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Mutual bank CEO voices support for broker channel

by Reporter11 minute read
Andrew Hadley

The chief executive of a mutual bank has called for caution around the implementation of Commissioner Hayne’s recommendations, saying proposed changes could impact competition.

The CEO of P&N Bank, Andrew Hadley, has backed the mortgage broking industry’s call for caution towards the implementation of Commissioner Kenneth Hayne’s recommendations pertaining to mortgage brokers, such as the abolition of trailing commission.

“As the dust has begun to settle, it’s pleasing that so many stakeholders, including the government, have articulated the need for caution so that unintended consequences do not result in consumers being adversely impacted,” Mr Hadley said.

“We, too, support the Customer Owned Banking Association’s and the MFAA’s position that caution needs to be applied to ensure that this particular recommendation does not play into the hands of the major banks, which in turn will erode genuine competition for consumers.”


The CEO noted the role brokers play in providing Western Australians access to the mutual bank’s products and services, saying that P&N will work with the industry to advocate for a fitting solution where all parties benefit, including consumers.

The recommendation to move to a consumer-pays model has been widely slammed by the mortgage industry, with associations, aggregators, brokers, non-major banks and non-bank lenders all pointing out the adverse implications of replacing upfront and trail commissions with a fee-for-service broker remuneration model.

For example, in a recent market update, AMP Capital chief economist Shane Oliver said: “[Brokers] have played a huge roll in injecting competition into the mortgage market by making it possible for small lenders, without a big shopfront presence, to take mortgage business away from the big banks via the mortgage brokers.”

Requiring borrowers to pay for the services of a mortgage broker when they are already “cash-strapped” is also likely to weaken competition by making advice less accessible.

“So, it’s understandable that the government is not so sure about this recommendation,” the AMP Capital chief economist said.

This week, Prime Minister Scott Morrison expressed hesitance towards the royal commission’s recommendation to eliminate trailing commission, saying that he doesn’t want the broking sector to “wither on the vine and be strangled by regulation that would throw them out of business… [and] deny choice and competition in the banking system”.

Further, Coalition government MPs railed against reforms that would “ride roughshod” over brokers and enhance the power of the big four banks in the mortgage market.

In his address to parliament, Barnaby Joyce, federal member for the seat of New England and former deputy prime minister, called for “temperance” in the legislative response to Commissioner Hayne’s recommendations, flagging risks to competition if commissions are banned entirely.

We have to make the appropriate changes, but we can’t ride roughshod over every broker,” Mr Joyce said.

“I think brokers have played a substantial role in spreading the customer base away from the four major banks and into minor banks.

“If we lose sight of that, we are actually going to reduce competition.”

Mr Joyce claimed that the commission’s recommendations may have contributed to the rise in the major banks’ share prices as a result of the perceived implications on competition.

Other lenders were more welcoming, such as Bendigo and Adelaide Bank, which said that it expects its business to continue growing through other segments of its third-party channel – regardless of Commissioner Kenneth Hayne’s recommendations being implemented by the government.

“As we have said all along, we welcome recommendations that put customers’ interests first, raise professional standards in the industry, enable competition and deliver better outcomes for everyone,” a spokesperson from the bank told The Adviser.

“There is still a lot of detail to work through to understand how each of the recommendations would be implemented, but any recommendation needs to strongly consider the best interests of customers.”

[Related: Big banks comment on broker remuneration changes]

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