The flat-fee model is once again taking centre stage in the broking industry. Although so far the royal commission hasn’t endorsed it, brokers can already take steps to keep the remuneration model from even gaining traction.
Cairns Mortgage Brokers director Roger Ward suggests two things brokers, particularly in regional areas, can do to quell the idea of a flat-fee payment.
The need to compete
First, brokers need to act as one via the MFAA. In Ward’s opinion, the royal commission has had little effect on the organisational structure and culture of the major banks so far. In fact, he feels like these banks will emerge from the commission’s scrutiny as even stronger and more profitable market leaders.
“The elephant in the room is the core problem: the banks’ dominance. They represent 80% of written mortgages, and this dominance is at the core of their unaccountability to regulators, consumers and government. I feel that part of the solution here is more competition, and to at least force the banks to sell their satellite lending entities,” Ward said.
“With an effective broker network, we could translate this more diversified competition into better outcomes for consumers.”
In a recent interview with MPA, BCFinance founder and director and 2018 Young Guns finalist Belinda Caesar said “the royal commission should be encouraging favourable outcomes for consumers. Adding costs to everyday people for an essential service is not accomplishing that”.
“Consumers should not have to pay a fee to become a bank customer,” Caesar said. “The cost of acquiring business should be borne by the banks, because they already profit from receiving the business.”
She added that brokers, with their passion for personal service and commitment, and having access to a wide range of loan and lender choices, are without a doubt, well worth any fee.
“Vote with their feet”
The second thing Ward suggests brokers do is “act aggressively against any institutions that undermine the industry and consumer choice” and vote with their feet to support lenders that support the mortgage broking business.
“In regional Australia, the number of suitable lenders is much less than in the capital cities due to the lending policy appetite of secondary lenders in the market,” Ward said.
“I feel that the big four get an easy run in regional Australia, and we need to encourage other lenders to better understand and accept the regional complexities for security location and borrower profiles.”