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Major bank CEO backs fees-for-service model

by Charbel Kadib11 minute read

The CEO of a big four bank has expressed support for a “consumer pays” model in the broking industry, which he claimed addresses perceived conflicts of interest.

Appearing before the financial services royal commission, Commonwealth Bank (CBA) CEO Matt Comyn noted his support for a Netherlands-style fees-for-service model, whereby consumers are charged a fee for mortgage advice.

When pressed by counsel assisting the royal commission Rowena Orr about previous research submitted by Mr Comyn to former CBA CEO Ian Narev, Mr Comyn conceded that he believes the existing broker remuneration model is conflicted.

Ms Orr then pointed to an email exchange between Mr Comyn and Mr Narev, in which the current CBA CEO expressed his belief in the benefits of a fees-for-service model, similar to that operating in the Netherlands. 


Ms Orr then asked: “Would you like to move to the Netherlands model, to go the whole hog, and have a flat fee paid by the consumer?”

Mr Comyn said in response: “I think, that is, in my view, the most attractive model.” 

Ms Orr continued: “But you feel unable to embrace that model in CBA because you feel no one would follow in the absence of regulatory intervention?”

Mr Comyn replied: “That is correct.”

Ms Orr added: “You believe the Netherlands model is the model that best serves the customer?”

Mr Comyn answered: “That’s how I understand it, yes.”

Mr Comyn also revealed that CBA had sought to introduce a “flat fee” commission-based model in January 2018, before choosing not to go ahead with the change in fear that the rest of the sector would not follow suit.

“We come to a view that nobody will follow, we will suffer material degradation in volume [and] we will not improve customer outcomes," he said. 

“[We] start ed thinking about how to continue to engage in the discussion, and certainly some time later [there were] meetings with broker groups, we conducted our own research, we got involved in the [Combined Industry Forum], [and] the Productivity Commission (PC) started looking at it..

He added: “But you’re quite right, at that point in time when I hit send on the email, that was my intent.”

Brokers do close to no work for trail: Comyn

Commissioner Kenneth Hayne also questioned Mr Comyn over whether brokers deliver ongoing services to clients to justify the payment of trail commission.

Commissioner Hayne asked: “Are there any ongoing services supplied by a mortgage broker, Mr Comyn?”

The CBA CEO replied: “I think they would be limited, Commissioner.”

Commissioner Hayne added: “Well, limited or none?”

Mr Comyn responded: “Much closer to none.”

The Commissioner added: “I will take that as a ‘none’.”

Further, when asked why CBA hadn’t moved to remove perceived conflicts in its broker remuneration arrangements, Mr Comyn said CBA is “wondering what might be recommended from the commission”.

“You’re waiting for us?,” Ms Orr said.

Mr Comyn replied: “You seem to be probing in the – in the right areas, yes.”

Mr Comyn's evidence was part of the royal commission's seventh round of public hearings, which began on 19 November and will conclude on 30 November. 

[Related: ASIC reveals its view on ‘best interests’ duty for brokers]

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