ASIC’s review of broker remuneration called for the end of volume-based incentives and soft dollar payments. The report, released earlier this year, found that larger aggregators spend between $500,000 and $1 million each year on conferences and courses for their brokers.
One in five aggregators told ASIC that brokers were entitled to such courses based on home loan sales.
ASIC’s review found that soft dollar benefits — including loyalty programs and trips to the Caribbean, Los Angeles and Hawaii — are “widely used in the broker channel”.
However, since the release of the 243-page report in March, the mortgage broking industry has united, taken action to raise standards and is eager to self-regulate.
Speaking to Mortgage Business, NAB’s general manager of broker distribution, Steve Kane, said that aggregator conferences are already changing in line with ASIC’s recommendations.
“We get proposals to support aggregators under the term ‘sponsorship’, but this is really now targeted very much towards education,” Mr Kane said.
“All of them are saying they need us to support them not just with money but with information, with technology support where we can and providing them with insights from raw data so they can use that in the way they manage their relationships with brokers.
“There is a real change. Three or four years ago, it was ‘please give me a bucket of money and I will spend it how I think’. Now, aggregators are saying, ‘We want to do this education program. This is what we are setting up in relation to excellence. This is what we are setting up in relation to risk, or to training and managing customer relationships.
“It is a very, very different environment today than it was three or four years ago. That is a very positive thing.”
ASIC’s recommendations have largely been supported by the mortgage broking industry. However, concerns have been raised over the impact of increasing regulation.
The ABA-funded Sedgwick review, in particular, seemed to muddy the waters. Industry bodies like FBAA and the MFAA were quick to reject some of Sedgwick’s proposals on remuneration reform.
ASIC’s recommendations are now in the hands of the federal government, which will make a response in the coming months.
“We were all very concerned when NCCP came in,” Mr Kane said. “What it did was strengthen the market. It is important that we self-regulate. The industry will be in a much stronger position in 12 months.”