As you may have seen in the press, the long awaited ASIC mortgage broker remuneration review was finally released late last week. Overall the review findings are in line with our expectations, and is a very positive outcome. The findings are a great outcome for brokers, with the broker industry seen as important to competition and being a positive for client outcomes, and does not find that the upfront and trail commission structures drive negative outcomes.
In an interview with ABC’s The Business on Thursday (16th March), ASIC Chairman, Greg Medcraft, defended the broker channel after the release of the regulator’s controversial Review of Mortgage Broker Remuneration. He praised the broker community for delivering great consumer outcomes as well as competition. Below is a summary of the 6 key recommendations and our view on each:
1. Changing the standard commission model to reduce the risk of poor consumer outcomes
This is something of a vague finding, that appears to be suggesting that the link between loan size and commission (given commission is % based) may drive higher loan sizes through the broker channel, and suggests that a link more to LVR may be better. Our view is that loan sizes are higher through broker because branches do a lot of existing client top-ups and restructures, and brokers can more effectively structure lending for those more complex loans. The view is that commission should be linked to other qualities rather than just volume. Should this be the outcome, this will work in Smartline’s favour as we have been supporting this proposition to lenders for a long time and will ensure that we get recognised for the quality of the loans and portfolio that we introduce to the lenders.
2. Moving away from bonus commissions and bonus payments which increase the risk of poor consumer outcomes
Expected recommendation. Will have no real impact on Smartline franchisees. We understand the need to change and will provide greater transparency to consumers and will have no serious impact on Smartline.
3. Moving away from soft dollar benefits which increase the risk of poor consumer outcomes and can undermine competition
Expected recommendation. No real impact on Smartline franchisees.
4. Clearer disclosure of ownership structures within the home loan market to improve competition
Expected recommendation. We fully support and endorse this recommendation.
5. Establishing a new public reporting regime of consumer outcomes and competition in the home loan market
Still needs detail, but overall public reporting on consumer outcomes and competition should be a positive move.
6. Improving the oversight of brokers by lenders and aggregators
Our view is that NCCP and ACL requirements already impose this, and that Smartline does this through our model, client engagement and compliance regime. At this stage not expecting this to impact on Smartline but more detail required.
Overall the findings are in line with expectations, and nothing overly onerous or scary. Again, it was great to see the report recognises the positive role Brokers play in the Mortgage market in improving competition and providing a valuable consumer outcome.
It is now up to the Minister and Government in terms of whether they adopt some or all of these recommendations, but based on the report, we consider this to be a positive set of findings for the industry and for Smartline.
Should you wish to discuss in more detail or have any questions at all, please feel free to give me a call.
National Franchise Recruitment Manager
02 9855 4224
Contact our recruitment manager Matt Fitzpatrick today
To find out more please call Matt on 02 9855 4224 for an initial no obligation chat. Matt can give you more information about the Smartline franchise and explain the process of joining Smartline.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.