The trajectory of broker remuneration reform is set to be determined tomorrow when voters take to the polls, with Australia’s major parties committed to their policy stances.
The broking industry will be closely tracking the results of tomorrow’s federal election, with the incumbent Coalition government and Labor opposition proposing contrasting policies in relation to broker remuneration reform.
The parties formulated their remuneration policy stances in response to the banking royal commission’s final report, in which commissioner Kenneth Hayne called for a ban on commission-based remuneration and the introduction of a borrower-pays model in the broking industry.
Neither party adopted commissioner Hayne’s recommendation in full. However, the Labor opposition has agreed to banning trailing commissions from 1 July 2020, as initially proposed by the Coalition government, which now advocates for the status quo.
The Labor opposition has also proposed the introduction of a fixed upfront commission, capped at 1.1 per cent, in a bid to remove lender-choice conflicts associated with varying upfront commission rates.
Both parties have stood by their policy stances, with Treasurer Josh Frydenberg recently reiterating his support for the existing model in an address to approximately 1,000 members of the mortgage broking and real estate industries.
The Coalition has said that it would not propose changes to remuneration unless recommended by a regulatory review if a “serious problem” is identified.
“The reason is that mortgage brokers play an absolutely critical role in our economy, and they help generate competition in that market, and we don’t want to see mortgage brokers put out of business with, effectively, their business just migrating to the big banks,” Treasurer Frydenberg has said.
In contrast, the Labor opposition has been critical of the Coalition’s “backflip” and has backed its decision to ban trailing commissions, claiming that it would help remove conflicts of interest highlighted by the royal commission.
“We consulted with mortgage brokers, we consulted with banks and financial institutions – particularly the smaller ones,” shadow treasurer Chris Bowen told a public forum in March.
“We came up with a different way of removing conflicted remuneration for mortgage brokers. We announced that we would have legislated a flat upfront commission rate to avoid mortgage brokers’ advice being conflicted by the rate of the commission offered.”
Australia’s minor parties have also weighed in on broker remuneration, with The Greens (Australia’s largest minor party) calling for commissioner Hayne’s recommendations to be implemented in full.
Senate crossbencher and member of the Centre Alliance Rex Patrick has also stated that he’s “yet to be convinced” that trailing commissions are not “money for nothing” – as suggested by commissioner Hayne.
The broking industry has been actively campaigning in defence of current remuneration arrangements, with industry associations, aggregators and brokers alike highlighting the value of trailing commissions.
Some mortgage brokers have also been inspired to run for Parliament, with the debate over broker remuneration front of mind.
Westate Finance broker David Goode is running as a candidate for the south-eastern Perth electorate of Burt.
Mr Goode, who is representing the Liberal Party, is contesting the seat against fellow broker and Western Australia Party candidate Sarcha Sagisaka.
Meanwhile, the former head of finance at the Mortgage & Finance Association of Australia, Stephen Bisgrove, is running for the NSW seat of Calare, representing the Liberal Democrats, who have also expressed support for the current model.
Despite the conflicting remuneration policies, both major parties have expressed support for the introduction of a best interests duty, also recommended by the banking royal commission.
The election is expected to be closely fought, with the Labor opposition ahead by a narrow 2 per cent margin on a two-party preferred basis (51 per cent to 49 per cent), according to the latest Newspoll data.
[Related: Broker policy contest heats up]