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Mortgage brokers worried about the future sustainability of their business model, have been told that remuneration is "not going to change in one year's time" and that efforts to protect the third party channel should look beyond trail.
Speaking to Australian Broker, Nick Young, managing director of Trail Homes, outlined several reasons that have left him confident the current remuneration structure will remain in place for the near future, even if Labor wins the upcoming election.
While the matter of remuneration has dominated the industry space over recent months, Young said “from both sides of politics, this is actually a very low priority issue.”
He explained, “This is an intellectual discussion that has come out of the royal commission, but very few people will actually be pushing for it.”
“I do not think, by any means, that it’s on the top of Labor’s pile.”
According to Young, even if Labor did win the election and immediately turned their focus onto implementing changes within the mortgage industry, there is built-in buffer time.
“First, Labor would have to win the election. Then, they must finish the industry consultation piece, which they’ve promised to do. They have to propose legislation, which has to go back to the industry again to be checked. It then goes to the lower house, then the upper house,” he explained.
“Once it’s through – the really killer bit – they need to give the banks and aggregators sufficient time to be able to update their systems to provide for whatever the new remuneration regime is going to be.”
Industry experts have said that banks would need at least one year of notice to institute a new system, following the already-lengthy legislation process.
“The summary: remuneration is not going to change in one year’s time,” said Young.
While there may not be immediate urgency, the managing director made sure to clarify that brokers should continue to do their part in protecting the future.
“It’s really important that the industry keeps pushing – clearly and professionally – for a balanced remuneration model, meaning an upfront and trails,” Young said, reiterating that it’s the model that best serves the broker, the bank, and the consumer.
High on his list of concerns regarding the removal of trails is the significant deal of upward pressure it would cause on interest rates.
Young was definitive, “Removing trails from the industry would be a significant step back for all stakeholders. Skewing it to an all-upfront or all-trail model ends up disadvantaging the consumer.”
As for now, Young encourages brokers to “continue business as usual.”
“My advice is to get on, build your businesses, and look after your clients as best you can,” he concluded.
