How CBA gamed the royal commission

The future of the Australian mortgage broking industry is not looking good. CBA chief Matt Comyn opened fire on the third-party channel during his day-and-a-half session in the witness box of the royal commission this week.

Anyone watching Mr Comyn would have seen how polished his performance was. But the moments of true brilliance occurred when he managed to apparently convince the royal commission that the mortgage broking industry should run on a fee-for-service model and that brokers do no work for their trailing commissions.

Most people have short memories these days. But try if you can to remember when mortgage broking started getting all of this negative attention. What sparked it? Where did it come from? Was there a series of scandals in the industry like we saw in financial advice?

No – there have been no systemic issues or widespread scandals in mortgage broking.

The war against mortgage brokers kicked off four years ago when the future of the industry was in the hands of another man from the CommBank camp – former CEO and Financial System Inquiry chair David Murray.

The threat that commissions would go back in 2014 was very real.

Some will remember major aggregator AFG and 17 lenders penning a last-minute submission to Mr Murray, who was busy preparing his final report.

The aggregator approached its lender panel seeking public endorsement of the broker channel.

AFG received written responses from 17 lenders including AMP, Suncorp Bank, Adelaide Bank, ANZ, Pepper, NAB, ME Bank, La Trobe Financial, Heritage Bank, Bluestone, ING Direct, Wide Bay Australia, MyState, Citi, P&N Bank, Liberty, Bank of Queensland and Macquarie.

CBA did not support them. Acknowledgement was received but no endorsement provided by Westpac and Bankwest.

The federal government’s response to Murray’s final report prompted ASIC’s Review of Mortgage Broker Remuneration, which was published in March 2017.

The broking industry largely praised ASIC’s efforts. It looked like the war was over.

Not quite.

The Australian Banking Association cobbled together its own report in the form of the Sedgwick review. This bank-funded effort unsurprisingly put brokers in a far more negative light.

Those close to the action could see a division occurring among the majors. CBA and Westpac weren’t a fan of the broker. ANZ and NAB were.

By early 2018, two reports had been published giving different views on the broking industry.

But by August, the Productivity Commission had crafted a patchwork quilt of a report into competition in financial services. Once again, mortgage brokers were the baddies; the PC recommended that trail commissions be banned.

Meanwhile, the Hayne royal commission had been underway for some time and all of this madness was being recreated in a media circus. The inquiry has been a blessing for journalists and lawyers, but not much use to the general public or financial services institutions. Unless you’re CBA.

This week Matt Comyn showed his true colours and used his testimony to further attack the third-party channel. It’s a smart move from a man with over 1,000 branches to protect.

The war against mortgage brokers has a long tail. CBA would love to see the industry terminated. It would be a great CommBank outcome.

But a terrible one for consumers.