$4.95 POST APPROVED PP255003/06906
ISSUE 7.09 May 2010
Broker commissions under threat Government bans
advisor commissions Commissions paid to mortgage brokers once again appear to be under threat but this time it is the government that has the industry fearing for its survival, not the big banks. The federal government recently banned commissions for financial advisors, reasoning that the incentive leads to bad advice, leaving some in the industry to question whether mortgage brokers may be the next target. “If the government is consistent, then eventually there will be a ban on commissions for brokers,” said Peter Connolly on the Broker News website. “Different lenders provide different commission structures for brokers now, so the same logic applied to financial planners – ie, bad advice due to getting higher commissions/ self-interest, etc – can be equally applied to brokers.” Federal Minister for Financial Services Chris Bowen cited ASIC research in announcing the clamp-down on financial planning commissions. “As ASIC found in 2006, poor financial advice is six times more likely [to arise] where commissions are paid in order to get various recommendations made.” He said that a similar initiative is underway in the UK. However, MFAA CEO Phil Naylor said the situation is completely different in the mortgage broking industry. Whereas a financial planner
Tax reforms will benefit brokers The Rudd Government’s proposed tax reforms will be a gift for small business, with company tax rates falling by 2%. But will the initiative eventuate? Page 4
>>
From low to prime Non-bank lender Provident Capital has added prime products to its offerings, providing brokers with an avenue to assist lenders with credit blemishes Page 10 Chris Bowen
sources funds from the consumer, a broker sources funds from a lender, delivering them to a consumer. “We would argue that the two circumstances are quite different,” Naylor said. “We think the argument that there is some linkage between mortgage brokers and financial planners is flawed.” ASIC will be charged with overseeing the mortgage broking industry under new regulations, and this has increased industry concern that it will apply the “poor financial advice” argument to
brokers. “With ASIC taking control of mortgage broker licencing, it is obvious that every aspect of our industry will be assessed, including remuneration,” said the National Finance Corporation’s Warren Schrodter. “One just hopes that both ASIC and the Labor government understand the key differences between superannuation commissions and home loan commissions.” page 19 cont.
>>
>>
Doing it differently Brokers who want to take their business to the next level are advised by Kenneth Marks, author of the Handbook of Financing Growth, to review their strategy first Page 20
>>