It is up to the broking industry to rise to the challenges and embrace the opportunities following the royal commission, said Treasurer Josh Frydenberg.
Speaking at Loan Market’s Game On conference in Hobart, Frydenberg discussed the government’s response to the royal commission and how it plans to move forward. Outlining the history of broking, he made particular mention of how brokers had increased competition by providing an “invaluable channel” for non-banks and regional lenders.
Following the royal commission final report recommendations to move mortgage brokers to a borrower-pays model, Frydenberg and the Liberal government took a measured approach and opted for a review in 2022 to look at the impact and implications of changing broker remuneration.
Speaking in a session titled ‘The Hon Josh Frydenberg MP: Reflections and views from the man who backed brokers’, Frydenberg said this review into remuneration will be held by the council of financial regulators and the ACCC.
Frydenberg also discussed the Best Interests Duty, which he expects to be finalised by 1 July 2020 and spoke positively about the future success of brokers.
“The government is confident that these changes will address the conflict of interests in the industry by better aligning the interests of consumers and mortgage brokers. I’m pleased to say the industry was already well advanced in moving towards these reforms prior to Commissioner Hayne passing down the final report,” Frydenberg said.
He added an encouragement to the brokers in the crowd to prove no further changes would be necessary.
“Through its actions the government has given the industry an opportunity to show it can meet the challenge of demonstrating it can manage any conflicts that arise from the continuation of upfront and trailing commissions.
“It’s now up to you the industry through its own actions to rise to that challenges and ensure further changes are not required beyond those we’ve already agreed to implement.”
Speaking further about the Best Interests Duty, he said acting for the customer’s best interests was something brokers did every day. In a service industry like mortgage broking it is important that customers trust brokers and Frydenberg said the duty would serve as an important signal to customers to provide more confidence to engage with the sector.
But he said they needed to get it right, without imposing unreasonable client burden or leading to a “tick a box approach”.
“The duty will also need to be applied in the context of responsible lending obligations, without further restricting the availability of credit. For all these reasons we will shortly begin our consultation with the sector on the drafting of best interest duty and I look forward to receiving input from your industry bodies and from the sector more generally,” he said.
Finishing on a positive note Frydenberg said mortgage brokers have a particularly important role to play.
“They are trusted by the community, they reach out to every part of our country. The public trust you, the industry, with the most important economic decision of their life, whether buying a family home or an investment.
“So I encourage and urge you to embrace this opportunity you have been given to ensure your very important industry continues to prosper and survive.”