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‘If brokers aren’t there helping consumers, who is?’: AFG

david bailey david bailey
Reporter 6 minute read

The head of a major aggregator has emphasised that “broader consideration” is needed on any wholesale changes to broker remuneration to ensure the longevity of the sector and provide competition.

Speaking at the Macquarie Australia Conference in Sydney this week, the chief executive officer of AFG, David Bailey, reiterated comments made last month that any radical changes to broker remuneration — such as flat fees or a fees-for-service model — would negatively impact “every single mortgage holder”.

Mr Bailey told delegates that while the industry required “additional regulatory oversight”, there was not a need for major changes to broker remuneration.

Speaking to The Adviser, the AFG CEO added: “I think there should be a broader consideration of what changes to a broker remuneration model would do to the broking industry, and the impact it may ultimately have on consumers should a remuneration model be introduced which makes it sub-economic for brokers to exist.


“The only outcome for that would be a reduction in broker numbers and ultimately the consumer would be worse off.”

He continued: “Brokers bring competition and choice to the marketplace. They also bring clarity around a very difficult market to understand. If they are not there helping the consumer, who is?”

More bank power would mean less competition

Mr Bailey argued at the Macquarie conference that if there was not a viable mortgage broking industry, “power [would be] given back to the big four banks again”.

He told The Adviser: “The impact of that would be less competition in the marketplace. Less competition means poorer outcomes for consumers, which therefore means higher interest rates.”


Earlier this week, ANZ’s chief executive officer, Shayne Elliott, said that conflicts of interest and poor incentive structures in the broking industry must be resolved through industry reform.

While he said that ANZ does not hold an official position on the matter, Mr Elliott told The Adviser that he would “absolutely” support such a move if proposed by industry stakeholders.

“[The] market itself will not resolve the issues around the potential conflicts or poor incentive structures, so we need to sit down as an industry with our regulators and come to a conclusion. If that means flat fees, that’s fine. We have no particular opinion on that,” the CEO said.

However, Mr Bailey told The Adviser that there are “issues” with the flat-fee model, which the Combined Industry Forum is currently reviewing.

Touching on the Australian Securities and Investments Commission’s Review of mortgage broker remuneration, the AFG CEO said: “ASIC ha[s] spent a significant amount of time looking at the broker remuneration model and came out and said that brokers provide consumers with good outcomes and the model is not broken, it just needs some tweaks. That is what the Combined Industry Forum is doing. It is considering those recommendations by ASIC. So, any calls of completely overhauling the broker remuneration model do fly a little bit in the face of a significant body of work by the main regulator.”

He continued: “I think, at the end of the day, the Combined Industry Forum is being charged with considering the recommendations put forward by ASIC. Given that they are representative of the whole industry, they are the ones that should be coming up with the most appropriate model to consider all options and the impact across the whole industry.

“I think the CIF has been charged with looking at the alternatives, and AFG will engage continually with [the] CIF to ensure the best possible outcome, at the end of the day, for the consumer.”

At the Macquarie event, Mr Bailey said: “The irony of all this is banks reward customers for larger loan sizes and give discounts... I don’t think that’s been addressed yet.

“Brokers wouldn’t account for 55 per cent of flow if customers weren’t getting a good outcome.”

In conversation with The Adviser, Mr Bailey concluded: “Brokers should now just continue to do what they do and serve the customer and make sure that the customer is front and centre of any proposition that they are considering.

“This argument comes down to the consumer and consumer outcomes. That is what this whole thing is about: making sure the consumers are well looked after. That is what brokers should be doing on a day-to-day basis and have done for as long as I have been involved in the industry.”

While there are several ongoing commissions and reviews yet to be finalised around broker remuneration, Bankwest announced last week that it was implementing changes to its broker commission payment model, including changes to trail and the adoption of CIF recommendations, effective from 1 July.

[Related: Aggregator provides PC with ‘evidence’ of broker outcomes]

‘If brokers aren’t there helping consumers, who is?’: AFG
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