Australia’s standard use of ongoing broker trail commissions is “unusual” internationally, according to the MFAA.
Australia’s standard use of ongoing broker trail commissions is “unusual” internationally, according to the Mortgage and Finance Association of Australia (MFAA), whose new Global Insights Report highlighted substantial overseas interest in the customer relationships those payments support.
The association’s first international research exercise examined the United States, Canada, the United Kingdom, the Netherlands, and Germany to identify lessons relevant to Australia.
While lender-funded remuneration predominates across most markets examined, the MFAA found Australia stood apart in how broker payments extend beyond settlement.
“Australia’s remuneration framework is unusual by international standards. While lender-funded remuneration exists in most markets examined, Australia is one of the few jurisdictions where ongoing trail commission remains a standard feature of broker remuneration,” the report said.
“In many overseas markets, remuneration is largely concentrated at origination, with little or no ongoing payment once the loan settles.”
The association added that international participants’ interest centred not simply on recurring payments, but on the continuing contact between Australian brokers and their customers.
“Several international stakeholders expressed interest in Australia’s model, particularly the role ongoing trail commissions play in supporting ongoing customer engagement. This level of ongoing engagement was viewed as unusual by many international participants,” the MFAA said.
The MFAA placed that engagement within Australia’s lending environment, explaining why comparisons of commission structures alone could overlook differences in how broker relationships develop.
“Australia’s lender-funded remuneration model is often the subject of domestic policy debate, yet the research highlighted just how distinctive some aspects of the Australian model are internationally,” the report said.
“In markets dominated by fixed-rate lending, adviser relationships are often concentrated around the initial transaction. By contrast, Australia’s variable-rate environment creates opportunities for ongoing reviews.
“Several international participants viewed this as a distinctive strength of the Australian broker model rather than simply a remuneration feature.”
Different settings, different structures
Commission levels, clawbacks and consumer-charging arrangements varied across jurisdictions, with the Netherlands, for example, adopting consumer-paid advice after mis-selling scandals and concerns about opaque commissions prompted a ban covering mortgages.
However, the MFAA presented the Dutch experience as evidence of the importance of regulatory context, rather than a recommended direction for Australia.
“For Australia, the Dutch model is therefore less important as a blueprint for reform and more valuable as a case study illustrating how remuneration structures interact with broader regulatory and market settings,” the MFAA said.
Despite international interest in trail-supported engagement, the association stressed that payment design was not the key determining factor in earning public confidence.
“The research suggests that consumer confidence is ultimately built through professionalism and trust rather than remuneration design alone,” the MFAA said.
Trust beyond the transaction
The remuneration findings formed part of a broader assessment of Australia’s mortgage broking industry, with the MFAA reporting sustained international interest in its development.
“One of the strongest observations arising from the research was the strength and maturity of Australia’s mortgage broking industry relative to many international peers. Throughout the research, international stakeholders consistently expressed interest in Australia’s broker market,” the association said.
Across different systems, the research identified professional standards as a shared foundation for consumer trust and the industry’s longer-term sustainability.
“Across all markets examined, professionalism emerged as a critical contributor to consumer trust and industry sustainability,” the report said.
“Whether through licensing, education standards, competency requirements or consumer protection frameworks, successful broker markets have continued to strengthen professional standards over time.”
The MFAA also found that increasingly digital financial services had not displaced consumers’ desire for personal guidance when making major consequential financial decisions.
“Trust emerged as one of the most important themes throughout the research. While technology continues to evolve and financial services become increasingly digital, consumers still seek reassurance, advocacy and guidance when making major financial decisions,” it said.
“For mortgage brokers, trust is not simply a by-product of good service. It is increasingly becoming one of the profession’s most valuable assets.”
[Related: Broker clawback costs rise in first industry-level measure]
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