Final royal commission report to be released this afternoon

The submission of the report brings to an end an extensive inquiry. According to the royal commission, over the course of its work it reviewed over 10,000 submissions from the Australian public, completed 69 days of public hearings and considered thousands of documents provided by entities, regulators and consumer advocacy groups.

The final report will be publicly available once the report has been tabled in the parliament.

Treasurer Josh Frydenberg said last week that the final report will be publicly released at 4.10pm today (Monday, 4 February 2019), following the close of trading on the ASX.

Speaking to the press last week, Mr Frydenberg said: "What we are seeking to do is proceed in a careful and considered manner about something which is very important to the community and very important to the economy.

"We want to have a strong stable banking system, but one where then public has confidence in our financial institutions. We want a system where the public can trust their financial advisors, and can trust their banks, because we need a strong and healthy and well-regulated banking system. But we also want to ensure that there is the free flow of credit, that’s affordable and accessible to the public. Because credit is part of the blood of the economy, we need the free flow of credit and we’ll be obviously carefully considering that in terms of responding to the royal commission."

He added: "What we also want to ensure is that we continue to support small businesses, and we continue to support a healthy financial system that delivers better consumer outcomes.

"They are the government’s priorities and they will influence and determine our final and formal response to the royal commission's report."

Following its release this afternoon, the Treasurer will hold a press conference at Parliament House.

It is expected that the final report will pick up on some of the themes from the interim report, which raised many questions relating to who brokers act for, as well as broker remuneration. 

The commission had previously looked closely at trail commissions for brokers and raised concerns over conflicts of interest in relation to broker remuneration, and wanted to understand whether this resulted in misconduct or negative outcomes for consumers.

However, recent data from Momentum Intelligence’s Consumer Access to Mortgages Report shows that the vast majority of mortgagors are not concerned by broker remuneration.

Ninety-six per cent of borrowers who had used a mortgage broker in their most recent experience were either “satisfied” or “very satisfied” and that nearly 80 per cent (78.6 per cent) of borrowers who have used or intend to use a mortgage broker “have no concerns with this structure”.

Further, the Combined Industry Forum has been working to remove any potential concerns around conflicts of interest by changing the structure of upfront broker commissions – which many lenders have already adopted.

The forum, which was established in June 2017 to develop recommended responses to key issues raised by ASIC’s Review of Mortgage Broker Remuneration (ASIC Review), consists of key representatives of the mortgage finance industry in Australia. 

The CIF is currently preparing a progress report to regulators on the implementation of the reforms, however many of the recommended reforms focus on the issue of conflicted remuneration.

During 2018, a number of changes were implemented, including:

• Changing the standard commission model to cease paying bonus commissions and bonus payments, “removing the incentive to choose one lender or product over another”
• Changing the standard commission model to remunerate the broker on funds drawn down net of offset, “removing any incentive to advise consumers to borrow more than they need”
• Moving away from non-monetary benefits, including adjustments to tiered servicing models, conferences, professional development, entertainment and hospitality, and sponsorship of aggregator events as a reward for volume of sales
• Implementing clearer disclosure of ownership structures within the mortgage broking market to “improve competition and transparency for consumers” 

The CIF said it hopes the reforms will “significantly alter the way mortgage brokers are remunerated with the goal of addressing potential conflicts and bringing more transparency to the process of obtaining a home loan for consumers”. 

The chair of the CIF, Anthony Waldron, commented: “The CIF has been working with the industry since May 2017 to develop recommended reforms that facilitate the adoption of ASIC’s recommendations.

“These changes are a positive step towards setting new standards and shaping the future of the broking industry.

“The work of the CIF show how the industry is committed to reform and to raising the bar in support of good customer outcomes and improving consumer trust,” he said. 

CIF deputy chair Mark Haron added that the changes would boost transparency and reinforce a customer focus.

“With 59.1 per cent of home loan borrowers relying on mortgage brokers to assist them, we believe that these reforms will provide greater transparency to borrowers and reinforce brokers focus on providing good customer outcomes,” Mr Haron said.  

“These reforms are a significant step forward for the industry and have been designed to address ASIC requirements, while recognising the competitive benefits that mortgage brokers bring to all home loan borrowers.”

The CIF has said that this year it will continue work on a governance framework comprising a public reporting regime, a customer-first duty and improved industry oversight and the development of a Mortgage Broking Industry Code of Conduct. 

[Related: REVEALED: What consumers think of broker remuneration]