The head of a major broking group has joined fellow industry leaders in calling for a considered approach to reform, amid ongoing scrutiny of the broking industry.
Speaking to The Adviser following the release of the Australian Finance Group’s full-year 2018 (FY18) financial results, CEO David Bailey urged inquiries, such as the Productivity Commission (PC), to allow the broking industry to work with regulators to “address any perceived conflicts”.
Mr Bailey noted that the Australian Securities and Investments Commission (ASIC) is working with the Combined Industry Forum (CIF) to reform the industry, and pointed to ASIC’s review into broker remuneration.
“We think the model, as reviewed by ASIC for about an 18-month period, has withstood the scrutiny of the main regulators in our sector,” Mr Bailey said.
“We think that by working with the regulator via the Combined Industry Forum, we’ll be able to address any perceived conflicts around the remuneration model, and some of those changes are already happening.
“There’s been a big body of work undertaken by ASIC, and they’ve identified some areas of focus and the industry is addressing that.”
The CEO added: “You do need to allow the industry to work with the regulator to come up with solutions.
“I think knee-jerk or momentum-based decisions coming out of any types of other views are dangerous.”
Mr Bailey echoed the sentiment of Mortgage Choice CEO Susan Mitchell, who encouraged the PC and the financial services royal commission to “defer to ASIC”.
Mr Bailey also cited Treasury’s “balanced” submission to the royal commission, which highlighted concerns over some proposed reforms, particularly the PC’s recommendation to ban trail commission.
Regarding trail, Mr Bailey stressed that in his view, trail commission “aligns brokers with the customer and the lender” and “ensures good outcomes for all parties involved”.
The CEO added that upfront commissions and clawbacks, not just trail, should be discussed as part of any proposal to reform remuneration.
AFG FY18 results
AFG FY18 results revealed 10.4 per cent year-on-year growth in the group’s net profit after tax (NPAT) to $33.3 million.
AFG attributed the rise to “strength in its distribution capabilities”, with residential settlements increasing by 3 per cent to $35.3 billion.
The broking group’s combined residential and commercial loan book now totals $145.4 billion.
“The main driver [of growth] has been our AFG Home Loans business, and the other piece was the efforts of our brokers who have continued to work hard and offer solutions to consumers,” Mr Bailey added.
Mr Bailey also stated AFG’s strategy for FY19, which involved investment in technology and continued advocacy for the broking industry.
“There are two arms of our strategy there. The first one is that we’ll continue to invest in technology and solutions which make life easier for our brokers to enable them to service their customers better,” the CEO said.
“The other piece is that we do play an active role in advocacy and looking after the broker’s interest, particularly in this environment, and we’ll continue to do that.
“We are being loud and present, and we are having the conversations that need to be had at the right time.”
[Related: Brokerage CEO ‘encouraged’ by PC report]