The Finance Brokers Association of Australia (FBAA), one of the peak bodies for mortgage brokers, has published research into borrower’s experience of working with brokers that pushes back against the need for a review into how brokers get paid.
A review of broker pay is set to be held next year as part of the conditions of the Hayne Royal Commission, which mandated a three-year remuneration review as part of its recommendations in 2019.
According to data from the FBAA, however, borrowers are overwhelmingly pleased with the experience that they get from securing a home loan via the broker channel, and have few qualms about the way that brokers are paid.
98% said that they would return to their broker for future business, 98.3% said that the broker had acted in their best interests and 93.8% said that they were not concerned about the commission structure.
On top of that, the other major broker peak body, the Mortgage Finance Association of Australia (MFAA) recently published research that suggested that broker market share has risen 12% since the Royal Commission, topping out earlier this week at a new record high of 66.8%.
“What we did is research our members’ borrowers, to get their feedback on what their experience was as users of brokers,” explained FBAA CEO Peter White. “The borrowers completed the survey independently and enabled us to collate the data. We also spoke to brokers to get their experiences.”
“We sized the marketplace: the MFAA reports about 16,000 brokers, and we look with a different set of optics. We go for all the people who are registered with ASIC and take out their overlaps: companies have directors who are credit reps, and that data counts them twice.”
“ASIC would say closer to 30,000 brokers in the market, but once you take the overlaps out, it brings it comes back down to 19,683.”
“That’s regardless of volume. We look at it in terms of the regulatory and political risk to ensure that we’re talking about the whole market and not a subset of it. That’s where the market sizing piece comes in.”
“This paper was put together to talk to the 2022 Remuneration Review. It’s about understanding the flows of the marketplace and what has changed that wasn’t there when the Royal Commission was done, because it was them who recommended that this review take place three years in the future, which will be next year.”
The FBAA published a short summary of their findings these week, with the full report currently only available to regulators and politicians.
“In the fully detailed report that goes to regulators and politicians, we talk about the Royal Commission, and most of the data that they based their recommendations on was from 2012,” said White. “In those days, there was no Best Interests Duty, no record-keeping or breach reporting, no conflicted remuneration bans – none of that stuff existed.”
“Now, today, all those things are in place and their data will be ten years old. You can’t run a measure to say that things need to change because of XYZ when the data that you are talking to is completely irrelevant to today.”
“Our research proves that borrowers think that brokers are doing a great job. That’s why we have the broker experience piece and all that it talks about. 98% said that they would use the same broker, 98.3% say the broker acted in their best interest. There’s no argument about broker commission: 98.3% had no problem with brokers getting paid a commission.”
“They think there’s a debate, but there actually isn’t one: regulations changed, borrowers are extremely happy with the way brokers are conducting themselves, there’s greater scrutiny and if you look at how brokers fared during Covid, the structure of remuneration supported and kept them off the government’s purse strings.”
“There’s nothing broken here, there’s nothing that could change dramatically that would improve the landscape – more so for the borrowers. In fact, if you change things, it would probably get worse. The whole thing is a highlight to say ‘nothing to see here, try to move on’.”
