Lets help big banks make more profit... said no one ever

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Monday was a sad day, “was it?” I hear you ask, “why?” The Australian Government handed down the findings of the Banking Royal Commission (RC), often referred to as the “Hayne Report”. The RC was created to investigate misconduct in the banking, superannuation and financial services industry. During this hearing there have been some hard-hitting revelations, with allegations of corporate greed, breaches of The Corporations Act and gross misconduct to consumers (yes, that’s you!)

There were 76 recommendations made by the RC, delivered by the current Federal Treasurer, Josh Frydenberg. Four key areas were identified which it was deemed would protect the consumers’ interests and these include;

  • Strengthening and expanding protections for consumers, small businesses, rural and remote communities

  • Raising accountability and governance standards

  • Enhancing the effectiveness of regulators

  • Providing remediation for those harmed by misconduct 

Interestingly, even after discovering gross misconduct by many banks, with clients being mistreated and losing out financially, there was no call to immediately address these issues. Senior banking officials and CEO’s still have their jobs today. These could be at the helm of your own bank.

A proposal to ban finance professionals - that’s mortgage brokers like myself - from receiving loan trailing commissions for new clients from July 2020 will have repercussions for everyone.

What has been proposed will essentially reduce the level of competitiveness, and increase the cost to you as the consumer. You will have less choice, as more power will be handed back to the big four banks. Commissions currently paid for by the bank’s, will be passed on to the borrower, and see bank profitability increase. This is reflected in the share market following the announcement of the RC final report, with the majority of bank share prices increasing significantly. I find this very interesting!

As an industry professional with many years’ experience, I am feeling concerned as to how these recommendations will impact consumers. I feel it will likely lead to increased rates and less competition - which in my view is not a good thing, fees and charges will be driven up through the lack of competition, and I envisage a more complicated process to apply for loans.

Do you know that there are more than 16,000 brokers in Australia with 27,000 employees? Or that brokers make up almost 60% of market share of home loans funded?

That speaks volumes about the service we provide. Most brokers are classed as small businesses, trying to make a modest income, and they make an invaluable contribution to the local economy, providing local flexible employment options, sponsoring and financially supporting sporting clubs and charities etc.

Small businesses are the lifeblood of Australia’s economy. We are so lucky to have experienced finance professionals, not just here in Esperance, but across Australia as a whole. People really value what we do. Why risk changing a model which reduces competition and will likely cost you as the consumer? Banks will have greater opportunity to charge you directly and nobody will be working alongside you, looking after your own personal interests or providing an all-encompassing service.

Independent mortgage brokers and financial professionals offer you a level of support which in my opinion cannot be matched by the banks. Without a broker, you will be at the mercy of the large banks, their strict processes and their pricing. For example, an average broker would have a panel of 20+ lenders that they can utilise to meet your individual requirements.

In short, I believe the inquiry was needed to correct any misconduct and bring about reform, but the recommendation of banning commissions just does not make sense. I’m open to change and believe there are many other ways this can be achieved. I see too many potential repercussions and damage with this proposal.

However, all is not lost, you have the chance to voice your feelings and make a stand. Please support what is important to you! People power is an amazing gift, if we join forces to make our views heard, we have the ability to make a difference.

Your voice counts! Through your support, let’s show the government and the leaders of this country what is right for everyday Australians! I want to see all consumers have choice and be treated respectfully. I urge you to seek the advice of your mortgage specialist and support them. They are the experts that treat you as an individual and they are working for what is best for you not the Banks!

Oh, and by the way, it’s believed only one Broking firm was represented at the RC, and it just happened to be owned by a Big 4 bank…