CBA CEO weighs in on flat-fee model

In his response, Mr Comyn appeared to endorse the Coalition government and Labor party’s approach to broker remuneration reform. 

“We are supportive of improving customer outcomes and we believe that the recommendations and the consideration that have been given by both sides of politics are appropriate and well-considered,” he said.

Mr Comyn went on to acknowledge that a flat-fee model would be “appropriate” in removing certain conflicts of interests, including those associated with loan sizes. He has previously voiced his support for a consumer-pays model and the introduction of a best interests duty, and again referred committee members to the evidence he provided before the banking royal commission.

During the royal commission hearings, CBA CEO Matt Comyn revealed that while the major bank had sought to introduce a “flat-fee” commission-based model in January 2018, it later abandoned these plans in fear that the rest of the sector would not follow suit.

“We come to a view that nobody will follow, we will suffer material degradation in volume [and] we will not improve customer outcomes,” Mr Comyn said last year. At the time, Mr Comyn also expressed his belief that a consumer-pays fee-for-service model, similar to that operating in the Netherlands, was “the most attractive model” but that CBA was unable to embrace it due to fears that “no one would follow in the absence of regulatory intervention”.

Speaking to the House of Representatives Standing Committee on Economics on Friday (8 March), Mr Comyn said: “Well, I think flat-fees are appropriate to remove conflicts of interest as they relate to the loan size. There are of course lots of different ways to design the fee structure.

“We’ve given a lot of thought to this particular topic in the past. It’s one of the areas that I was examined on. There are pros and cons with any fee structure,” he said.

The head of the major bank told the committee: “We’ve given a lot of thought to, as I mentioned earlier, ensuring that the mortgage broking industry remains viable and is able to provide access and distribution particularly to meet those customer needs but also to facilitate competition.

“We think it’s important that, as part of improving customer outcomes, the remuneration would be free [of] – or at least seek to manage or reduce – potential conflicts of interest. We had given previous consideration to flat-fees as a way to do that – of course how and where to set the flat-fee. It is an important consideration.”

He continued: “I think the materials that we’d prepared on this particular topic are a matter for the public record and were examined as part of round 7 [of the royal commission hearings] as part of my evidence. We gave the topic a lot of thought and from my view, there is some complexity and a lot of consideration that needs to be given to exactly how to set and design that.”

Mr Comyn added: “The commission and the counsel assisting referred to a number of documents I authored around my view as it relates to those recommendations,” Mr Comyn continued.

“Clearly, we acknowledge and support the recommendations and I’d separate those in the context of both impacts around trail and changes to the upfront commissions, and also to the introduction of a best interests duty.”

CBA has also released an update on the actions it has taken in addressing all 76 of Commissioner Kenneth Hayne’s recommendations, adding that it would work with the third-party industry to develop a solution on broker remuneration changes.   

“We will work constructively with the broking industry as changes to remuneration are designed and implemented,” the response read.

[Related: CBA emails reveal former broker remuneration plans]