EXCLUSIVE: The major banks have begun releasing their reactions to the banking royal commission recommendations on broker remuneration, with NAB saying it recognises upfronts will need to change to ensure the viability of the channel and CBA reiterating its stance on a consumer-pays model.
Following on from the release of the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on Monday (4 February), which called for a ban on trail commissions and a move away from a lender-paid commission to a consumer-paid fee, the major banks have begun outlining their thoughts on the suggested changes.
NAB ‘supports brokers through this change’
On Wednesday afternoon (6 February), NAB spoke to brokers and broker industry bodies reiterating its support for the broker channel and acknowledging the “major change” that the recommendations suggest for the channel.
Speaking to The Adviser after the broker engagement, Mike Baird, NAB’s chief customer officer for consumer banking, said: “We acknowledge that these recommendations signal a major change for the broker industry.
“We believe a vibrant, competitive mortgage broker market is essential to maintain competition in the mortgage market in Australia.
“NAB supports mortgage broking as a channel of choice of home buyers. Mortgage brokers play an essential role in enhancing competition in the home loan market and enabling access to credit for Australian home buyers.”
While Mr Baird said that the bank would now “take the appropriate time to review the report as the recommendations are expected to have a significant impact on our industry,” he said it would “work through these with the Treasury-led taskforce and industry associations including the Combined Industry Forum”, in which NAB plays a key role.
Notably, Anthony Waldron, NAB executive general manager of broker partnerships and chairman of the Combined Industry Forum, added that he recognised that brokers are good for competition in the lending space, which benefits consumers in the long run.
Mr Waldron said: “Brokers have enabled smaller lenders to compete, which is ultimately good for consumers.
“With the proposed removal of trail commissions from 2020, we recognise that upfront commissions will need to change to ensure the viability of the industry,” he said.
“We want to be the bank that supports brokers through this change and we will stand side by side with the industry as we go through this change to ensure good customer outcomes.”
He told The Adviser: “We will continue to communicate with our brokers ensuring they are well informed and have the right tools, education and support to implement the changes required.”
CBA CEO ‘recognises that not all brokers share [his] views’
The Adviser has also received feedback from the CBA regarding Commissioner Hayne’s recommendations.
Speaking following CBA’s profit announcement on Wednesday (6 February), CEO Matt Comyn reiterated his stance on broker remuneration, which he voiced during the royal commission hearings last year, and from which Commissioner Hayne appears to have drawn heavily for the basis of his recommendations.
In an investor briefing, Mr Comyn was asked to release further information about the bank’s analysis in relation to broker remuneration and the cost of home loan distribution.
In response, Mr Comyn said: “I won’t break down the distribution costs differentials between the branch network and the mortgage broking market.
“I note that over the years, a number of analysts have estimated that, and I think some of the estimates I’ve seen are quite reliable.
“As you noted, I was extensively examined on my views in relation to the mortgage broking channel. I think they provide an essential service for customers but my view aligns with the commission’s recommendations, it was my view then and it remains my view today.”
In a media briefing, The Adviser asked Mr Comyn whether he was supportive of a consumer-pays model, to which he responded: “Yes. The first thing that I would say is that the mortgage broking channel provides a very important service to our customers and to customers around the country.
“I was examined extensively on this topic during my appearance at the royal commission. My views on that time have been documented, which was what the commissioner was examining me on. The views that I expressed align with the commissioner’s recommendations. They were my views then and they remain my views now.”
CBA message to brokers
The Adviser noted that broker-originated loans make up 40 per cent of CBA’s home loan flows and asked what his message was to brokers given that such a model could damage the viability of the broker proposition.
Mr Comyn replied: “As I said, I think brokers – and I know a lot personally – offer an important proposition. And in my evidence [to the commission], I also stressed the importance of that channel being able to thrive in the future.
“Of course, I recognise that not all brokers will agree with those recommendations or my views. Some brokers have been kind enough to share their views directly with me and I can understand that those recommendations do not necessarily align with everyone’s views.
“But as I said, I do think those are the appropriate recommendations and I can see the challenges for brokers.”
He concluded: “But ultimately, I think they deliver better customer outcomes over the long term.”
When asked by The Adviser what Westpac’s stance was on the changes to broker remuneration, a spokesperson said: “We want to see a viable broker market. Brokers are an important driver of competition and valued by many of our customers.
“Any change to the structure of payments needs to be considered carefully, given potential unintended consequences,” they said.
ANZ group executive for Australia, Mark Hand, noted the "sweeping recommendations that will change the landscape of financial services in Australia" put forward by the royal commission's final report but said that ANZ would "work constructively with all our stakeholders to implement the recommendations of Commissioner Hayne’s final report as soon as is practical".
Mr Hand said: "We will do this in the spirit of the Commission’s review, rather than treating it as a compliance exercise.
"As you are acutely aware, the business model for mortgage brokers may be significantly changed as a result of the recommendations. This is clearly a major concern for the many businesses that make up the broking industry."
However, he added that it was "positive that both the government and opposition have acknowledged the broking sector’s crucial role and are committed to consultation and gradual implementation."
The group exectuive added that ANZ supported a new ‘best interest’ duty and "a better model for broker remuneration".
"As the major parties have acknowledged, changes to remuneration need to take place over time and involve careful consultation with all affected groups.
"Mortgage brokers have been an important partner for ANZ for almost thirty years. We don’t see this changing.
"[Brokers] all play an important role in helping our customers navigate what can be a stressful and complex process," he said.
The ANZ executive concluded: "We see brokers as integral to promoting competition and choice within the broader industry. If we work together, I’m confident we can create a better future for both brokers and our customers.
"ANZ is committed to the broking channel and we will work with [the broking industry] to help ensure the industry continues to serve Australian consumers within any new regulatory framework."
*This story was updated on 11/02/2019 to include ANZ's response.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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