks.
While the majors stated that they had changed their remuneration scorecards in response to the Sedgwick review, they told the committee that implementing broker remuneration reforms were not so straightforward.
“The banks also stated that the recommendation relating to mortgage broker remuneration presented the greatest challenge because it involved third parties,” the committee report said. “However, they committed to work through the issue with [the] industry.”
A number of lenders have already made changes to accreditation and commission structures.
CBA revealed last month that from the first quarter of 2018, new mortgage brokers will be required to hold at least a Diploma of Finance and Mortgage Broking Management, have at least two years’ experience writing regulated residential loans, be a current member of either the MFAA or FBAA and be a direct credit representative or employee of an approved aggregator or Australian Credit License (ACL) holder.
CBA also expects to have the changes recommended by the Combined Industry Forum (CIF) to broker commissions instated by 30 June.
Meanwhile, ANZ informed brokers earlier this month that it will make changes to its upfront commission structure, effective 1 February 2018.
“My view is that we will continue to see these tweaks coming through,” Deloitte financial services partner Heather Baister told The Adviser.
“I think the interesting thing will be if there are any significant change to the commission structure. Nobody really wants to go first on making any significant change, so all we are seeing at the moment are these small tweaks,” Ms Baister said.
However, the Deloitte partner added that if any major changes to broker commissions are to be made, they will need to be led by the CIF.
“I know that forum is working very openly to try and ensure that they can respond to the ASIC findings,” Ms Baister said.
“We will continue to see amendments being made and tightening of broker oversight by the lenders. I think that trend will not change. ASIC’s oversight of brokers will be continuing, with increased intensity this year. I think we will continue to see announcements from the regulator about what they think lenders and aggregators should be doing.
“The real question will be if there is any significant change and how that is managed across the industry.”
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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