Tag: Mortgage Brokers

Which Banks Are Changing Broker Commissions Fastest?

From Mortgage Professional Australia.

The latest update on bank reform has revealed the slow and varying progress made by banks in changing broker commissions.

Ian McPhee’s report, commissioned by, but independent of the Australian Bankers Association, asked banks how far they had implemented the Sedgwick Review’s recommendations. Stephen Sedgwick called for an end to volume-based incentives and for banks to ensure remuneration was not directly linked to loan size.

Macquarie Bank, My State Bank, and Bank Australia were amongst the furthest ahead banks, with ‘substantial alignment’ of their broker remuneration to Sedgwick’s recommendation. Only Qudos Bank was fully aligned with the recommendations.

Conversely, Commonwealth Bank’s broker remuneration and governance arrangements were ‘not aligned – planning and/or some implementation progressed’. Work on reforming remuneration had not started at Bank of Queensland, and work reforming governance had not begun at Bank of Sydney.

Of the other majors, ANZ, NAB, and Westpac reported partial implementation of Sedgwick’s reforms.

An imperfect scorecard

McPhee himself notes that “it is not appropriate to draw early conclusions on the status of individual banks’ implementation programs.”

For a start, banks self-reported their own progress with minimal oversight from McPhee. Furthermore, banks’ reporting cycles vary; a bank that reports at the end of the financial year may appear further advanced than a bank that reports at the end of the calendar year, for instance.

According to McPhee “the Sedgwick Review recommendations relating to banks’ arrangements with third parties are least progressed, with a number of banks reporting that they are still in the planning phases. This reflects the time taken to establish the Combined Industry Forum and agree industry-wide responses.”

The Combined Industry Forum set out its changes to remuneration in December.

Credit conditions ‘the tightest they’ve been in 15 years’

From The Adviser.

Members of the industry have challenged the assertions of a professor of economics regarding the state of the current lending market and broker remuneration, with one broker stating that it’s harder than ever to get a loan.

In an opinion piece for The Australian Financial Review, a professor of economics at UNSW Business School, Richard Holden, warned that Australia is “blithely repeating” the US housing market “mistakes” that led the housing “implosion” and global financial crisis.

According to Mr Holden, there are several “markers” that point to this, including lenders that “let you borrow a lot compared to your income”, “risky” mortgage structures and, most notably, mortgage broker commissions and incentives.

The professor wrote: “A remarkable 55 per cent of all new mortgages come through a broker. And those brokers get paid based on how many dollars of home loans they write.

“Their incentives are thoroughly misaligned with both borrowers and lenders — just as was the case in the US a decade ago. There are also high-powered incentives for those originating loans with banks, creating more moral hazard.”

The claims have been dismissed by the executive director of the Finance Brokers Association of Australia (FBAA), Peter White, who told The Adviser that he believed Mr Holden’s analysis “shows absolute ignorance, to the nth degree, of what actually happened in the US. It had nothing to do with brokers. Brokers are a distribution channel. What caused the US GFC was that the wholesale corporate bond market was getting greedy on low-doc lending and then had bonds that they wouldn’t sell. It had nothing to do with brokers whatsoever.”

Mr White added that broker remuneration and incentives had been the subject of several reviews in recent years, and that the professor’s comments, therefore, “don’t make any sense whatsoever in the context of the current market”.

Touching on Mr Holden’s comments about there being a “moral hazard”, the FBAA head said: “Australia is globally known as being one of the most regulated countries in the world and it ensures that any potential risk is mitigated and looked at to ensure that there is no moral question.

“Bonus incentives have been looked at to try and remove any risks, and that is what we’ve done. These are things that were done in the past, it’s not current. So, he is not up to speed with what is happening in the current reality of the current market.

“Drawing these analogies to the US market and pointing some line to brokers and their payment and incentives is just garbage.”

Several brokers also contacted The Adviser to voice their opposition.

Credit conditions ‘the tightest they’ve been in 15 years’

Speaking to The Adviser, Smartline mortgage broker Ian Simpson said that he “deeply disagreed” with a number of Mr Holden’s assertions.

Mr Simpson said that the comparison to the US subprime market was “wrong” because low-doc lending pre-subprime in the US constituted more than half of lending and did not require verification of income, whereas Australia has less than 5 per cent low-doc loans, and it largely used alternative income verification.

He continued: “I completely refute both of the broker allegations. There has been an exhaustive review and analysis of the whole broker remuneration model etc and what they have discovered is that brokers actually have very little influence on the amount a borrower can borrow. In 99 per cent of cases, we look at a customer’s scenario, a borrower’s situation and assess income, how much deposit they have, fixed liabilities etc and work out, based on their current situation, how much they could borrow. But the amount that the client borrows is not dictated by us; it’s dictated by their situation.

“Within the broker community, I’d say that 90 per cent of brokers have a long-term concern of their clients (in every industry around 10 per cent do), because if you don’t have a concern for the long-term health and welfare of the client, you don’t actually have a business. And given all the levels of compliance and continued education and scrutiny, you’re not thinking about getting a few extra dollars in commission now at the detriment of your client. Your client needs always come first, and their best interests come first, because our business are only built on happy clients and long-term relationships.”

The Smartline broker added that the lending market, rather than being loose, was actually tighter now than he had seen it for more than a decade.

“Australian lending standards are probably the tightest lending standards that I have seen in my 15 years of being a broker,” Mr Simpson said.

“I’ve never seen such a gargantuan gap between interest rates and servicing rates, but that is not necessarily a bad thing. Borrowing money is hard. Banks are asking more questions than they ever used to ask — it’s a daily challenge getting loans approved.

“Credit conditions are tight, the tightest I have seen them ever. And now with the Royal commission, banks are going to be asking more and more questions, not less and less.

“So, from a remuneration point of view, we’re working as hard as we ever had for our money. And from a systemic point of view, the market is healthy, and if the regulators weren’t, there then the housing market would be putting the financial system at risk.

“Just because the US housing market went up and then had an almighty housing crash does not mean that we are going to have one here in Australia. I don’t believe that at all, considering the house price growth in the last 12 months has risen [by] 3 per cent. That’s hardly a market out of control.”

More lenders to change their commission models

From Australian Broker.

Other lenders are expected to amend their remuneration structures following ANZ’s changes to its upfront commission model, with major banks to lead the way.

ANZ will pay brokers an upfront commission of 62.5 basis points effective 1 February 2018, up from the current 57.5 basis points.

Under the new structure, ANZ will no longer give brokers volume-based incentives, following the Combined Industry Forum’s proposal to stop the payment of volume-based bonus commissions and campaign-based commissions in response to the ASIC and Sedgwick reviews.

ANZ’s trail commission structure remains the same.

While ANZ is ahead of the curve, other lenders are likely also re-examining their own broker remuneration models in the wake of the CIF reforms.

“It’s indicative of what’s going to happen – the pressure as a result of the ASIC inquiry to remove soft benefits and incentives, particularly volume-based incentives,” said Martin North, principal at Digital Finance Analytics.

He believes the change in ANZ’s upfront commission model is a good move because it streamlines the structure and makes it clearer.

“The problem with volume incentives and soft benefits is that they raise complexity and confusion in the minds of potential consumers, on whether they are getting the best advice they could get and whether the advice is in some way being influenced by financial incentives. Anything that can be done to remove that ambiguity is a good thing,” he said.

While some brokers believe it is still too early to tell how further changes to broker commission will affect their business, they welcome such changes if they will help improve customer experience.

“Ultimately, if the reforms help deliver better customer outcomes, then that is a good thing,” said John Flavell, CEO of Mortgage Choice.

David Meadows, client services manager at Astute Financial, said further regulatory reviews and changes to remuneration structures will affect profitability, but that such changes are not entirely bad. “Increased regulatory reviews are happening across the financial services industry,” he said. “We are not the only ones going through them.”

For now, ANZ’s tweaking of its commission system is not believed to be a disincentive for brokers. It in fact represents a slight increase in broker commission, said North.

“My understanding is that not very many brokers would have gotten the higher commission previously because it was volume-incentivised.”

ANZ Tweaks Mortgage Broker Commissions

From The Adviser.

ANZ has advised mortgage brokers that its upfront commission structure will change from next month, by removing the volume incentive.

In a note to brokers obtained by The Adviser, ANZ’s general manager of broker distribution, Simone Tilley, explained that the bank has recently completed a comprehensive review of its commission structure.

“As a result, I wish to advise that ANZ will make changes to its upfront commission structure, effective 1 February 2018,” Ms Tilley said.

“We believe that the planned changes will provide a simpler commission structure which delivers on ANZ, aggregator and broker requirements and is more transparent for the customer.

“There has been no change to ANZ’s current trail commission structure.”

From 1 February 2018, ANZ will pay an upfront commission of 62.5 basis points.

Ms Tilley explained that this base upfront rate does not include any additional LVR adjustment component calculated and payable under the new structure.

The bank currently pays an upfront commission of 57.5 basis points. However, brokers writing more than $100 million with the group receive an upfront payment of 62.5 basis points.

The new change removes the volume-based incentive from ANZ’s commission structure, something that was recommended by the Combined Industry Forum in response to the ASIC and Sedgwick reviews.

ANZ continues to pay the lowest upfront commissions of the big four banks.

ASIC’s report into broker remuneration noted that volume-based and campaign-based bonus commissions that supplement the standard commission model can create potential conflicts of interest and “higher risk that brokers will place customers with lenders for the wrong reasons”.

As such, the Combined Industry Forum outlined that by the end of 2017, industry participants “should respond to ASIC’s recommendation” to cease these payments.

The Combined Industry Forum report, which was released on 11 December, revealed that there were 38 groups collaborating on the response, including the four major banks, five industry associations, aggregators, brokerages and consumer group Choice.

NAB refunds $1.7 million for overcharging interest on home loans

ASIC says National Australia Bank Limited (NAB) has refunded $1.7 million to 966 home loan customers after it failed to properly set up mortgage offset accounts.

Following customer complaints, NAB conducted an internal review which found that between April 2010 and August 2017 it had not linked some offset accounts to broker originated loans. This resulted in those customers overpaying interest on their home loan.

NAB has refunded affected customers so that they are only charged interest that would have been payable had the mortgage offset account been properly linked from the commencement of the home loan.

‘Consumers should be confident that when they sign up for a home loan they are receiving all of the benefits that are being promoted,’ Acting ASIC Chair Peter Kell said.

‘Where there are errors there should be timely and appropriate action to ensure that consumers are not any worse off as a result of the mistake.’

NAB reported the issue to ASIC. NAB has also engaged PwC to review the remediation approach and to ensure NAB’s compliance systems will prevent a similar error from occurring in future.

NAB has commenced contacting and refunding affected customers.

Background

An offset account is a savings or transaction account that is linked to a home loan account. Any money in the offset account reduces the amount of interest payable on the linked home loan. For example, if the outstanding balance on the home loan is $300,000 and there are savings of $50,000 in the offset account, then interest is only payable on the difference ($250,000).

In this case, NAB failed to link some offset accounts to home loan accounts, which meant that money held in those offset accounts did not reduce the interest payable on the home loan accounts. As a result, consumers paid more in interest than was required.

NAB also conducted a broader investigation which found that the issue only applies to broker originated loans.

NAB will also remediate customers who had an offset account during the relevant period but had repaid their home loan before 2017.

NAB said:

In February 2017, NAB commenced a review into how it processes offset account requests for customers who apply for a home loan through a Broker, looking back to 2010.

This review found that some customers may not have had their offset account correctly linked to their home loan, and that these customers may have consequently paid additional interest.

We sincerely apologise to our customers for this, which was due to administration errors.

All of the customers identified through this review with an open account have been contacted and received refunds. They represent 0.73% of the total number of offset accounts established through our Broker channel since 2010 (approximately 178,000).

NAB advised ASIC about this matter earlier this year, and, over the past 12 months, has implemented a number of measures to improve offset origination processes, and enhanced the ability for customers to review their offset arrangements themselves.

AFG Highlights The Number Of Mortgage Broker Related Investigations

AFG has today called on the banking Royal Commission to recognise the significant inquiries that have already been conducted into the mortgage broking sector and the important role mortgage brokers play in the Australian lending market, as the government outlines the inclusion of mortgage brokers in the scope of the banking Royal Commission.

“The mortgage broking channel accounts for more than 53% of the Australian lending market so it is unsurprising that we are in the mix, however 2017 has also been marked by significant regulatory scrutiny of our industry,” said AFG CEO David Bailey.

“The ASIC Review of mortgage broker remuneration and the ongoing Productivity Commission inquiry into competition in the financial system have both looked at the structure of the mortgage broking sector.

“We are confident Justice Hayne will recognise the unprecedented data collection process conducted by ASIC in their Review of mortgage broker remuneration has thoroughly examined our industry.

“The ASIC report recognised the important role that mortgage brokers can play in promoting good consumer outcomes and strong competition in the home loan market and we are confident any other examination of our sector would find the same,” said Mr Bailey.

The Combined Industry Forum (CIF), made up of representatives from across the mortgage industry, has submitted a report to government that outlines a package of reforms to address the proposals made in the ASIC review.

“The Productivity Commission is also undertaking a significant examination of the competitive landscape and mortgage brokers are a key lynchpin in providing that competition.

“The Royal Commission, and the industry as a whole, needs to focus on how competition can be further improved and this should include the impact the government guarantee has on competition.

“Ultimately, the findings of this inquiry should assist the government to promote a competitive and stable financial industry that contributes to Australia’s productivity,” said Mr Bailey.

“The mortgage broking sector provides vital competition to deliver on that aim.

“AFG has 45 lenders on its panel with more than 37% of borrowings going to lenders other than the four major banks, and we remain committed to ensuring choice and competition remains for Australian consumers.

“This competitive tension ensures consumers continue to have choice and most importantly benefit in terms of home loan price and service because of the service brokers deliver on a daily basis across the Australian lending market,” he concluded.

Brokers to be included in royal commission

From The Adviser.

The Governor-General has now issued the Letters Patent to the Honourable Kenneth Madison Hayne AC QC, formerly a judge of the High Court, establishing the royal commission.

Notably, the Treasury outlined that the Letters Patent require the Royal Commission to inquire into the conduct of financial services entities, “including banks, insurers, superannuation trustees, holders of Australian financial services licenses and intermediaries, such as mortgage brokers”.

Intermediaries between borrowers and lenders have been added following the government’s consultation with the appointed Commissioner on the draft Terms of Reference, which were released earlier this month.

The royal commission will examine allegations of misconduct or conduct which falls below community expectations. The commission will be focused on identifying ways to ensure that Australia’s financial system continues to work efficiently, effectively and in the interests of consumers.

Commissioner Hayne is authorised to submit an interim report to the Governor-General no later than 30 September 2018, and required to submit a final report no later than 1 February 2019.

“The financial system plays an important role in the lives of all Australians and we encourage all interested parties to engage with the royal commission,” the Treasurer Scott Morisson said.

“The Government has already taken comprehensive action to deliver better outcomes and protections for banking and financial services customers.

“This includes moving to establish a new one-stop shop to resolve customer complaints; significantly bolstering the powers and resources of the Australian Securities and Investments Commission; creating a framework to hold banking executives accountable for their actions; and boosting banking and financial services competition.”

CBA to Change Mortgage Broker Commission Structure

From The Adviser.

The Commonwealth Bank of Australia expects to have the CIF-recommended changes to broker commissions instated “ahead of 30 June” next year, according to its general manager for distribution strategy and execution.

Speaking to The Adviser following CBA’s announcement that it would no longer accept accreditations from new mortgage brokers with less than two years of experience (or from those that only hold a Cert IV in Finance & Mortgage Broking), CBA’s general manager for third-party banking, Sam Boer, and Matthew Dawson, general manager for distribution strategy and execution, revealed that they expect to change broker commissions next winter.

Mr Boer and Mr Dawson both welcomed the Combined Industry Forum’s reform package, which was released last week (and to which Commonwealth Bank was a contributor) and included recommendations that lenders pay brokers commission on a utilisation basis (i.e., based on facility limit drawn down by the customer and, in cases where the loan has an offset account, on the amount drawn down net of offset account balances).

General manager Boer said: “The whole industry got behind that one and we thought it addresses the concern raised around the potential conflict of interest and we’re very much supportive of that and working through our solution with our business partners on how we might go about implementing that in the new year.”

Mr Dawson added: “We are still working through the how of the commission changes, but we expect that we will still have it implemented ahead of 30 June.”

The CIF reform package states that it expects the commission changes to be implemented by lenders by “end 2018”.

Changes to CBA accreditation for new brokers

Last week, the major bank revealed that it would be making major changes to the way it accredits new brokers.

From “the first quarter of 2018”, new mortgage brokers will be required to meet new minimum education standards to be able to write Commonwealth Bank loans and demonstrate a commitment to professional development and on-the-job experience.

For CBA accreditation, all new brokers will soon be required to meet the following standards:

– Hold at least a Diploma of Finance and Mortgage Broking Management

– Have at least two years’ experience writing regulated residential loans

– Be a current member of either the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA)

– Be a Direct Credit Representative or employee of an approved Aggregator/Head Group or Australian Credit License (ACL) holder

Mr Dawson told The Adviser: “We will absolutely be building a training framework and ongoing professional development framework as part of the rollout of the new strategy coming in to ensure that the brokers we’re partnering with feel assured and comfortable when they are sitting down in front of a customer to have really deep conversations around appropriate products for them.

“We will be providing that and equally working with the head group programs to ensure that the head groups that have their own professional development programs… that we support each other…. We provide content for their platforms and, where appropriate, we will rely on their platforms as a means of us getting comfort over the professional development of brokers.”

Mr Dawson continued: “I think, for us, this has been about working with the [Combined] Industry Forum and we have played a key lead role in that.

“It has been really important for us, and we are really supportive of the industry forum and the consultation process that we ran in terms of the engagement with brokers.”

He revealed that the bank surveyed 12,000 brokers in July and got nearly 2,000 respondents.

“We’ve had focus groups with many brokers right throughout the country over the last couple of month. We’ve met with every head group. This has been, for us, all about residential and making sure we support a robust industry and support the longevity of the industry.”

CBA to introduce major accreditation changes next year

From The Adviser.

Commonwealth Bank has announced that, from next year, it will no longer accept accreditations from new mortgage brokers with less than two years of experience or from those that only hold a Cert IV in Finance & Mortgage Broking.

Speaking to The Adviser on Thursday (14 December), CBA’s general manager for third party banking, Sam Boer, and executive general manager home buying, Dan Huggins, explained that the bank would be bringing new benchmarks for mortgage brokers “designed to lift standards and ensure the bank is working with high-quality brokers who are meeting customers’ home lending needs”.
As part of the reforms, from “the first quarter of 2018”, new mortgage brokers will be required to meet new minimum education standards to be able to write Commonwealth Bank loans and demonstrate a commitment to professional development and on-the-job experience.

For CBA accreditation, all new brokers will soon be required to meet the following standards:

– Hold at least a Diploma of Finance and Mortgage Broking Management

– Have at least two years’ experience writing regulated residential loans

– Be a current member of either the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA)

– Be a Direct Credit Representative or employee of an approved Aggregator/Head Group or Australian Credit License (ACL) holder

Cert IV has ‘served its purpose’

Speaking of the changes, Mr Boer told The Adviser: “I actually sat down and reviewed a Cert IV for a friend of mine and looked at the process, and I think that while the Cert IV has served its purpose, with the new standards and expectations that are on us (which have been highlighted through the [ASIC and Sedgwick] reviews and through the Combined Industry Forum reform package), it’s time that we need to look at and set new benchmarks.

“So, that is what we feel is appropriate for the brokers that we want to partner with, to ensure that we are delivering those great customer outcomes.”

Mr Huggins added: “We want to ensure that customers feel confident that mortgage brokers have achieved that minimum standard of education and they can be confident in the advice or the guidance that they are seeing — because home loans are complex products and we want to make sure that customers get good outcomes.”

The executive general manager for home buying continued: “Brokers have done a fantastic job of supporting the industry and supporting great customer outcomes and we want to make sure that that continues for new entrants to the market.”

Two-year requirement

When asked why the decision has been made to only accredit new brokers with more than two years of residential loan writing experience, Mr Huggins said that the decision came down to the quality of loans written.

He told The Adviser: “The data that we have seen on the back book shows that there is a clear correlation that those that are more experienced (and those that are writing more loans) provide better customer outcomes, be they either the ongoing performance of the loan, the ongoing performance of the customer, and adherence to responsible lending as well.”

Mr Boer highlighted that there is a “huge amount of turnover” with new brokers, which he said was a “clear indication that these people need support”.

The general manager for third party banking continued: “They need more training, they need more investment to ensure that they are successful and, of course, with the increased complexity now and expectations on meeting responsible lending, we need to make sure that our brokers are meeting those standards and doing it right.

“So, it is very difficult for somebody without any financial experience, we believe, to be able to meet those standards. And therefore, we need to support, embed and ensure that they have that minimum level of capability.”

When asked whether new brokers coming from financial backgrounds (such as ex-bankers) would also be subject to the two-year requirement, Mr Boer said: “This is really about experience in sitting in front of customers and actually discussing mortgage products. But it’s not the only requirement that we have focused on. There is the education standard as well, which is also a very important part of the requirement.”

Aussie brokers to be held to same standards

Mr Boer emphasised that the new accreditation process holds “the same rules for everyone”, and that CBA-owned brokerage Aussie would also be subject to the same accreditation changes.

He told The Adviser: “It’s the same rules for everyone. We are investing with all our strategic business partners to ensure they meet the new standards.”

“We believe that [the changes] are in the best interest of consumers and the industry alike.”

Accreditation changes form aim to support Combined Industry Forum reform package

The accreditation changes for new brokers come off the back of the Combined Industry Forum’s reform package, which was released this week (and to which Commonwealth Bank was a contributor).

According to Mr Huggins, the new changes form part of CBA’s new mortgage broking model and “long-term commitment” to the industry.

“As a leading home lender we recognise mortgage brokers as a key channel for customers who are looking to purchase a home, and we have been working with the industry forum to find the right balance to ensure the best customer outcomes,” Mr Huggins said.

“Our new standards follow extensive consultation with the brokers, and are another example of our commitment to delivering the recommendations of the Sedgwick Report and ASIC review well before the 2020 deadline.”

Mr Boer added: “We’re committed to the process around the industry reform package – it is significant amount of change with quite a bit of challenge and a lot of investment required by industry. At CBA, we are making a huge investment to support the industry and ensure we are delivering on those standards.”

All new accreditations on hold

CBA said it would work closely with brokers who meet these requirements during the accreditation process, including conducting interviews and providing support with professional development plans.

The bank expects to launch the new process in the first quarter of 2018, with all new accreditations on hold until then to ensure the new process is implemented effectively.

In addition to the updated accreditation standards, CBA is also reviewing non-monetary benefits provided to brokers to ensure they support good customer outcomes; improving the value proposition for accredited brokers; and rolling out the industry’s proposed changes to commissions and KPIs. These changes will be in line with the principles announced in the CIF package, and further details will be released in the new year.

Mortgage Brokers To Be Assessed On “Good Customer Outcomes”

An excellent piece from Sam Richardson at MPA.

For the first time in mortgage broking history, a ‘good customer outcome’ has been defined by the industry.

The Combined Industry Forum created the definition as part of wider governance reforms, in response to ASIC’s Review of Mortgage Broker Remuneration.

The CIF defines a good customer outcome as when “the customer has obtained a loan which is appropriate (in terms of size and structure), is affordable, applied for in a compliant manner and meets the customer’s set of objectives at the time of seeking the loan.”

Additionally, lenders will report back to aggregators on ‘key risk indicators’ of individual brokers. These include the percentage of the portfolio in interest only, 60+ day arrears, switching in the first 12 months of settlements, an elevated level of customer complaints or poor post-settlement survey results.

MFAA CEO Mike Felton, who took part in the CIF, told MPA that the definition “it does hold the industry to a higher standard in terms of saying appropriate versus ‘not unsuitable’, but in reality there has been so much change in responsible lending I don’t think it’s going to make that much difference to their current behaviours.

“The regulator has done a lot of research in this area, we are just articulating it…the first time it’s been articulated.”

Not legally binding…yet

According to Felton, the good customer outcome definition will not be applied retrospectively to loans and is not currently legally binding, but will be subjected to an industry code which gives teeth to the reforms.

This has come as a disappointment to consumer advocates, such as CHOICE, which wanted brokers to be legally required to act in the best interests of consumers, in common with financial planners.

The intention of the Combined Industry Forum, however, is for the definition to form the basis for a new system of governance, and become part of licensing conditions. This process of governance will not be in place until 2020.

The first step is for every individual broker to be issued with a unique identifier number, that stays with them throughout their career. MFAA boss Felton told MPA that the being able to track individual brokers would help make governance ‘data-driven’.

Insights from tracking could “provide direction to your monitoring; file monitoring, surveys, mystery shopping. That in turn drives remedial training, education and outcomes, and then reports back to continually improve.”

Felton describes the governance framework as “the centrepiece, the absolute glue, in the reform package.”

Disclosure to customers

Not only will the industry collect far more information about itself, it will also make that information public.

By the end of 2018, brokers will be required to publish to customers the numbers of lenders used in the previous financial year, in addition to the top six years and the proportion of business going to them.

Aggregators will need to provide to ASIC on the spread of lenders being used by brokers, such as brokers using less than 3 lenders or more than eight.

The Combined Industry Forum also calls for lenders to provide ASIC information on the “weighted average pricing of home loans in the previous financial year across their different distribution channels using various standard scenarios.”