The regulator’s review of mortgage broker remuneration, released earlier this month, identified a number of conflicts of interest within the sector and made several recommendations for how it could be improved.
“The government requested the ASIC review in November 2015 in response to the government-initiated root and branch Murray Financial System Inquiry,” said Minister for Revenue and Financial Services Kelly O’Dwyer.
The review received 35 submissions from interested parties during a three-month consultation period, and a number of representatives from the mortgage industry subsequently agreed to develop an industry response to the final report.
“I welcome the proactive steps taken by the mortgage industry forum to engage with the government and consumer stakeholders on the issue of mortgage broker remuneration,” said Ms O’Dwyer.
“The government recognises that mortgage brokers play an important role, with more than half of all home loans originated by brokers and 26 per cent of these loans written to non-major lenders, as compared to only 12 per cent of loans written outside the broker channel.”
Some of the proposals the ASIC report made to the industry included improving the standard commission model, shifting away from bonus commissions, increasing disclosure of brokerage ownership structures, and improving lender and mortgage aggregator oversight measures.
People should just pay an hourly rate to a mortgage broker. full stop. Every loan I’ve seen from a mortgage broker has been a line of credit, ongoing trail commissions for the odd email encouraging you to switch a couple of years is inappropriate. In addition Mortgages should be made a financial product and fall under the definition of a financial product.
The issue with this is that if someone pays fee for service for insurance, they can save by winding down commission to zero. Unless something has changed, this isnt currently an option for a mortgage broker.
I use a mortgage broker and he is great… I have come across some horrible ones in my time though.
Anonymous, most banks will pay a lower commission for a Line of Credit compared to a standard P&I or IO loan. So if the broker is doing this, then they are shooting themselves in the foot. Which is counter-intuitive based on your comment that implies they are consumed by self-interest.
The rate the client pays doesnt vary if they go to via a broker or via the branch, so why would someone want to pay an hourly fee?
It’s the same with the life insurance market. If a client goes direct to one of the insurers they will pay the same premium as if they come to me. It’s only different if the adviser/broker decides to dial down the comms and charge a fee for service instead. However, that’s usually more expensive for most ‘ordinary’ Australians with the combo of premium and advice fee being more than the premiums with comms. It doesnt make sense, either for the client or the adviser.
When people came to me to purchase a super fund or a investment product, I’d receive a 0.6% trailing commission from Colonial, from BT from AXA, from Perpetual etc. the commission was the same from just about every company and the client paid the fee whether they purchased the product from myself or purchased it directly from the manufacturer. Now the Government claimed that removing commissions would therefore lower advice costs, increase advice to all australians and prevent poor advice. So would removing commissions from Mortgage brokers achieve the same thing..that being, being over sold a mortgage. Apologies for coming across as an idiot it’s just a lot of planners sat on their hands and upon Labor government being elected they got a rude shock & I think next time around mortgage brokers, advisers, risk advisers will be in trouble again.
I agree with your comment for ordinary Australian’s although over time that 30% commission saving will reap benefits.
I cant see how anyone really makes a case for charging full commission on a policy with premiums 30k+…. Charge 5-10k and wind the commissions down to $0… client will save the fee in the first year then you can charge an ongoing annual fee for review. Its just self interest writing big policies on a commission basis (and im not saying thats a crime lets just be honest about it).
I honestly think a lot of riskies are lucky the general public doesnt understand commission can be would down to achieve a 30% (give or take) premium saving.
I got over 69 negative likes that must be some record, …..or it’s a robot. apologies for being negative, adding nothing to the debate… but hey, i had a good time.
what a silly comment
Accountants, financial planners, insurance professionals and mortgage brokers…. Seems like a trend to me. Rather than having snipes at each other maybe we need to band together with a view of taking on the greedy self serving top end of town, ASIC and the corrupt political agendas. If this wasn’t such a conspiracy it would be a farce.
As far as trying to “band together” is concerned, what do you suggest here Karla? I don’t think a campfire, holding hands and some singing will help us here against the Big Bad Wolf. I would be interested to hear a strategy.
I think we need to establish a platform for our voice. what about establishing a website like the rebel cpa members with a domain, advisersfightback.org
another moronic comment, seriously is this all you have to offer? How about you get off your most likely over sized back side and come up with some strategies and then contribute something worthwhile to the conversation, buffoon.
Well said KArla!! Pity we aren’t unified like the ISA are forced to be. This was meant to be one of the functions that the original professional bodies (FPA & AFA) were initiated to do, but have been corrupted themselves along the way.
Govt releases a report which ‘identified a number of conflicts of interest’ and hey presto another bunch of bureaucrats are set for life. Name a human endeavour that doesn’t have a conflict of interest at its heart? I charge these regulatory bureaucrats with a conflict of interest. The only way to secure their future employment is when they identify the conflicts of interest of others. Is that a conflict or what?!
Not to mention unanimously voting their own pay rises in for the pollies, or in the case of Medcraft, securing funding from us to not increase the number of ASIC employees but to increase their pay. But that’s not conflicted is it?
She’s not the Minister for Banks for no reason. Plum job back at NAB for Ms O’Dwyer once she’s booted from Parliament.
Right on Jimmy, Smelly O’Dwyer the Minister for the Financial Institutions is an absolute stinker to IFA’s.
Please go back to the banking world / NAB O’Dwyer and get all those hard earned kick backs you have earned by your unwavering support of all things Bank and Insurance Institutional.
If there is one thing that the mortgage industry can learn from the insurance industry is that they will be screwed by corrupt people. ASIC thought churn was an issue having review a mere 200 files of targeted advisers. The FSC jumped on this and corruptly stoked the churn debate to lobby for reduced commissions knowing full well that it was not an issue and once the LIF was passed provided ASIC with data that resulted in identifying that churn was in fact not an industry issue.
There will be very corrupt people in your industry (e.g. the banks) who will lie and cheat to get the best profitable results for themselves and all of this will be worse for the end consumer.
And finally don’t expect Kelly O’Dwyer to act honestly. She will side with the banks or any other group which can ultimately provide her with a job post politics.
hahaha
She won’t rest until she destroys the entire finance industry.
She is well on the way to achieving her objective.
Welcome abroad boys. Your nightmare starts here !
true that, another industry which is working fine, even the ASIC chairman is quoted as saying, “broker’s deliver great consumer outcomes” about to be torn apart because the big 4 are losing market share and have lost control over the distribution of their product and supply chain. a mortgage is an anchor product on the back of which many other products are sold, this is why it is imperative that the big 4 do not lose control, which they have, as consumers keep going back to those darned brokers, and brokers now originate more than 50% of all home loans. why do you think CBA bought Aussie, and owns 20% of mortgage choice, and NAB owns Smartline, to name just a few . +1 welcome to the nightmare