Banking Royal Commission results

Might reduce the workload for the broker.

Perhaps broker does a fact find and then produces a proposal for a flat fee. Client then goes direct to lender.

What happens to the aggregator under fee for service?

 

I'm in Melbourne and there was some great press for mortgage brokers on both morning programs on 3aw. Neil Mitchell had the topic covered for a good 20 mins.

What I don't get is - have any consumers lost out to come out with this recommendation? I get it for Financial planners who reccomend their own product under their own licence (ie. AMP), however mortgage brokers provide a recommendation of at least 3 lenders - issue a credit proposal document saying how they are authorised and how they are remunerated and have access to say 30 lenders instead of 1. This gives more power to the banks and less for the end consumer. This will kill the non banks and reduce competition. A user pay model just won't work and this will lead to higher rates and greater profits for the banks.

I think consumers can see this clearly and these days, while it is so hard to get a loan, the value of the broker is higher - the skill of the broker is need to avoid a decline. Even MArk Bouris said this morning that 4 out of 10 of his loans end in decline. Thats pretty **** to tell the truth. I have only had two declines in the last 6 months - both NAB auto declines on application (no reason).

I guess the opportunity will be with a "squeeze" clients don't have the patience to deal with banks and pay the broker to avoid the headache, a broker model will need to be established that is profitable.

I doubt many brokers are making big money at the moment, I don't know how they will survive to tell the truth.

Cheers Ivan

 

Too late

 

I don't think Kierank is making a value judgement necessarily. Just saying that not all RC findings are followed through on.

 

Yes - borrowers are struggling to get their deposits, how are they to pay another couple of thousand upfront? Or are they supposed to borrow that too?

It is difficult to see why he thought there was a need to bring the costs forward and onto the borrower - and surely he could forsee that the likely outcome is not good for brokers and smaller financial institutions?

Blame Matt Comyn - remember the 1300 brokers making $1m/year? ref: Why CBA dumped its bold plan to stop paying mortgage broker commissions

 

Obvously others in the market agree:

 

Banking royal commission: Banks, AMP rally but mortgage brokers smashed

 

Loving my bank shares today. WBC up 8%! AMP up 9%! Rest up 4-6%

The market has given its verdict on the severity of the RC on banking profits loud and clear.

 

Roadrunner, you'd struggle to put together a vanilla in this day and age. Don't get me started with self employed.

May as well do our complex tax online and do away with accountants as well.

Please mate

 

Some of these points are quite fair IMO.

Over time as the mortgage process will move to an online model only. You've mentioned a way it could work above. Realistically a few more things need to happen before this works in full. The mortgage process needs to digitise, steps are slowly being taken in this direction over time. As this happens, the role of brokers will either evolve or cease to exist.

IMO all of this works out as a massive positive for the customer, as the experience will be faster, more efficient, cheaper & easier to interact with. At the centre of this is a better customer experience and outcome. It's why it'll happen over time.

Nonetheless, these are not of the considerations the RC had when framing their decision point. Their mandate was misconduct, not how technology can improve markets & credit allocation. Personally, it's quite disappointing that a massive review into misconduct has concluded with a recommendation to smash the broking industry. I can appreciate their reseaning, the concerns raised are quite legitimate. Unfortunately the solution presented involves brokers pretty much dying out as an industry and affordable choice for customers. Ideally this wholesale change would've come about from a more positive review about improving a customers experience, rather than a review into banking misconduct.

 

Yep (unless you are long)...

Finance sector ETF

 

Local Mortgage Broker Hospitalised After Being Thrown Under Bus By Royal Commission

 

People Committing Crimes Should Face Criminal Charges, Finds 14-Month-Long Royal Commission

 

That sums up the RC outcome nicely .

 

I guarantee not one single banking executive will face a sentence. Love the beetota

 

Spot on Rolf.

The RC recommendations are very anti competitive, and this is the problem of over-regulation. Over regulation is essentially protection for the big businesses who already have systems, processes and market share in place.

Free markets are a wealth creating, monopoly-busting machine.

Put slightly more cynically: these recommendations couldn't have been more perfect had the banks written the legislation themselves (which they may have). Consider:

- Banks no longer have to pay a referral fee
- Banks no longer have to pay a trail.
- The use of mortgage brokers is discouraged via the upfront fee. By default, the use of large banks directly by consumers is now encouraged.

Banks are very big winners out of this. And the one structural advantage consumers once had to give them some negotiating power - the mortgage broking industry - has been removed.

This reminds me of Gillards "mining tax" - where Rio Tinto and BHP joined with government to design the regulation. Over regulation always benefits the big boys who can afford it.

 

Do you think MOC--AFG are in the buy range?..

 

Exactly as what @John_BridgeToBricks posted.

When the Government spends $300M (from memory) of our money on the Royal Commission into Aboriginal deaths in custody, I want to see a lot of significant outcomes (not just a glossy report).

When the Government spends $75M on this RC, I want to see some significant impacts as well.

I don’t want to be negative but not too many of the 135 x RCs already completed have met taxpayers‘ expectations.

Sad but true

 

I agree with some on here that the FHB and unsophisticated PPOR community will be steered to the big 4, where they mostly rate shop anyway. Those with poor credit and low incomes from that mob may see a broker. The investors and financially savy buyers will still seek a broker and see the benefit in paying for it - which is really no different to other members of the team - FP, Accountants, BA etc. If you agree with this, I’d be interested to hear from the brokers what percentage of their business looks to be affected? What is the critical mass of clients for them as they see it.

Additionally, I foresee the broker shifting toward an advisor package deal to represent increased value. I honestly believe this is a positive for consumers as many arent harnessing a team of advisors. More companies like Empower Wealth (free plug because I love their podcast Property Couch!).