Industry in ‘incredibly strong position’ ahead of rem review

In a recent video update to members, MFAA CEO Mike Felton reflected on the achievements of the year 2021, and what the industry would be facing this year.

Stating that last year had been “an incredible year of contrast and extremes” that will “go down as an extraordinary year that certainly stretched us”, he suggested that the changes of 2021 had helped put the industry in a stronger position for 2022.

Mr Felton noted the upheaval that the industry faced last year – including the introduction of the best interests duty on 1 January, a swathe of new regimes and reforms that came into effect in October, stop-start lockdowns to contain COVID-19 outbreaks, and lengthy turnaround delays – but added that much of the groundwork laid in 2021 has helped place the industry in a strong position ahead of the upcoming remuneration review.

He reflected that many of the changes had helped feed into strong consumer confidence and trust in brokers, who “continue to vote with their feet” and drove a new record market share for the third-party channel in the September 2021 quarter, when two-thirds of all new home loans were introduced through a broker.

Mr Felton also flagged that brokers had written a record volume of $93.5 billion in the September quarter (more than double the same volume in the September 2019 quarter), which meant that “the size of the market available to our industry is growing quickly”, and that, while this had been growing, there had continued to be low arrears, high customer satisfaction in an “ever growing Net Promoter Score” and “miniscule” broker complaints to AFCA.

“Not only does it drive trust confidence amongst consumers, it also drives trust and confidence amongst regulators, government and all sides of politics, which is an incredibly strong position to be in as we head into the 2022 review,” Mr Felton said.

The MFAA CEO added that the association had undertaken a “significant amount of work on the 2022 review” last year, in preparation, adding that brokers were in “an exceptionally strong position” and should “keep those great outcomes and strong data intact” as the industry heads closer to the remuneration review.  

Other work that the MFAA said it was continuing this year was its work to “relentlessly advocate for the interests of brokers across all areas”, including working with lenders, regulators, and government on the key issue of lender turnarounds, which Mr Felton said should be the same for borrowers regardless of which channel they chose to lodge a loan through.

The association head concluded by stating that the record number of association members would help bolster the association’s financial position so it can “defend the industry should the need arise in the upcoming year” and also support its work in advocacy, professional development, education, events, and mental health initiatives for the benefit of members.

Background to the remuneration review

The review forms part of the government’s response to commissioner Kenneth Hayne’s recommendation in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry regarding how brokers are paid.

While the government had initially said in its official response to the final report in 2019 that it would ban trail commission payments for new mortgages from 1 July 2020, the Treasurer revealed that the role of upfront and trail commissions would instead be reviewed in 2022. 

Treasurer Josh Frydenberg recently suggested to Momentum Media that such a review would be held in the “back half” of the year.

[Related: 94% of broker clients unconcerned with broker remuneration]