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Banks as well as the SMSF, financial planning and life insurance sectors have been blamed for bringing unfair heat on mortgage broker commissions.
FBAA chief executive Peter White said it is an “uninformed assumption” that the regulatory spotlight could soon be turned on mortgage broker commissions, even though some commentary has suggested that this may be the case.
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Mr White’s comments come after insurance specialist Sam Kitchen said that all commission-based intermediaries in the financial services industry will be under the spotlight, including mortgage brokers.
“Upfront commissions have been an issue in the insurance industry for a long time, as highlighted in both the Trowbridge Report and in ASIC Report 413 which was issued last year,” Mr Kitchen told The Adviser earlier this week.
Mr White claimed he had a discussion on Monday with the report’s author, John Trowbridge, and said Mr Trowbridge did not suggest further investigation into the consideration of reducing mortgage broker commissions.
“Actually, it was quite the opposite – maybe his recommendation [to reform commission structure for financial planners] brings it in line with mortgage brokers,” Mr White told The Adviser.
“There are a couple of things in the market that are probably stimulating the conversation in plenty of different directions, but I think it’s more the fact that we’ve had so much limelight on the SMSF and life insurance areas that it’s more of a collateral blow.”
He believes the problem does not lie with brokers.
“If there was a root cause, I reckon the line would draw back to banks incentivising their divisions to get more volumes, and how do you do that? Pay more commission,” Mr White said.
“In all honesty, I think broker commissions are very reasonable, and because of clawback arrangements, they’re probably a bit too small.
“You can’t have a commission structure that’s set five years ago and think it’s still completely valid today because the cost of living and doing business has gone up.”
[Related: RBA sounds alarm on broker commissions]
