The continued growth in broker market share proves that the current arrangements in the broking model are working, the CEO of a non-bank lender has said.
Speaking to The Adviser following the release of Liberty Financial’s full-year 2018 (FY18) results, CEO James Boyle said that he expects Commissioner Kenneth Hayne to consider the competitive impact that changes to the broking model would have on the mortgage industry before he outlines his recommendations in the financial services royal commission’s final report, due to be released in February.
“Commissioner Hayne was clear in his observation that part of the issue that has resulted in [misconduct highlighted by the commission] has been the lack of competition,” Mr Boyle said.
“I can’t imagine that he will not consider the impact of any recommendation on the mortgage broking community because the mortgage broking community has been so important to maintaining competition.
“A mortgage broker is the only place a borrower can go to compare different lenders’ products and that’s critical.”
The non-bank CEO pointed to the latest data from the Mortgage and Finance Association of Australia (MFAA), which reported that broker market share increased to 53.9 per cent in the June quarter of 2018, which he said is proof of the effectiveness of the existing broker remuneration model.
“[The] mortgage broking community is responsible for more than half of all home loans that are written,” Mr Boyle continued.
“[These] numbers seem to suggest that the current arrangements that are in place with mortgage brokers, with regards to commissions, work.”
Mr Boyle also made reference to the Combined Industry Forum’s reform agenda, noting that work is already underway to improve consumer outcomes.
“We have already seen a number of changes implemented around mortgage broking commissions and transparency through the CIF,” the CEO said.
“I think, by and large, mortgage brokers do a terrific job for the consumers that they help, and we will continue to support them in the future.”
Brokers drive Liberty’s growth
In its FY18 results, Liberty Financial has reported a net profit after tax (NPAT) of $64 million, up by 10 per cent from FY17.
The non-bank’s profit growth was spurred by a 15 per cent rise in new loan originations, increasing the value of its total assets under management by 35 per cent to $10.2 billion.
Mr Boyle said that the lender benefitted from avoiding prudential standards imposed on banks and noted the contribution of Liberty’s broker network.
The Liberty CEO said that its broker partners were “essential” to the success of the business in FY18 and were responsible for delivering $4.9 billion in new loans across home, motor and commercial lending, which he said included an increase of 59 per cent for new commercial loans and a 17 per cent increase in new motor vehicle loans.
“Liberty has proven to be a dependable provider of free-thinking financial products and services, which have helped customers responsibly achieve their financial goals,” the CEO said.
“Throughout the year, we have demonstrated our commitment to the mortgage broking industry by improving the availability of our products, such as personal loans, and maintained our presence in SMSF and low-doc lending.”
Mr Boyle also stated that its acquisition of personal loan financier MoneyPlace and its investment in insurance provider ALI Group would enable its broker network to “offer a broader suite of relevant products through a single relationship, which he said would deliver “value to customers”.
Further, the non-bank CEO pointed to Liberty’s partnership with aggregator National Mortgage Brokers (nMB), which it acquired in August 2017, which he said was additional proof of the non-bank’s commitment to the broker channel.
“National Mortgage Brokers sits alongside company-branded Liberty Network Services, which has more than 130 advisers, which makes it easier for customers seeking competitive lending solutions to find Liberty,” the CEO said.
Mr Boyle concluded: “Liberty has a strong balance sheet, distinguished risk management capabilities and an unmatched track record in funding, which means we are well positioned to continue delivering market-leading products and services to our business partners.
“Importantly, we understand the key to adding significant value to those seeking financial products is finding the solutions that customers want.
“For Liberty, this means an unrelenting commitment to ongoing learning, continuing innovation and, most importantly, putting our customers’ needs first.”