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Suggestions from the FBAA that trail commissions are under threat have been dismissed by industry figureheads as scaremongering.
FBAA president Peter White told delegates at a seminar on Wednesday that Australian brokers could lose their trail commissions, pointing to trends in overseas markets as an example.
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“No other country pays trail commissions to brokers, so Australia is behind the eight ball in this respect,” Mr White told The Adviser on Wednesday.
But MFAA chief executive officer Phil Naylor said while there were no guarantees, “there has been no indication the banks will change their remuneration structure”.
“Anything Peter White has said about commissions obviously comes from his own musings. I have heard absolutely nothing about lenders cutting commissions,” Mr Naylor told The Adviser.
And Mr Naylor’s views were supported sections of the banking industry.
Citibank’s head of distribution and marketing Peter Hayward said he couldn’t foresee any changes to commission structures in the short term.
According to Mr Hayward, right now commissions are likely to be the last thing the banks are concerned about.
“With regulation now only months away the industry is focused on the introduction of licensing,” Mr Hayward said.
The aggregation industry was also quick to quash any speculation that trail commissions were in danger.
Brendan O’Donnell, chief executive of Choice Aggregation Services said he was unsure as to what Mr White was basing his assumptions on.
“Brokers have shown incredible resilience and have demonstrated their ability to adapt and change to meet the new market requirements and conditions. Moreover, we have strong commitment from lenders across the spectrum from banks to non-banks of their commitment to the channel,” he said.
Mr O’Donnell said he was bullish about the prospects for the broker market in the years ahead and expects them to grow market share as they embrace new legislation, licensing and further diversification.
“The broker market is maturing rapidly and becoming a truly professional industry supported by a strong tail wind in the form of licensing. Banks and non-banks will continue to support brokers who focus on building the client relationship rather than those that are solely focused on providing a transaction – which is one of the reasons why trail commissions will continue into the future,” he said.
“Furthermore, many of the banks’ trail commission structures have been designed to encourage client retention with brokers, which reduces ‘churn’ and in turn reduces the costs to the client and the bank.”
