The market can “resolve” the ongoing broker remuneration dispute without government intervention, ANZ CEO Shayne Elliott has told a parliamentary committee.
Fronting the House of Representatives’ standing committee on economics on Wednesday (27 March), ANZ chief executive Shayne Elliott was asked to weigh in on the effectiveness of proposed government-led broker remuneration changes in response to the banking royal commission’s recommendations.
Liberal MP Craig Kelly asked: “How would it be possible for someone sitting here in Canberra, in an office, to work out what [commission] rates, prices and fees will be more efficient than negotiating between yourselves and the mortgage brokers?”
Mr Elliott responded: “I would agree with you if you’re referring to the market. I think that the market can resolve [the issues]. I think that it has.”
The ANZ CEO added that the commission rates offered by banks can be used as a “competitive tool” to attract business, but emphasised that in ANZ’s experience, brokers were primarily drawn to lenders that were more likely to meet the financing needs of their clients, particularly in light of tighter credit conditions.
“Our experience though, and this has [been the case] for a number of years, is that the fee that we pay the brokers is not correlated to the amount of business that we get,” he said.
Mr Elliott's remarks are backed by Momentum Intelligence's Third-Party Lending Reports which consistently show that commission is one of the last considerations a broker has when deciding which lenders to use.
“Obviously, it has an impact, you have to be in the mix with [competitors], [but] what customers and brokers want is certainty of getting a transaction done.”
Mr Elliott was also asked to offer his thoughts on commissioner Kenneth Hayne’s proposal to introduce a borrower-pays remuneration model.
The CEO said that while both major parties have opted not to adopt commissioner Hayne’s proposal in full, he does not expect the “status quo” to remain in place.
“I expect that the way that brokers get remunerated and who pays will be an ongoing discussion in the community,” he said. “I imagine that there will be changes going forward.”
He added: “I don’t believe it’s just a matter of status quo. I think it has opened a really good question and that debate will continue.”
Borrowers are voting with their feet
Throughout the course of the hearing, Mr Elliott also highlighted the value of the broker channel, noting that borrower satisfaction with the channel is evidenced by the rise in market share.
“Part of the reason that there’s been an increase is that people like the services they get. Our research shows that people go to a broker for fundamentally two reasons,” he said.
“One is price transparency. And that has actually become more difficult for people because there are a lot more operators. There are more competitors in the markets than there used to be.”
He continued: “Two, it wasn’t that long ago, whether you were an owner or investor, or whether [the loan] was principal and interest and interest-only, the rate was more or less the same. Today, that’s not the case. There are wide variations. It’s much more complicated for people.
“That has encouraged people to go to a broker because they can go through all that for you.”
Mr Elliott added: “[Brokers] are very good at helping with the process. Most of us get a mortgage once every 10 years, but brokers are processing them every day, which means they’re good at understanding what documents you need and advise you on which banks would be good or not.”
[Related: Major bank raises rates on lines of credit]