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Broker

Association launches defence of the broker channel

by Reporter9 minute read
The Adviser

The MFAA has launched a defence of the broking industry, refuting allegations of poor consumer outcomes and bringing together a plethora of evidential “proof” that brokers are driving competition.

As first revealed at the association’s recent roadshows in the past few weeks, the Mortgage & Finance Association of Australia (MFAA) has pulled together data from a range of sources to challenge some of the rhetoric about brokers.

The industry has been under close scrutiny over the past year, with the Productivity Commission looking at potentially recommending a swathe of reforms to the mortgage broking sector, the royal commission questioning broker remuneration and potential conflicts of interest, and some consumer groups and media reports painting brokers in a negative light.

However, the association has now presented to government departments and regulatory agencies a data package to provide an evidence-based rebuttal of the negative reports and to emphasise ASIC’s review of mortgage broker remuneration, which did not conclude that the upfront and trail commissions have detrimental impacts on consumers.

Speaking to The Adviser, MFAA CEO Mike Felton explained: “Scrutiny of our industry is relevant and proper. We are a systemically important industry and you would expect scrutiny of such an industry. We do, however, say that the public debate and the rhetoric that you get is very different to where ASIC landed, to the data, and to the industry we know and understand.”

He continued: “There has been criticism of the industry and we think that comes from some with entrenched interests that would have something to gain from a rationalisation of a broker channel and also from those who are misinformed.

“Brokers know and understand the industry and the outcomes that they are delivering week in and week out for their customers. So, to be presented with a very different picture, that creates great concern and frustration because they don’t recognise it as their industry. That is not their broking industry.

“When there are two mismatching pictures being painted, it creates a lot of cognitive dissonance. You have a lot of stress as a result of this mismatch between what you know is true of the industry and what is being said about the industry elsewhere.”

Mr Felton added: “If [the broking industry] were systemically broken, you would have complaints and arrears going up, and you wouldn’t have consumer support of the channel, or competition increasing. You would have a very different picture to the one that emerges.

“So, we would argue very strongly that poor consumer outcomes are not core to our industry. And this data shows that.”

Research pack findings

The MFAA data pulls together statistics from a range of sources, including MFAA data, findings from ASIC’s review of broker remuneration, figures from the Credit and Investments Ombudsman (CIO) and the Financial Ombudsman Service (FOS), as well as data included in some of the responses to the royal commission.

It includes a range of graphs and tables which show, among other findings, that:

  • More than 50 per cent of residential mortgages are originated through brokers.
  • While broker numbers continue to rise, the number of complaints made to the CIO and the FOS has dropped (complaints relating to brokers made up just 6.1 per cent of complaints to the CIO and less than 1 per cent of complaints to the FOS in 2016–17).
  • Complaints made to the MFAA itself have declined by 78 per cent in the past 10 years.
  • Brokers are increasing competition by driving more loans to lenders outside of the big four (non-major lender market share rose from 21.5 per cent in 2013 to 28 per cent in 2017) and away from the majors (major bank net interest margin has dropped in recent years).
  • Aggregator data shows that brokers earn a Net Promoter Score of +70.

Mr Felton said: “The Productivity Commission has asked for data and we believe this adds to that body of data.

“The evidence shows that: [the] industry has doubled in size; satisfaction is up with a phenomenal Net Promote Score of +70; despite broker numbers growing strongly, and brokers making up 91 per cent of CIO members, they only made up 6 per cent of complaints. And for the FOS, less than 1 per cent of complaints between 2013 and 2017 were about brokers. That is an amazing accolade for the industry, it is phenomenal.

“So, there is great satisfaction and you have these external reviews which show there are no systemic issues and then you look at arrears and compliance and it is even more stark that there are no major problems.

“Couple all this data with the values that brokers offer — from choice to convenience to personalised service, relationship continuity and unpacking complexity — and we would certainly argue that the broker proposition is a very different proposition than a branch.”

He added: “We can see that there is no correlation whatsoever to the picture that has been painted in the public domain. And I think this data will achieve a greater degree of awareness based on actual data and relevant facts relating to the amazing outcomes that our industry is producing.”

Mr Felton said that he believes the broking industry will continue to drive good consumer outcomes and noted that the Combined Industry Forum is working on its framework to “continually improve” the industry.

The MFAA has said that its members will be able to download the data package from its website in the coming days for brokers to send out to customers, should they so wish.

“We have a massive business collectively, in the form of the mortgage broking industry, and we need to do everything that is right to ensure that has longevity,” the MFAA CEO said.

“We will include this message in our ongoing narrative and advocacy going forward because it is a very compelling message.”

[Related: Aggregator provides PC with ‘evidence’ of broker outcomes]

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Comments (41)

  • Stephen bisgrove former mfaa e Wednesday, 20 June 2018
    Mfaa the pretenders the da is pretentious deals with nothing of loan writer fraud re living expenses or close relations that brokers do have with ppty developers and re diving kick backs. Mfaa 8 million to run a tin pot show 2 million and lower fees.mfaa please disband.
    0
  • Congrats to The Adviser for allowing all comments - not surprised it is held in high regard.

    What is the MFAA doing about the unconscionable conduct by MC franchisor? Crickets.
    0
  • Congratulations and thank you Evan & MFAA. It's a very positive initiative that no-one can deny, is good for our industry. It's now up to brokers to put this on our websites, our screens, social media, emails and information packs and get the message out there.
    0
  • That's a welcome and solid response from Mike Felton. Well done! We need to win this argument on facts and not emotion.
    3
    • Stephen Bisgrove Monday, 18 June 2018
      No facts MFAa no answers how to deal with fraudulent alicatkons
      0
  • Nice to read some factual information as opposed to the propaganda contained in the doctored reports from Sedgwick , Rice Warmer , UBS etc
    5
  • Stuart Donaldson Tuesday, 12 June 2018
    Well said Paul Lewis, and spot on!
    0
  • I bet some of these negative comments are coming form those who did not bother to attend the MFAA Roadshows and support the industry body.
    2
    • Better to be a member of the FBAA as Peter White the CEO has been supporting Brokers on this for years. MFAA coming in at the end is just a cop out.
      0
    • The real question is why would any broker waste their time attending an MFAA or FBAA roadshow? Just why?

      These 2 industry bodies are near useless to me, yet I am forced to hand at least one of them around $500 / year. That is damn well support enough.

      I think the FBAA is slightly better than MFAA, but I can assure you, that is most certainly not high praise for the FBAA.

      Spartacus
      1
  • Gr8 2 C, if only they had a little urgency but better late than never.
    1
    • Mike's presentation will be available on the MFAA website in a few days. Watch it. You will understand why they have timed it this way.
      -2
      • 10 years into this battle & Mike does an online presentation to some brokers. Seriously, you are very easily pleased.

        Spartacus
        3
  • Well, at least they are making some sort of effort. But even when they are offering support to us brokers it's hard still not to feel a little frustrated with this "wordy" politician style double talk from MFAA. Talk about Cognitive dissonance. Why does the MFAA have to so waffle and beat around the bush?

    Customers love brokers, brokers are consumer advocates fighting for Australian home loan consumers against the greed of banking executives. Brokers have exceptionally low levels of complaints. Brokers are the main drivers of competition through the Australian home loan market. Anyone pushing for a change to the way brokers are paid have an agenda that is hostile to good consumer outcomes.

    Spartacus
    -2
    • The MFAA hired a lobbyist to handle conversations with government, and take a politician style approach because that's how you influence policymakers - the last thing we need is an industry body slagging off the government and regulators.

      I think this approach from the MFAA is one that will serve us well
      10
    • Log on to the MFAA website in a few days and watch Mike's presentation - there is no 'beating around the bush' - we are in extremely capable hands here - get behind them, they are on our side........
      2
    • Log on to the FBAA and see what Peter White has been doing for years, not after it's too late.
      1
  • At least it's a start from the MFAA.

    The Major Banks would love nothing more than to pay Brokers a flat fee.

    Be great if the MFAA could organise for the second tier Lenders/Funders to get together and guarantee they will continue to support the Broker Channel with their current remuneration, am sure we'd see a different view from the Majors once that was agreed to


    4
    • Major Banks won't be paying Brokers a flat fee because introduction of flat fees will mean there are no more brokers. Non-banks and regionals need brokers so they would be against killing off brokers with an introduction of flat fees
      -1
      • Actually anonymous, if you re-read Alex’s post, I think you will find you are in fact confirming Alex’s point (which was well made).

        Spartacus
        0
        • No Spartacus. Banks won't decide if flat fees are introduced, legislators will. I doubt that will happen due to loss of competition in the mortgage market. If by chance it does get introduced, there will be no brokers as it won't be viable. Asking the MFAA or FBAA or the CIF or anyone else to arrange any type of guarantee demonstrates a lack of understanding of the process.
          -1
          • Anon, surely you understand the concept of influence.

            The regulators and legislators are influenced by powerful forces (eg. the big banks - who would benefit from the removal of brokers).

            But the smaller lenders can also be a strong voice of influence also (especially if they spoke with one voice).

            A strong voice of unified support for brokers from the mid sized and smaller lenders would be a powerful statement.

            It would also see the majors back off, especially if the statement was strong enough to uncover the big banks agenda in trying to kill broking.

            The MFAA or FBAA unifying mid and smaller lenders in support of the broker proposition is a great concept worth investigating. But it is unlikely to happen as these broker bodies are useless.

            Spartacus
            0
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