The Assistant Treasurer has confirmed that ASIC will undertake an extensive and thorough review of the mortgage broking sector.
Kelly O’Dwyer told The Adviser that the federal government has written to the regulator requesting that it undertake the review to help determine the effect of current remuneration structures on consumer outcomes.
“The government’s response to the Murray Inquiry emphasised the need to better align the interests of consumers and the financial services industry,” she said.
“The review by ASIC will help to determine the extent to which misaligned incentives may be creating a conflict of interest between mortgage brokers and consumers.”
In its response to the Financial System Inquiry (FSI) last month, the government said it would “look to examine remuneration structures in the mortgage broking sector”.
Furthermore, the government agreed with the FSI recommendation that mortgage brokers must disclose their ownership structures, and said it will develop legislative amendments to ensure that mortgage brokers adequately disclose their relationships with associated entities.
The government has requested the review to commence by the end of 2016, and the Assistant Treasurer noted that it will not be limited to bank-owned brokerages.
Aussie Home Loans CEO James Symond believes the review will enhance the performance of the mortgage broking industry, and said he was happy with Aussie’s disclosure of CBA’s majority stake in the mortgage group through its marketing and loan materials.
“It is a fact that CBA’s share of our provision of loans has actually fallen since the bank acquired its current 80 per cent holding in Aussie,” he told The Adviser.
Last month, NAB executive general manager of broker partnerships Anthony Waldron said the bank was looking forward to working with the government and ASIC on the two key policy areas.
“We fully support the government’s plan to ensure mortgage brokers sufficiently disclose their relationships with associated entities, and we look forward to working with ASIC in their examination of remuneration structures in the mortgage broking sector,” he said.
Choice CEO Stephen Moore told The Adviser that the aggregator has no issue with disclosing the fact that it is owned by NAB.
“The ownership of Choice by NAB is absolutely positive, and I know that we simply wouldn’t have been able to make the investment we have and the level of support we’re able to provide to our brokers without NAB’s support,” he said.