Another Senate crossbencher has weighed in on proposed changes to broker remuneration, questioning the validity of trailing commissions.
Senator Rex Patrick of the Centre Alliance has said that he is “yet to be convinced” that trail commission payments to mortgage brokers should remain in place.
In response to the banking royal commission’s final report, shadow treasurer Chris Bowen stated that, if elected to government, the Labor opposition would ban trail commission payments to mortgage brokers from 1 July 2020 and cap upfront commissions at 1.1 per cent.
In contrast, the Coalition government has committed to retaining the “status quo”, despite also conducting a review on the impacts of banning trailing commissions.
When asked if he would support the Labor Party’s proposal should they win government, Mr Patrick echoed the sentiment expressed by commissioner Kenneth Hayne in his final report.
“I’m yet to be convinced that trailing commissions should remain as part of the remuneration model for mortgage brokers,” the senator told The Adviser. “They were dubbed as ‘money for nothing’ by commissioner Hayne.”
However, the senator added that he would continue to consult with the industry before making a final determination.
“As I have done on many other occasions, I will consult with the industry and with the consumers and ensure that any proposal is subject to proper scrutiny in the Senate,” he added.
Mr Patrick also weighed in on the royal commission’s recommendation to ban grandfathered commissions for financial advisers.
“What I would like to see first, however, is for whoever is elected in May to take action to remove grandfathered trailing commissions – these commissions are unequivocally money for nothing,” he said.
Several crossbenchers in both the House of Representatives and the Senate have now outlined their positions on broker remuneration.
Last week, outgoing senator and leader of the Liberal Democratic Party David Leyonhjelm expressed strong opposition to the federal Labor opposition’s proposed broker remuneration policy.
Senator Leyonhjelm, who recently abdicated his seat in Canberra to pursue a position in the NSW Legislative Council, warned that a trail ban would threaten the viability of the broking industry and “demean” satisfied borrowers.
“I oppose a ban on trailing commissions,” he told The Adviser. “I believe that fee-free mortgage brokers shouldn’t be regulated out of existence.”
He added: “[Many] borrowers are happy with this service and should not be demeaned as naive victims of exploitation.”
Australian Conservative senator Cory Bernardi has also stressed the importance of the broker proposition, warning against legislative reforms that would bolster bank profitability to the detriment of the broking industry.
“The collateral damage from the royal commission are mortgage brokers, and the commission’s targeting of them will only serve to wreck one industry and further profit the banks,” he said.
“Overwhelmingly, I use a mortgage broker because they make my life easier, and if the legislation in reaction to the commission’s recommendations destroys the mortgage broking industry, ordinary Australian consumers will be worse off in terms of choice and convenience.”
One Nation leader Pauline Hanson has also previously noted her opposition to broker remuneration changes.
Following the release of the banking royal commission’s report, Ms Hanson criticised commissioner Hayne’s call for a borrower-pays remuneration model and backed the preservation of both upfront and trailing commissions.
Ms Hanson said that the proposed ban on upfront and trailing commissions paid to brokers, as outlined in the banking royal commission’s final report, has “jeopardised the survival of more than 17,000 small businesses across Australia”.
“That’s the number of mortgage brokers providing loans to mums and dads, who rely on upfront and trailing commissions paid by the lender to survive,” Ms Hanson said. “Take those commissions away and make the borrower pay and you will decimate the industry.”
She added: “That’s tens of thousands of jobs, millions of dollars in tax revenue and much less competition for the big banks.”
The Adviser also reached out to Andrew Wilkie, independent member for the federal seat of Denison, who said: “I’m in the process of meeting with consumers and industry representatives but am unable to comment further until I see the detail of any Labor federal government proposal.”
Mortgage industry leaders have been campaigning policymakers ahead of the federal election, with CEO and co-founder of Australian Mortgage Marketplace Graham Anderson the latest stakeholder to discuss potential broker remuneration changes with the Labor opposition.
However, according to Mr Anderson, the Labor Party is “sticking to its guns” on broker commissions.
“[Whether] we like it or not, that is what they are going to stick to. So, at least now we know what we have to plan for,” he said.
“We are pretty happy to have that clarity now.”
Crossbenchers are expected to play a vital role in determining the success or failure of potential broker remuneration reforms following the federal election, set to take place in May.
The latest Newspoll, released yesterday, reported that the Coalition government’s primary vote has pulled ahead of the Labor opposition for the first time since July 2018, rising to 38 per cent, 1 per cent above Labor (37 per cent).
However, the Labor Party has retained its lead on a two-party preferred basis, ahead of the Coalition by 52 per cent to 48 per cent.
[Related: Crossbencher rebukes proposed trail ban]