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Morningstar mulls impact of scrapping comms

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Charbel Kadib 6 minute read

A move to adopt a consumer-pays broker remuneration model would have a “major impact” on demand for brokers, independent research agency Morningstar has said.   

In an analysis of Mortgage Choice’s financial outlook, investment research agency Morningstar has provided insight into the potential ramifications of regulatory change in the broking industry.

Morningstar stated that the outlook for the broking industry is “increasingly uncertain” due to “potential structural changes that could [be] forced on participants” off the back of recommendations outlined in the financial services royal commission’s final report.

The research agency has observed that in its view the major banks “seem to be pushing a fixed commission model rather than a variable commission model” and noted the potential impact of changes to remuneration.


Following Commonwealth Bank CEO Matt Comyn’s admission that he would support a Netherlands-style fees for service remuneration model in Australia, Morningstar said that such a change would stifle consumer demand for the third-party channel.

“Changing the broker remuneration model from brokers being paid commissions by lenders on loan settlements to brokers charging borrowers upfront fees would likely have a major impact on consumer demand for broker services,” Morningstar noted.

However, Morningstar added: “Absent major industry restructuring resulting from the royal commission recommendations, we expect broker usage across the industry to remain at relatively high levels around 54 per cent due to increasing complexity of servicing a home loan.”

Many in the industry have voiced concern over CBA CEO Matt Comyn’s remarks regarding broker commissions, with several aggregatorsbroker groups and both broker associations hitting out at what they see as “self-serving” comments aimed at driving customers back to CBA bank branches and increasing the bank’s profits.

Further, Alex Whitlock, director of mortgages at Momentum Media, wrote an open letter to the CEO of the Commonwealth Bank of Australia, warning him of the ramifications of his comments and asking him to clarify his stance regarding broker commissions.


The Adviser has not yet received a response.

Building on this, The Adviser commissioned Momentum Intelligence to produce a white paper to better inform legislators about the intricacies of third-party distribution. 

The cornerstone of the report is a major survey of borrowers to understand the decisions behind why they chose their mortgage provider, what their sentiment and understanding was around commission and, importantly, what would influence their decision when choosing which distribution channel they would use for a home loan in the future. 

A key question asked to respondents was around borrower sentiment towards paying a fee for service and how this could impact their choice to use a broker. 

The findings of the survey will be released in due course. 

[Related: Open letter to CBA CEO Matt Comyn]

Morningstar mulls impact of scrapping comms
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Charbel Kadib

Charbel Kadib

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.


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