The head of the Mortgage and Finance Association of Australia has said that while the industry would support changes to remuneration structures that were creating systemic harm, there is no evidence to suggest that brokers are.
MFAA CEO Mike Felton made the comments to The Adviser following the news that a new bill could enable ASIC to prohibit remuneration structures that result in “significant consumer detriment”.
Speaking to The Adviser, MFAA CEO said: “Protecting strong consumer outcomes is vital to the future sustainability of the mortgage broking industry. Where there is evidence remuneration structures are creating significant consumer detriment or systemic harm, and the industry is either unwilling or unable to remedy them, it would not be unreasonable for Government to take action to address the matter either under advice from ASIC or directly by ASIC.
“The industry has, however, come together through the Combined Industry Forum (CIF) to deal with conflicted remuneration practices which it believes pose an unacceptable risk to customers. In December 2017, a raft of reforms to remuneration practices and industry governance were announced by the CIF to specifically deal with conflicted remuneration.
“The effectiveness of these reforms will be continuously monitored by the CIF, and should further changes be required, they will be dealt with by the industry.”
Noting that the broking industry had already been through “two significant reviews” over the past 18 months, including the Sedgwick review and the ASIC remuneration review, Mr Felton highlighted that neither had found evidence that current remuneration structures were causing “systemic harm to consumers”.
“There is also nothing in the data to suggest that brokers are causing systemic harm,” the CEO said.
“Quite the contrary. Consumers continue to vote with their feet in support of the broker channel for good reason. Brokers provide a level of service and a proposition that is unparalleled in the industry and produce the strong consumer outcomes and referral relationships that are at the very core of the mortgage broker business model.”
The head of the MFAA continued: “Mortgage broking is a mature and systemically important industry to competition and to the Australian economy. This means greater external scrutiny but also means a significant increase in the level of required self-regulation and reform. This ensures that the longevity of our industry is protected, as is the competition and access to credit that brokers bring to the market.
“The package of reforms being implemented by the CIF… includes a significant governance framework that ensures that the reforms being implemented are not a ‘set and forget’, but rather an ongoing process of self-assessment, self-correction and continual improvement that will monitor outcomes and adjust as required on an ongoing basis.”
He concluded: “Strong consumer outcomes are at the core of everything a mortgage broker does, and the CIF is well progressed in enhancing those outcomes further by addressing conflicts in a manner that protects competition and avoids unintended consequences that may themselves create significant consumer detriment.”
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