Rem review scrapping a result of ‘industry mobilisation’: Phil Waugh

While the federal Treasurer had suggested to Momentum Media last year that the role of upfront and trail commissions would be reviewed in the “back half” of the year, it was confirmed last Saturday (19 March) that the Australian government will not be proceeding with the proposed review of mortgage broker remuneration.

The move came about following widespread engagement from the industry – including from both the Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA).

It has been widely welcomed by the mortgage broking industry, particularly given that both sides of the political spectrum have now suggested that they won’t touch broker commissions this year. The announcements come ahead of an upcoming federal election.

Speaking to The Adviser, the executive of broker distribution at National Australia Bank (NAB), Phil Waugh, said the about-face was a testament to the unification of the entire broking industry.

Mr Waugh said: “When I look at the progress of the industry, certainly from the [banking] royal commission, and the mobilisation of the industry and representation and alignment of its participants, [I think] that has enabled the government to recognise that that level of maturity and sophistication and progress since 2017 has been material. 

“I think everything that’s gone on around the implementation of the best interest duty, Design Distribution Obligations (DDO), the cutting of conflicted remuneration — and the alignment more broadly across the industry to actually implement and govern those initiatives — has shown a level of maturity and sophistication and, certainly, adherence with the direction that the government gave when they brought out their response to the findings of the royal commission.

“At NAB, we quite openly state that we want to be the bank behind the broker. We’ve been actively involved with industry bodies such as the Combined Industry Forum and the MFAA and have worked really closely with the industry on things like best interest [duty], DDO, conflicted remuneration removal, and we’ve been vocal about our support of the mature third party channel. 

“So, we’re really pleased that the industry’s gotten itself to a position whereby the government feels comfortable to make the announcement they did last weekend.”

Looking to the future, Mr Waugh said he believed the key focus of the federal government would be on housing affordability this year.

Mr Waugh elaborated: “We’ve had the most disruptive two years, across everything. From industry changes, to the tragedy of bushfires and floods and climate change, to COVID and now conflict… There’s been so much uncertainty. 

“I think the government has actually navigated the environment really well and if you talk to NAB’s chief economist, Alan Oster, he’d say that the government have done a really good job with the economy to actually navigate through what’s been a really uncertain time (though that might not be the perception of [the] public!).

“But now, the question is: how do we actually springboard out of it? I think that’s where the nervousness is.

“If you think about the housing market and the growth we’ve seen in [prices] over the last 12 months particularly, but really since May 2020, the [issue] is really around affordability.”

NAB’s executive for broker distribution said he believed it was the role of the mortgage industry, and large organisations such as NAB, to “work with government and with government initiatives to drive a greater level of affordability”.

“I think that’s where organisations, with our level of social responsibility, can have conversations as to how we can partner with government…  in both state and federal government to actually ensure that there’s a good outcome for all Australians (and not just for those that have already got property ownership) and ensure that there’s the right level of balance in affordability across different sectors of the community,” he said.

He concluded by suggesting that the cost of mortgages was therefore becoming a key area of competition in the mortgage market – particularly for brokers (who are held to a best interests duty).

“I think that we’re probably now in the most price-sensitive environment that I’ve seen for some time. And it’s just not for fixed rates, but in the variable rate environment as well,” he said.

“This goes back to the intent of the royal commission around customer fairness and the overall economics for making [sure the mortgage is] the best possible outcome for a customer.

“It’s now all about packaging all that up, and ensuring that service levels get more competitive, that the product features are right, and the price is competitive. 

“It’s really becoming super competitive on the price to customer.”

[Related: Industry celebrates having certainty over remuneration]