The ongoing discussions around the flat-fee model have the makings of a blockbuster movie: a good-defies-evil story, epic battles, heartbreaking casualties, and sometimes a bit of dancing.
Hatch Financial Services Director Tim Gaspar added fuel to the fire when he said that CBA CEO Matt Comyn had “endeavoured to paint himself as Luke Skywalker, champion of good pushing against the tide of evil that is all around him” when he appeared at the Royal Commission’s seventh round of hearings.
Alone on the dance floor
During the hearings, Comyn said he had long championed the flat-fee model within the bank as a way to advance good relations with customers, and claimed that ASIC and the Sedgwick Review similarly advocated the model, which was only days away from being adopted by CBA.
“That was until Comyn realised that CBA was going to be standing all by itself in the middle of the dance floor, dancing alone,” said Gaspar. “It seemed not one lender was that keen on CBA’s choice of music. So CBA tried to slip off the dance floor, hoping that no one noticed. And no one did at the time.”
Gaspar added that while Comyn was “enjoying the warm inner glow that comes from being the centre of attention and having an audience liking what he is selling”, it became clear that brokers and representatives of the broking community were not invited to give evidence against his merchandise.
And like most blockbuster movies, the flat fee story contained a good measure of deceit. According to Gaspar, the remuneration model that the Netherlands employs “has seduced the commission,” and Comyn exploited it to advance the bank’s interest while appearing altruistic.
Truth is always the first to go
CBA’s chief executive may have been keen to mention the bank’s plan to help brokers transition to flat fee payment, but he failed to say how the model would render broking unviable, causing thousands of brokers — big and small players, seasoned and budding — to likely go out of business.
“If broker numbers fall dramatically, that will hand market share and power back to the big four, given their established distribution networks,” said Gaspar. “Consumers come to brokers because banks aren’t delivering the service they want. CBA’s answer is to stop brokers from being able to afford to deliver service.”
According to Gaspar, the flat fee system isn’t as lustrous as it seems at first glance, and it raises serious questions on how it will be a win for consumers.
“Comyn might be more Darth Vader than Luke Skywalker, and brokers are the rebel fighters in the Home Loan Wars. No matter how the story is written, the broking industry is under threat. But consumers will be the biggest losers,” said Gaspar.
“And as always, truth is the first casualty of war.”