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Support for the current broker remuneration model from the chair of the House of Representatives’ standing committee on economics has “validated” the government’s decision to reject the banking royal commission’s recommendations.
Last week, the House of Representatives’ standing committee on economics invited the Mortgage & Finance Association of Australia (MFAA), the Finance Brokers Association of Australia (FBAA), and the Australian Finance Group (AFG) to testify on behalf of the broking industry as part of an ongoing review of Australia’s financial institutions.
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Stakeholders discussed recent regulatory developments in the broking industry, particularly concerning the broker remuneration model and the best interests duty.
Tim Wilson, Liberal MP and chair of the committee, opened the questioning by revealing that in his view, recommendations handed down by commissioner Kenneth Hayne in the final report of the banking royal commission to scrap commission-based remuneration in the broking industry were off the mark.
“I actually think Hayne got it wrong on mortgage brokers and trailing commissions,” he said.
Connective director Mark Haron has welcomed Mr Wilson’s “encouraging” remarks, which he said have “validated” efforts to maintain existing arrangements.
“The revelations validate the government’s decision not to immediately implement this particular recommendation from Hayne and the industry’s tireless work to educate policymakers and Australians on the value of brokers and the potential impact of the recommended changes on choice in the market,” he said.
“Connective has always unequivocally rejected the recommendations to change the mortgage broker remuneration model.
“The model for how mortgage brokers are paid is not fundamentally broken. It’s important to remember that regulators, government bodies and most consumer experiences all conclude there is absolutely no systemic misconduct in the mortgage broker industry.”
Mr Haron noted the work the industry has done over the past 12 months “to self-regulate” in preparation of the best interests duty.
“In the last week, we’ve seen the industry rally behind implementing the best interests duty guidance announced by ASIC, which includes practices that many brokers have applied since before the royal commission and continue to improve on,” he said.
“Quite frankly, removing trail commissions will only add to diminishing competition in the home lending industry, because having access to a mortgage broker who provides the support to ensure customers remain with the most appropriate product for them, over time, is valuable. And trail commissions allow for this support in the ever-increasing complexity of Australia’s home lending market.”
He concluded: “Connective will continue to educate and advocate for brokers when it comes to mortgage broker remuneration.”
[Related: ‘Hayne got it wrong’: Committee chair backs status quo]
