Policymakers should ensure that broker reforms do not “damage” the pro-competitive role of the industry, Treasury Secretary Philip Gaetjens has warned ahead of an imminent policy response from the federal Labor opposition.
Appearing before the Senate estimates committee, Treasury Secretary Philip Gaetjens has renewed the department’s call for a cautious approach to broker remuneration reform off the back of the banking royal commission’s recommendations.
Mr Gaetjens made reference to Treasury’s submission to the royal commission, in which it flagged the risks of alternative remuneration model and specifically noted that a “radical” borrower-pays model could have a “significant detrimental impact on competition in the mortgage market.”
The Treasury Secretary told the Senate estimates committee: “One issue in particular where Treasury did express a strong opinion was in relation to the role of mortgage brokers in promoting competition.
“As governments of all persuasions have recognised, it is important that care be taken to not damage – and where possible, to enhance – competition in the banking sector.”
Mr Gaetjens’ comments come ahead of the announcement of the federal Labor opposition’s policy approach to Commissioner Kenneth Hayne’s broker recommendations.
Shadow treasurer Chris Bowen has told the media that the opposition’s policy response is imminent, stating that he has been consulting with the financial services sector and with consumer groups to “carefully” determine a policy framework.
Mr Bowen said that Labor’s policy would be “explicit” and criticised the Coalition government’s proposal, which he said provides the industry with “uncertainty”.
“The royal commission did identify issues in mortgage broking, real issues, which need to be addressed,” he said.
“The government has said that they’ll get rid of trail commissions and then have a review of upfront commissions but that doesn’t really provide much certainty for the sector.
“We want to deal with the matters that the royal commission identified in mortgage brokers, the problems that they identified.
Mr Bowen added: “Of course, we’ve been taking our time to carefully consult with all relevant parties, and we’ll have more to say in coming days about our proposed approach.
“We will be fully transparent and explicit in our approach, not only well before the election, but in the immediate future.”
Labor has previously expressed “in principle” support for all 76 of Commissioner Hayne’s recommendations, which would include ban on commission-based remuneration to brokers.
The broking industry has strongly opposed Commissioner Hayne’s call for a borrower-pays remuneration model, with industry leaders flagging the risks of structural changes to the broker model on competition in the mortgage market.
The industry has also launched campaigns promoting the broker proposition, with the Mortgage & Finance Association of Australia funding a “Don’t Kill Competition” campaign, which aims to demonstrate to a mass audience the negative ramifications of potential policy changes
Grass-roots campaigns have also been launched, which include petitions with over 70,000 signatures.
However, some have called for greater cohesion between broking industry stakeholders.
Speaking to The Adviser, director of Victorian-based brokerage SJC Financial Group Shawn Hassall said: “My major concern with all that’s gone on is the fact that we don’t have a message that is actually coherent or cohesive across the entire industry.”
Mr Hassall welcomed the MFAA’s campaign designed to highlight the competitive contribution of the broker channel but urged industry leaders to outline the purpose and utility of commission-based remuneration.
“We need the message to be about how good we are, what we do well, and why we get paid,” he said.
[Related: Fees-for-service not an ‘equitable’ model]