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In the weeks since the release of the banking royal commission final report, and through the outstanding efforts of all involved, we have achieved a significant change which will benefit our clients.
Following Labor’s announcement regarding their position on recommendation 1.3 of the Hayne Royal Commission, I feel that some in our industry are viewing this as a sign the work is now complete and we can all get back to business as usual.
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This change of rhetoric by the opposition is, in my view, only the beginning of the need for our industry to continue the good work on educating consumers, politicians, public servants and consumer groups about the value mortgage brokers deliver to consumers and the competition we bring to the Australian mortgage marketplace.
We must continue to work with our industry bodies, aggregators and lenders to bring them closer to an outcome which recognises the client has selected the broker as their chosen advisor.
Now that both major political parties have aired their view that recommendation 1.3 appears unworkable, the next battle regarding the structure for commission is not for the public to be concerned with. This is for the industry to negotiate through a consultative approach.
It is important for individual brokers to continue to play a vital role at the grassroots level.
It is, however, Treasury, industry bodies, aggregators and lenders who are the key players involved to ensure a fair final outcome is delivered.
I am concerned these key players are not all on the same page.
The Labor party’s proposal regarding removal of trail and an increased upfront commission appears likely to deliver an economic benefit to the lenders bottom line at the expense of brokers.
The lenders, including those who are vocal supporters of third party, are potentially conflicted as they may benefit in the event of trail disappearing.
Any move to an upfront only model has the potential to drive a wedge between lenders and brokers. History has clearly shown us that some lenders may see this as the opportunity to work against brokers to wrestle back the relationships that the brokers hold with clients.
Our industry bodies continue to discuss the retention of trail commission. This is the position we should all be taking as this outcome ensures a strong broking industry which can continue to deliver great customer outcomes.
Each of the major aggregators is influenced by different drivers. Some by their revenue model, some by shareholders and some by the ownership model. We must have them all working towards a common objective.
It is not time to be complacent or to waive a white flag.
In the time from now until the new government is sworn in (whichever party wins), we need to continue to push lenders, industry bodies and aggregators for the retention of trail income as our endorsed position.
Broker remuneration is only one side of the ledger. Importantly, now is the time we must also negotiate for the changes that will empower brokers to provide clients with superior outcomes.
Through delivering a superior client experience we also increase the value which can be associated with mortgage brokers.
This opportunity must be seized to build a robust model in which customers benefit from lenders working in harmony with brokers. A reduction of the friction which currently exists in the broker/lender relationship is paramount.
Here are some changes worthy of consideration:
- Recognition by lenders that the broker is the clients chosen professional adviser.
- Lenders to provide brokers with access to their client’s current product information (interest rates, terms, structure, etc).
- All lenders should accept discharge authorities from brokers rather than force clients to go through difficult conversations with lenders to switch to a better deal.
- Implementation of a standardised approach to the utilisation treatment of upfront commissions and a standard, automated, review process to identify and pay on subsequent drawings of previously unused limits.
- Removal of conflict through commission rates and clawback penalties being standardised across all lenders for similar product types.
As an industry we must continue to strive for positive change to ensure clients are delivered superior outcomes and brokers receive fair compensation for the ongoing value we deliver to the lenders and to our clients.
