A leading financial services lawyer believes commissions in mortgage broking and financial planning are beneficial to all.
It is a false assumption that commissions paid to brokers and advisers by the banks leads to incorrect advice, Gadens partner Jon Denovan told Mortgage Business.
“It’s demonstrably false because of situations where the big problems we have seen like Storm Financial – that wasn’t a factor of commissions,” Mr Denovan said.
“That was a factor of them building their business,” he explained.
“There is no evidence at all that I’m aware of that commissions are the problem, yet it is just an easy assumption and as soon as you say that commissions are the problem and make the user pay, then immediately the user stops using the service all together.”
Mr Denovan’s comments come after a number of industry figures raised concerns about conflicted remuneration in mortgage broking.
“Commissions are a good thing,” he said.
“It spreads the cost of service for the customer and there are sufficient checks and balances to make sure the vast majority of people don’t do the wrong thing.”
There will always be people who do the wrong thing regardless of commissions, Mr Denovan said.
“Those who are going to do the wrong thing are going to take back-handed commissions anyway, so banning commissions isn’t going to stop the payment of commissions, it will just move them underground.”