Labor open to discussing clawback

During the “Politics and Mortgage & Finance Brokers’ Remuneration Future” discussion with FBAA managing director Peter White, the shadow financial services minister and member for Whitlam reiterated that the Labor Party would not seek to change broker remuneration (as had originally been proposed by the party in 2019, following the banking royal commission).

Touching on the change of position from the ALP on broker remuneration, the shadow financial services minister said that, following the 2019 election, ALP leader Anthony Albanese had tasked his party with reviewing all of the party’s policies and asked his ministers to “spend a year or two consulting with stakeholders".

Mr Jones therefore thanked Mr White “for all the engagement [they’ve] had over the last couple of years”, stating: “I can honestly say that the decisions that we’ve made in Opposition, and in preparation for this election, have been improved by the fact that we’ve had a good ongoing dialogue, and not just in the weeks leading up to the federal election.”

The shadow assistant treasurer told viewers of the webcast that he believed it was clear that “we don’t have anything fundamentally broken in the remuneration system for mortgage brokers”.

Mr Jones said that while the ALP thought commissioner Kenneth Hayne had done “a good job” overall, he added “we don’t agree with where he landed on the commissions for mortgage brokers”.

“I think the commission-based remuneration arrangement is the right model. It’s working at the moment. There might be some things we need to fine tune (and I’ve had a yak with you [Peter White] about that). But I think, by and large, that the structure of commission-based remuneration is right,” Mr Jones said.

‘I'm fully aware of the impact that clawbacks have’: Stephen Jones MP

Over the course of the 15-minute webcast, the Labor MP said that, given the “very challenging economic environment” and “real cost-of-living pressures on households”, the ALP wanted brokers to be “focused on their clients, not on where the next financial or regulatory hit is going to come from the Commonwealth”.

“We want you focused on your clients in a difficult environment, not focused on Canberra,” he said.

“So let us make it crystal clear: no change to the commission-based remuneration arrangements. We won’t be proceeding with that review. We don’t think something is so fundamentally broken there. We’ll keep these [current] arrangements in place.”

The FBAA MD Mr White welcomed Labor’s position and added that – should the Labor Party win the federal election on 21 May – he would hope to sit down with Mr Jones and “talk about clawbacks and the unfair structure that sits under that” to “see if we can land clawbacks in a more reasonable position”.

In response, Mr Jones said: “Well, let’s have that conversation. [I’m] happy to do that with you and the other associations. I think it’s important that we have that dialogue.

“I’ll be coming to it with the principle that brokers should be fairly remunerated for the work that they perform. And I’m fully aware of the impact that clawbacks have; you can perform a whole heap of work and [then] forces outside your control mean that the rem for that work all but disappears. So, I do get it.

“I’m keen to have that conversation. Because I basically want to make this point clear: in a fairly concentrated lending market – particularly in the home mortgage, [which is] a fairly concentrated lending market – brokers play an important role in ensuring that consumers have access to the best information, the best deals and the best rates. 

“We want to ensure that brokers are able to make a fair profit for the work that they perform because, I think in a market like the Australian market, we actually need brokers to operate.”

However, Mr Jones added that he would also “have to have a conversation with the banks, who have a dog in that fight as well”.

Touching on the value of brokers to Australian borrowers, particularly in a rising interest rate environment, Mr Jones reflected on his own, personal experience of using a broker, stating: “I thought I knew it all… I had my mortgage with the one provider for the best part of 20 years. [After] a change in personal circumstances, I thought: ‘I’ll go and approach a broker’. And I did and I saved thousands of dollars. 

“I was the classic back-book client... too busy to sort that stuff out and [it] made a big difference to me. So I’ve got firsthand knowledge about how that stuff operates.”

‘An enormous step forward for our industry’

Speaking to The Adviser following the webcast, Mr White said the association was “apolitical” but welcomed that both the federal government and the Labor Party had decided that fundamentally changing how brokers are remunerated was unnecessary, and would not be reviewing remuneration this year.

He particularly welcomed the shadow financial services minister’s comments on the value of brokers and his readiness to engage in discussions around clawback.

Mr White said: “Being prepared to have that conversation is the first step since about 2006 or so that any politician is really wanting to further that conversation... So, I think if nothing else, the ability to have somebody who is prepared to sit down and fairly talk about [potentially] reducing unfair clawbacks back to one year is an enormous step forward for our industry. 

“And, I think we could see by the commentary from [Stephen] he’s very keen to engage. He gets it. He uses a broker himself. So, he understands it and he understands the value proposition. We've got to put our thoughts as to what happened in the past exactly there; in the past. Where [Labor] land now is in an enormously supportive position.

“As [Stephen] said, there’s nothing fundamentally broken… So they’re accepting of that and they agree with it. So I just think it’s a really great step forward to be able to then take that to the next level.” 

The FBAA head told The Adviser that the association will also be reaching out to the government’s financial services minister to try and have similar discussions.

Mr White concluded: “We [the FBAA] are apolitical in this conversation. It’s not us saying you should vote this way or like that… but what I do want to know is what the political views are on this. 

“I think it’s important that everybody has a fair chance to make an informed decision when they vote. Regardless of what side of politics they land on…I think it’s only fair that we understand where things stand today. You just need the right information.

“But, personally, I think [that was] a damn good conversation that I have been working towards for many, many years.”

[Related: EXCLUSIVE INTERVIEW: Shadow financial services minister and shadow assistant treasurer, Stephen Jones MP]