The MFAA has launched a defence of the broking industry, refuting allegations of poor consumer outcomes and bringing together a plethora of evidential “proof” that brokers are driving competition.
As first revealed at the association’s recent roadshows in the past few weeks, the Mortgage & Finance Association of Australia (MFAA) has pulled together data from a range of sources to challenge some of the rhetoric about brokers.
The industry has been under close scrutiny over the past year, with the Productivity Commission looking at potentially recommending a swathe of reforms to the mortgage broking sector, the royal commission questioning broker remuneration and potential conflicts of interest, and some consumer groups and media reports painting brokers in a negative light.
However, the association has now presented to government departments and regulatory agencies a data package to provide an evidence-based rebuttal of the negative reports and to emphasise ASIC’s review of mortgage broker remuneration, which did not conclude that the upfront and trail commissions have detrimental impacts on consumers.
Speaking to The Adviser, MFAA CEO Mike Felton explained: “Scrutiny of our industry is relevant and proper. We are a systemically important industry and you would expect scrutiny of such an industry. We do, however, say that the public debate and the rhetoric that you get is very different to where ASIC landed, to the data, and to the industry we know and understand.”
He continued: “There has been criticism of the industry and we think that comes from some with entrenched interests that would have something to gain from a rationalisation of a broker channel and also from those who are misinformed.
“Brokers know and understand the industry and the outcomes that they are delivering week in and week out for their customers. So, to be presented with a very different picture, that creates great concern and frustration because they don’t recognise it as their industry. That is not their broking industry.
“When there are two mismatching pictures being painted, it creates a lot of cognitive dissonance. You have a lot of stress as a result of this mismatch between what you know is true of the industry and what is being said about the industry elsewhere.”
Mr Felton added: “If [the broking industry] were systemically broken, you would have complaints and arrears going up, and you wouldn’t have consumer support of the channel, or competition increasing. You would have a very different picture to the one that emerges.
“So, we would argue very strongly that poor consumer outcomes are not core to our industry. And this data shows that.”
Research pack findings
The MFAA data pulls together statistics from a range of sources, including MFAA data, findings from ASIC’s review of broker remuneration, figures from the Credit and Investments Ombudsman (CIO) and the Financial Ombudsman Service (FOS), as well as data included in some of the responses to the royal commission.
It includes a range of graphs and tables which show, among other findings, that:
- More than 50 per cent of residential mortgages are originated through brokers.
- While broker numbers continue to rise, the number of complaints made to the CIO and the FOS has dropped (complaints relating to brokers made up just 6.1 per cent of complaints to the CIO and less than 1 per cent of complaints to the FOS in 2016–17).
- Complaints made to the MFAA itself have declined by 78 per cent in the past 10 years.
- Brokers are increasing competition by driving more loans to lenders outside of the big four (non-major lender market share rose from 21.5 per cent in 2013 to 28 per cent in 2017) and away from the majors (major bank net interest margin has dropped in recent years).
- Aggregator data shows that brokers earn a Net Promoter Score of +70.
- Brokers are not swayed by commissions (according to Smartline’s submission to the royal commission).
Mr Felton said: “The Productivity Commission has asked for data and we believe this adds to that body of data.
“The evidence shows that: [the] industry has doubled in size; satisfaction is up with a phenomenal Net Promote Score of +70; despite broker numbers growing strongly, and brokers making up 91 per cent of CIO members, they only made up 6 per cent of complaints. And for the FOS, less than 1 per cent of complaints between 2013 and 2017 were about brokers. That is an amazing accolade for the industry, it is phenomenal.
“So, there is great satisfaction and you have these external reviews which show there are no systemic issues and then you look at arrears and compliance and it is even more stark that there are no major problems.
“Couple all this data with the values that brokers offer — from choice to convenience to personalised service, relationship continuity and unpacking complexity — and we would certainly argue that the broker proposition is a very different proposition than a branch.”
He added: “We can see that there is no correlation whatsoever to the picture that has been painted in the public domain. And I think this data will achieve a greater degree of awareness based on actual data and relevant facts relating to the amazing outcomes that our industry is producing.”
Mr Felton said that he believes the broking industry will continue to drive good consumer outcomes and noted that the Combined Industry Forum is working on its framework to “continually improve” the industry.
The MFAA has said that its members will be able to download the data package from its website in the coming days for brokers to send out to customers, should they so wish.
“We have a massive business collectively, in the form of the mortgage broking industry, and we need to do everything that is right to ensure that has longevity,” the MFAA CEO said.
“We will include this message in our ongoing narrative and advocacy going forward because it is a very compelling message.”