Brokers have been urged to remain calm following the release of the financial services royal commission’s final report, irrespective of Commissioner Hayne’s recommendations.
Speaking to The Adviser, managing director of the Finance Brokers Association of Australia (FBAA) Peter White urged the industry not to “jump at shadows” in the aftermath of the release of the final report of the financial services royal commission.
Concerns over potential reform to the broking industry model, particularly remuneration, intensified when Commissioner Kenneth Hayne claimed in his interim report that value and volume-based commissions in the mortgage industry have been an “important contributor to misconduct and conduct falling short of community standards and expectations, and poor customer outcomes”.
The commissioner also suggested that commission-based remuneration in the mortgage industry “might” be in breach of obligations in the National Consumer Credit Protections (NCCP) Act.
However, Mr White urged brokers, who he acknowledged are “passionate about the industry for the all the right reasons”, to remain calm should the commission recommend reform to the broker model.
“We’ve got to be careful that when the [final RC report] comes out, that we don’t jump at shadows,” he said.
The FBAA head added that he doesn’t believe the final report will contain “prescriptive measures” for the broking industry, stating that he expects much of the spotlight to be placed on the behaviour of the banks.
However, he expects negative rhetoric targeted at the third-party channel.
“I don't believe the royal commissioner will recommend prescriptive measures for the broking industry, but I do believe there’ll be commentary directed at mortgage brokers,” he added.
Mr White also expects negative rhetoric to come from politicians jostling for public support ahead of the federal election.
“Brokers need be conscious of the fact that we are in election mode,” he said.
“Once the royal commission’s final report comes out, we’re going to hear politicians jump up and down and scream about it.”
Mr White continued: “I’ve heard very close conversations on both sides of government, I know what they’re thinking.
“[They’ll] be grabbing for votes, saying things we don’t like.”
However, the FBAA head noted that despite the rhetoric, policymakers would need to exercise due diligence before legislating for reform recommended by the commission.
“Whoever’s in government after May has a certain process they need to go through,” he said. “It’s not quick; it’s not simple, and it’s not going to define our industry.”
He added: “The royal commission may recommend changes to remuneration, [but] that doesn’t mean it goes.
“It means the government of the day has to investigate it, review it, liaise with the industry and identify whether or not it should be removed.”
Mr White noted that it could take up to three years before potential changes proposed by the commission are legislated by government.
The commission’s final report is expected to be released in early February.
[Related: FBAA slams campaign to end commissions]