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With broker remuneration being brought back into focus recently, the CEO of Mortgage Choice has said banks have ‘conveniently forgotten’ that changes have already been made.
The CEO of major brokerage Mortgage Choice, Anthony Waldron, has said that conflict between home loan distribution channels needs to be mitigated and commentary made by some quarters clarified.
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Speaking to The Adviser, the Mortgage Choice CEO and former NAB banker, said that several lenders have announced a renewed focus into proprietary lending investment in recent months, with some offering cheaper mortgages through online channels than others.
“The banks decide their pricing strategies, and if they want to compete away every cent of profit? Well, that’s their decision,” he said, but added that both broker and proprietary channels need to be strong to support home buyers in Australia.
“It’s good that they [the banks] have healthy competition. We need the banks to have proprietary channels that are strong; that’s not a bad thing. It’s actually a good thing. It’s the ability to have both that actually provides the best outcome. Wherever customers want to be, that’s where we need to be.
“Customers continue to choose brokers, and that’s just going to accelerate, if anything. We’re in the early-to-mid 70 percent now [for broker market share] and there’s still growth to come from our perspective,” he said, flagging that the broker channel is legally obliged to work in the best interests of customers (which lenders aren’t) and provide a wide range of choice and solutions for borrowers.
“Customers continue to choose brokers, and that’s just going to accelerate, if anything and if customers want to be with brokers, then banks need to be there as well. And they all know that.”
However, he said that commentary made by some of the major bank CEOs earlier this year about margins being lower through the broker channel and calls to bring in broker remuneration caps – amid other calls for broker remuneration reviews – were “convenient”.
Waldron said: “People have conveniently forgotten what has actually happened over the last five or six years. After the ASIC broker remuneration review and the Royal Commission, there was also a fairly significant change to commissions made, regarding net-of-offsets and paying only on the amount drawn down.
“During the peak periods [of lending] at the back end of COVID, broker remuneration was down 10–14 per cent because of those things. When they talk about bank margins having gone down but brokers not having a hit on their remuneration. That’s conveniently forgotten. The reality is broker did get a hit back in 2019, which just went straight to margin at the banks. The banks actually got an increase in margin back then. But they’re not talking about that, they’re just talking about the fact that it’s come down now.”
The Mortgage Choice CEO also said that bankers were bringing in higher bonuses for their bankers when selling home loans, which were not comparable to broker commissions.
He said: “A banker is an employee, getting paid as an employee. A broker is a standalone small business and has all sorts of costs that a standalone employee doesn’t have to pay; to the aggregation businesses, for their technology, for their insurances, for their offices. They have to pay for everything just to run a small business. They’re very different in the way that they operate to a banker.”
[Related: Major bank CEOs slammed for calling for cap on broker commissions]
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