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The best interests duty will be a “powerful ally” in the broking industry’s corner when it defends the utility of the existing remuneration model in 2022, according to MFAA CEO Mike Felton.
Speaking to The Adviser following the Mortgage & Finance Association of Australia’s (MFAA) virtual conference, CEO Mike Felton noted the importance of adapting to forthcoming best interests duty obligations, which take effect on 1 January 2021.
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Mr Felton said demonstrating compliance with the obligations would form a key part of the industry’s defence of the existing broker remuneration model, which will be reviewed by the Council of Financial Regulators (CFR) in 2022.
“When the MFAA testified a couple of months ago at the House of Representatives’ hearings, it was further reinforced that the 2022 review is a genuine review and is not a tick and flick [exercise], and that trail will be front and centre of that review,” he said.
“We think that we are actually in a very good position going into 2022, but let’s make no mistake, a fully functional best interests duty is absolutely critical to that review.
“It is that ‘catch all’ that mitigates conflicts and is a powerful ally to have in our corner, one that will certainly make our industry stronger, more resilient and improve our ability to face scrutiny going forward.”
Mr Felton said he’s confident the industry can convince the CFR – which includes Treasury, the Reserve Bank of Australia (RBA), the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) – of the utility of retaining both the upfront and trail commission payments to brokers.
“We were absolutely able to make the case at the time the royal commission was released based on evidence from ASIC and Treasury and based on strong industry data that trail has actually stood our industry in good stead for some years,” he said.
“I believe we will be able to confidently do that again in 2022 and even more so with a fully functional best interests duty in our corner.”
The MFAA chief also noted the broader benefits of demonstrable compliance with best interests duty obligations, which he said would strengthen the broker proposition.
“We certainly believe that a best interests duty will assist in improving trust and confidence among the 45 per cent of customers that don’t currently use a mortgage broker,” he continued.
“Importantly, it will also improve trust and confidence among regulators, governments and consumer groups.
“Over time, we would expect our industry to hopefully then, once we get through that 2022 review, to get some clean air so that we can continue to do what we do so well, and that is driving competition, access to credit and producing amazing outcomes for the clients and communities that we serve right across the country.”
[Related: ‘Hayne got it wrong’: Committee chair backs status quo]
