Banking Royal Commission results

Capitalism will win in the end

 

We were all FHB's and part of the unsophisticated PPOR community once.

 

No new brokers will enter the industry.
Of the existing 27,000, I imagine over half will already be looking at a new career.

Without trail, brokers salary literally just got halved. I know people are saying it will introduce churn but with fees and hassles of refinancing not to mention credit crunch I see this very unlikely (at least nowhere near the required level).

Of the then Remaining I think a few will carve out a niche, maybe a few thousand. The rest will die out with time and this is based upon no trail let alone fee for service.

Obviously with the huge reduction in brokers A lot of others are going to lose jobs. Aggregators, industry body employees, lower level banking assessors (as they will be replaced by brokers needing a job).
A lot of referral partners also just lost a huge chunk of revenue as banks aren’t going to pay for leads.

And honestly I don’t think I’ve even scraped the surface. The fallout is going to be massive!
My mind is honestly blown how ANYONE thinks this is in the best interest of anyone except the Big4 and shareholders.

 

I was planning my annual euro trip and I thought I can definitely 'afford' to fly business class. But I thought of all the money I could save by flying economy instead.

 

If you have to think and rationalise about flying business you are probably streching and can't afford it in my opinion.


Every luxury in life can be rationalised as being a waste. Toyota instead of Lexus. Or a used car is even better.

I have had friends and families who's life were cut short. The money can not be taken with you. Egyptians tried.

 

But I can also buy a Porsche. Does that mean I should stop taking public transport and instead drive a Porsche?

And what about if I live a long life (or at least match the life expectancy of people like me)? Should I want to live a poor old life?

 

have a listen to this

Tom says the Banking Royal Commission has got one recommendation really wrong - Drive With Tom Elliott - Omny.fm

 

Surely the mortgage broking industry will contract massively. There will still be a place for good brokers skilled in structuring etc to service serious investors, who can see value in $2K - $4K fees, but the vast majority of people just will not pay these kind of prices.

The most value that brokers offer nowadays (for me at least) is understanding and advising on serviceability and likelihood of loan approval at the various banks, and preparing applications that have the best change of sailing through approval smoothly. Yes it's convenient to see a summary of different products and their features, but it's easy enough for your average consumer to compare interest rates and loan features on Canstar, etc. Much harder to understand which products and lenders you are likely to be approved for in your particular financial situation.

I suppose a quick churn model could be adopted similar to the tax return industry (H&R Block, etc) for the franchise broker chains, but this would require a huge increase in productivity to serve many more customers in the same amount of time to get fees down to what consumers are willing to pay out of pocket for the service.

I truly feel for the many good brokers on this forum who must be going through a very tough and uncertain time right now.

 

Good point, might need to give that some serious thought....

 

There are hidden features or I should say non-published lender policies that an average customer cannot find on Canstar or other similar websites such as how easy is to do an equity release, free desktop valuation, debt recycling, multiple offsets, loan splits, etc. Most importantly, Canstar and the likes cannot tell you the chance to get your loan app approved and how long should it take, will it exceed your finance clause deadline.

 

Another thing to note is that a mortgage brokers trail book is their business asset.

I imagine at the news alone the value of a trail book has just been halved if not more. This is some brokers Superannuation! Others opportunities to get out and change their lives...but now
I’m not sure any broker could sell their trail book right now. Even if they could what’s the value anymore? It would be lucky to be .5X I reckon.

Then after next year no more. So this means a brokers business becomes fairly worthless, ecspecially small operators. I know a lot of other businesses don’t have value when the main person exits but regardless it was I imagine a considerable driver for people entering and staying in the industry.

This really really is a sad time and I’m not sure people realize how many lives will be effected.
If it were hundreds of other industries people would be up in arms. For some reason brokers got painted with the same brush as the banks.

 

This a ridiculous situation, and Big 4 are now high fiving themselves.What a joke.The level of capture is unprecedent

 

^ agree Albanga. Except when you said 'for "some reason" brokers got painted' - looks to me like they must have been identified early on as the patsy/whipping boy for the whole thing and a decision made to throw them under the bus and leave the banks alone. It's hard not to suspect corruption when they clearly were not the source of the problem. The changes are worth billions in extra margins to banks and reduce competition sending borrowers back to the big 4 like the 80's where we all put on our Sunday best and go to the local branch and say "please" like Oliver twist. People will pay more interest, get less appropriate loan products and I daresay rents will rise on these changes over time too, so nobody wins except the big banks.

 

Look at it from another angle,most of the board that were in charge of the risk management teams prior to the RC are still there employed from what I asked at all the banks agm's before I was asked to leave from one AGM after asking that question ..CBA will pay a div of 2 bucks end of march and it takes a certain willpower and concentration to hold bank equities when they drop from $95.00 back to $65.00 over a few years ..

Just a simple question Deck,if you were a investor in a company that the face value drops 30% over a few years would you sell and run or just not worry about it?..

 

From a purely selfish aspect, the one issue which potentially irritates me is the proposal to annually negotiate a fee with an FP. I have my arrangements in place, I don't use an FP for investment advice (as far as I am concerened the operative phrase of Self-Managed Superannuation Fund is Self-Managed) yet now I could be in a position to effectively tick some bloody boxes merely to satisfy the concept of what somebody else thinks I should do.

Be nice if the legal buggers would get out of my life when I am completely comfortable with present administrative arrangements. Rather sick of having to tell myself every year I should consider insurance aspects when it's a single member fund. No account of the totality of my circumstances but that's the way it is.

 

very happy with RC targeting brokers. as an example my broker used to pester me if i move bank cause i got better deal with direct bank lending. Brokers job was nothing more than manipulating applications to get a loan cause they know the nuances of bank staff to get loans approved. Excellent job Hayne!!!

 

Peter, good post. You say 60% of your workload is after sales service. A point clearly not understood by the RC given their comments on trails.

 

Albanga, all of your posts are spot on.
Terrible situation. I have been in the industry for 13 years and well over 20 years when you include my time at one of the big 4.
I will be one of the ones to leave the industry and have already commenced planning.
While this will affect us brokers dramatically in all the ways you have stated, this is a backdoor way of eliminating a lot of second tier lenders and non banks.
By putting focus on the brokers with blatant lies, the damage to the second tier lenders etc will be able to take place while the focus is on the broker network. The broker network is the "distraction."
The public backlash would have been far to great if they targeted the banking institutions directly.
By focusing on the broker channel and basically saying what they want about it, the public will let it slide, as even though they'll have the inconvenience of having to go back into the branch network, they'll still be able to apply for lending when required. The backlash in this scenario is only from 200 or 300 hundred thousand people (brokers, families, aggregators, employees etc) rather than backlash the whole country if they targeted the lending institutions directly to look after the big 4.
This is corruption at it's finest
Hayne was the perfect commissioner for them because he'll be dead soon, but no doubt his family will be looked after handsomely.
Hayne is a criminal, but it will never be spoken about

 

Unfortunately it appears that RC has taken on the face value of what the CBA CEO has said during the interview. It is one of those things that I feel is often taken for granted in life. That is, when post sale service is carried out as part of customer care service it is more seen as obvious from consumer perspective. To that extent end consumers will unlikely to praise such so often flying under the radar.

Client portfolio annual reviews are a must for me personally so I can ensure client's are able to optimise their portfolio and ensuring it caters for their lifestyle circumstances such as starting a family etc. It's a bit like a yearly annual health check analogy. That all takes time and effort for brokers. It's really a shame that if trail is removed, brokers may be forced to focus more on how to churn deals rather than optimising/growing existing portfolio.

Cheers,
David