The current level of scrutiny placed on mortgage brokers and commissions could have benefits for both the industry and consumers according to a respected member of the industry.
The issue of brokers and their commission is currently subject to review, with the Australian Securities & Investment Commission currently holding a wide-ranging inquiry into the practice
One major bank, Westpac, also announced this week that it will review its commission structure
While scrutiny of that level may be a warning bell for some about conduct in the broking industry, Jane Slack-Smith, director of Investors Choice Mortgages, said the vast majority of mortgage brokers are working with their client’s best interests, not commissions in mind.
“When I’m working with a client and looking for a lender or loan for them I base all my decision on what would suit them and I would say that’s the case for the majority of brokers,” Slack-Smith, a two-time Your Investment Property Magazine Reader’s Choice Mortgage Broker of the Year, said.
“That’s at the top of the list and the potential commission is so far down the list that it’s not important at all. It’s just not something that most would think about when working with a client,” she said.
Though she believes the majority of brokers are acting appropriately, Slack-Smith said she still welcomes the spotlight being shone on the industry.
“One of the things that happens when you have a review like this is that people get to see the potential benefits and downfalls that can come with any decision,” she said.
“I think one of the things people will see is that brokers across the country are doing the right thing by customers and see that when it comes to assessing somebody and what loan might suit them brokers have access to a lot more information to help them make the right decision.
“The other thing is that there probably are a small number of people who aren’t doing the right thing so I welcome the review in that it might encourage them to leave the industry.”
Even though she believes the majority of the industry is acting appropriately, Slack-Smith said she isn’t surprised regulators have turned their attention to mortgage brokers.
“I’m not sure there’s anything in particular that has prompted it.
“In reality I think this is just progression and mortgage brokers are the next financial group being looked at, we’ve seen it happen with financial planners and those sort of people and now it’s happening to us.”
While the current reviews are focussing on the commissions brokers receive from banks, concerns have also been raised recently about brokers being incentivized by developers to direct clients to specific property purchases
, but Slack-Smith again said that practice is not as widespread as many may think.
“There are a few developers who will dangle things to brokers, I had one who offered me a brand new BMW if I referred 10 clients to them but I said I was happy with my Toyota.
“Again there may be some who accept those deals, but if you listen to the concerns that APRA and the RBA have been raising recently in regards to people borrowing to buy off the plan and new apartments you’ll see that it’s really not in the best professional interest of brokers to point people to those kinds of things.”
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