The chairman of the Combined Industry Forum has sought to reassure brokers of the cross-industry support they garner, following the release of its interim report which outlined the progress of measures designed to reform the remuneration and compliance model.
Following the release of the body’s interim report, chairman of the Combined Industry Forum (CIF) Anthony Waldron has reiterated the group’s commitment to the broker channel.
“The CIF is here to support [brokers], and we want to help the industry deal with some of this change, and that is why the group came together, to help the organisation move into an environment where we help ourselves, through self-regulation, to assist the industry and help the industry grow,” Mr Waldron said.
“[The broking industry] continues to focus on doing the right thing by the customer and getting a good customer outcome, because ultimately that is what it’s all about and I think the growth of the industry has shown that.”
Mr Waldron also sought to add clarity to the CIF’s proposal to introduce a “customer first duty”, which would extend the good consumer outcomes requirement and incorporate a “conflicts priority rule”.
According to the chairman, who also serves as NAB’s executive general manager of broke partnerships, the proposal “makes sense” and would help brokers better understand what it means to work in a customer’s best interest, adding that he believes that in “99.9 per cent of cases”, brokers are working in the best interests of their clients.
“When we defined a good customer outcome, we really said that there were four areas that we needed to make sure were being focused on,” the chairman continued.
“The appropriate size and structure of the loan, the customer’s state of requirements and objectives were being met, that the loan was affordable and [that it] was applied for in a compliant manner.”
“[This proposal] is just building upon that; [it’s] ultimately a higher benchmark than just the pure ‘not unsuitable’ test.”
The CIF’s interim report also outlined the progress that the group has made in introducing reforms to broker remuneration and in drafting the Mortgage Broking Industry Code.
The cross-industry body reported that its moves to end payments of volume-based bonus commissions were “complete”, with reforms to cease “soft dollar benefits” still in progress.
Following the release of the interim report, Mortgage and Finance Association of Australia CEO Mike Felton noted that the industry has taken decisive action on this key issue and other recommendations raised by the Australian Securities and Investments Commission (ASIC) and the Sedgwick review.
“I am particularly pleased with the progress made this year. This move gives consumers continued confidence that recommendations from brokers are not biased towards a particular lender,” Mr Felton said.
“The abolishment of volume-based bonus commissions by members is a significant milestone for the industry. I look forward to continuing our work with the industry and consumer groups as we implement additional reforms in response to ASIC’s report.”
Finance Brokers Association of Australia executive director Peter White added: “Moving away from campaign-based incentives and other volume-based bonus payments is an important step in addressing community concerns about remuneration practices in the mortgage broking industry.
“Scrapping these bonuses that encouraged a focus on sales is an important step for the industry and demonstrates its commitment to change while also maintaining healthy competition.
“Each member of the Combined Industry Forum is committed to driving change and to ultimately rebuilding trust with our customers.”
CEO of the Australian Banking Association Anna Bligh also weighed in, stating: “The ASIC review, the Sedgwick review, the Productivity Commission and the [financial services] royal commission have all shown us that the industry has a problem with these types of payments that may encourage customers to borrow more than they need.
“These types of payments present a risk that brokers will place customers with lenders for the wrong reasons.
“By addressing these types of incentives, the industry has acknowledged their failings and taken responsibility to fix the problems to ensure Australian customers are receiving high-quality advice.”
Moreover, Mr Waldron revealed that the CIF would be hosting a webcast on 10 September that will be broadcast live to brokers across the country to address any further concerns relating to the CIF reform agenda.