A Sydney-based broker has outlined the way in which his brokerage is preparing for potential changes to the broker remuneration model.
Speaking to The Adviser, director of Catalyst Advisers Stephen Michaels said that his brokerage has developed a strategy to offset losses incurred by a potential change to the broker remuneration model off the back of the financial services royal commission.
“We've kind of looked at it from different perspectives,” Mr Michaels said.
“One is already kind of up and running – diversifying the income of the business by establishing a full-scope financial planning and advice business, which was always a way to hedge against direct impact on our commissions.
“Also, if the model ever changes to either not include trail or to a flat fee for a loan, irrespective of loan amount, it’s just as simple as doubling down on volume.”
However, Mr Michaels said that there’s no “silver bullet” or “golden goose” that would completely offset risks.
The Sydney-based broker also highlighted the competitive contribution of the broker channel, warning that an alternative remuneration model would need to adequately reward brokers to prevent a significant industry exit.
“Brokers will be important regardless, solely because of competition in the industry,” he said.
“If the broking occupation didn't exist, then the consumer wouldn’t benefit. You’d have the big four banks taking control, so I think our occupation is very important in the industry.
“The remuneration structure will change eventually, but it will have to be enticing enough to keep the top 10-20 per cent of brokers in the industry.”
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