‘We’re not going to change it’: Shadow financial services minister on brokerage compensation

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The “existing arrangements” for brokers’ pay would remain under a Labor government, confirmed MP Stephen Jones, the shadow minister for financial services and pensions.

Speaking at an event hosted by PritchittBland Communications in Sydney on Thursday January 28, Shadow Deputy Treasurer and Shadow Minister for Financial Services and Superannuation MP Stephen Jones confirmed that the Australian Labor Party has no no intention of changing current broker compensation. structure and that the Kenneth Hayne Commission “probably wasn’t right” on its recommendation to move to a consumer-pays model.

The final report of the Royal Commission into Misconduct in Banking, Superannuation and Financial Services recommended that “changes in brokers’ compensation be made over a period of two or three years, initially prohibiting lenders from paying trailing commissions to mortgage brokers in respect of new loans, thereby prohibiting lenders from paying further commissions to mortgage brokers”.

In its official response to the Royal Commission in 2019, Labor originally proposed to ban trailing commissions paid to mortgage brokers and cap initial commissions at 1.1%.

However, the deputy shadow treasurer and member of Whitlam has confirmed that the party no longer supports changing brokers’ pay.

Asked by The Adviser how the ALP would deal with brokerage compensation if they win the next federal election, Jones said: “We think that’s a settled issue; the existing arrangements are a settled issue.

“We believe that the existing arrangement should be maintained. We are not going to change it…

“We think Hayne probably wasn’t right about that. He might have been right in theory, but if you look at how the industry works, and how it works in Australia and the fact that over 60% of residential mortgages are now underwritten through brokers, you would damage to the established situation of adopting the royal commission Hayne [recommendation on broker remuneration].”

The Shadow Minister for Financial Services and Superannuation’s comments are relevant given the upcoming federal election, which is expected to be held in May.

Neither Labor nor the current coalition government has expressed any intention of making any major changes to brokerage pay in recent months.

While the Morrison government initially said in its official response to the final report in 2019 that it would ban trailing commission payments for new mortgages from July 1, 2020, the Treasurer later revealed that the role of commissions initial and follow-up would instead be reviewed in 2022. .

Treasurer Josh Frydenberg recently suggested to Momentum Media that such a review would take place in the “second half” of the year.

Members of the industry, including associations, aggregators and individual brokers have been busy engaging with politicians and outlining the impacts changing broker compensation would have on the industry.

In a recent video update to members, Mortgage & Finance Association of Australia (MFAA) chief executive Mike Felton said the association had undertaken “a significant amount of work on the 2022 review” last year, in preparation for the upcoming review, adding that brokers were in “an exceptionally strong position” to deal with it.

Appetite to move to a consumer-pays model is also low among existing brokerage clients, with research from the Finance Brokers Association of Australia (FBAA) recently finding that the vast majority of brokerage clients are not concerned by the fact that brokers receive commissions, and less than a third would pay service fees.

The survey echoes similar findings made by Momentum Intelligence in 2019, when the inaugural report on consumer access to mortgages found nearly two-thirds of borrowers (58%) said they would not willing to pay a broker fee, while a whopping 96.5% of broker clients said they would not be willing to pay $2,000 for the service.

[Related: Broking industry poll launches ahead of federal election]

‘We’re not going to change it’: Shadow financial services minister on brokerage compensation



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Last update: January 28, 2022

Posted: January 28, 2022




Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian brokerage industry, the mortgage market, financial regulation, fintech and the wider lending landscape, Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser webcasts. Live.

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