A group of brokers, aggregators and lenders have met the shadow assistant treasurer in Canberra to discuss the future of mortgage lending and the ramifications of removing trail.
Nearly 100 representatives from the mortgage industry met shadow assistant treasurer and federal member for Fenner, ACT, Dr Andrew Leigh, at the QT Hotel in Canberra on Tuesday (19 March) for the Future of Mortgage Lending forum, organised by AFG in partnership with Connective and Mortgage Choice.
The town hall meeting involved a panel discussion featuring Dr Leigh as well as Mark Hewitt, AFG’s general manager - broker & residential, Connective’s executive director Mark Haron, Mortgage Choice’s general manager, distribution, Neill Rose-Innes, as well as broker directors Mark Nocera (Casa Mortgage Services) and Mark Edlund (Clarity Home Loans).
Following on from a similar meeting arranged by AFG in Adelaide last month with Assistant Treasurer Stuart Robert, the meeting aimed to demonstrate to Dr Leigh the role that mortgage brokers play in providing competition in the lending landscape and providing good consumer outcomes.
The event also heard from broker customers, who outlined the solutions that their brokers had been able to provide for them.
Dr Leigh ‘very receptive to the messages in the room’
Speaking to The Adviser about the event, AFG’s Mr Hewitt said that the purpose of the meeting was to have a town hall type discussion with economist-turned-politician Andrew Leigh, and to outline how Labor’s plans to remove trail for new loans from next year could impact borrower outcomes.
“We wanted to get the point across to Dr Leigh about the unintended consequences of abolishing trail and the impacts that could have on the brokers’ ability to provide an ongoing service to their clients,” Mr Hewitt said.
“Labor’s focus was very centred on talking about them being the first to move on commissions, but the sentiment in the room was definitely around the abolition of trail and why it was not a good idea.
“What was particularly impressive to me was the care and concern that the brokers in the room had for their customers and also their concern about the unintended consequences of having their remuneration front-loaded in the way that Labor is proposing.”
He continued: “We were talking about the impacts that the removal of trail might have on brokers’ [ability] to provide ongoing service to clients and also the fact that the model without trail doesn’t provide any incentive for an ongoing customer relationship.”
Looking at customer outcomes, the Future of Mortgage Lending event also heard from broker clients who provided details of how their broker had helped them.
One testimonial came from a borrower who was in financial hardship and was on the brink of having his house repossessed, but his broker was able to refinance him and set him on a path that “helped him keep his home and keep his family together on the property without being forced to sell up”.
Another came from a major bank customer who was reportedly in the “wrong product” and finding it hard to exit her loan, but the broker enabled her to refinance out to a smaller lender where she was “extremely satisfied”, Mr Hewitt said.
“There was concern in the room around the kind of behaviour an upfront-only commission structure might create,” the AFG GM said.
“While that structure might be trying to avoid conflicts, but it could actually increase conflict,” he said.
The general manager for broker and residential at AFG added that he thought Dr Leigh was “very impressive”, noting that he remained at the event for an extra half hour to “answer every question that was directed to him”.
“He was very receptive to the messages in the room, and was very impressive and engaging,” he told The Adviser.
“It takes a fair bit of courage as well, as he was the only person in the room who thought that abolishing trail was a good idea, but he stood by the party line while still engaging and being respectful to the counter arguments.
“We were very pleased with how it went because it’s a continuing conversation – and it was a two-way conversation, hearing both sides, which is what we wanted to achieve,” Mr Hewitt added.
As well as remuneration, the event also looked at the recommendation to bring in a best interests duty for brokers and what that could entail.
Mr Hewitt said: “He was keen to understand how a best interests duty would work – and it was interesting that he had straight away suggested that best interests would mean best interests rate. However, the brokers in the room outlined why best interests of the customer is more than just rate – it’s the whole package, their customers’ aspirations over five years and their whole banking packages, not just the cheapest rate...
“As you expect, Dr Leigh did stick to the Labor Party line, but I’m sure we gave him a couple of additional things that he and/or Labor might not have considered, and we hope he takes that back to the party and discusses it with his colleagues,” he concluded.
Many groups have been campaigning, lobbying and meeting politicians to outline the ramifications of changing the broker model off the back of the banking royal commission and in the ramp up to the federal election.
Major campaigns, including the MFAA’s “Don’t Kill Competition” campaign and the FBAA’s “Don’t Burn Borrowers” campaign, have also seen widespread uptake and cross-industry support.
Indeed, the broking industry’s continued engagement and education of legislators around the unintended consequences of changing broker remuneration has already borne fruit, given the Coalition government’s recent announcement that “following consultation with the mortgage broking industry and smaller lenders… [it] has decided to not prohibit trail commissions on new loans but rather review their operation in three years’ time”.
Mr Hewitt said that the Future of Mortgage Lending event would continue to other states in the coming months, and advised that any broker or brokers groups looking to engage politicians on the consequences of changing the broker remuneration structure focus on “keeping it about the customer”.
[Related: Treasurer delays trail abolition date]
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers.
As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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