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Mortgage Choice chief executive Michael Russell dismissed claims that bank representation on the share register of an aggregator or franchisor distorts mortgage broker lender recommendations.
Mr Russell’s comments come after a second round of submissions to the Financial System Inquiry addressed issues of vertical integration in mortgage broking.
“Unfortunately there continues to be far too much misreporting on this issue,” Mr Russell said.
“While it is true that a number of bank and non-bank lenders do have a stake in several aggregators and franchisors, in most cases they do not own the individual broker businesses that operate under these head groups,” he said.
“These individual broker businesses take great pride in always acting in the best interests of their clients, irrespective of who owns their aggregator or franchisor.”
Regional banks Suncorp, ME Bank, Bank of Queensland and Bendigo and Adelaide Bank have argued for increased transparency and better disclosure to ensure customers understand the level of broker independence.
In a combined second submission to the Murray Inquiry, the four regionals highlighted that there is currently no obligation on mortgage brokers to disclose the ownership structure of their aggregator.
However, Mr Russell appears to agree with one assertion by the regionals, saying that the perception that bank ownership distorts a broker’s recommendations often arises when the bank on the register of the head group elects to pay a higher level of commission, or lowers their aggregation fees, as an inducement for business.
The regionals claim that while they have “no firm evidence” that vertical integration is distorting the way brokers’ direct borrowers to lenders, there may be some means of increasing a broker’s remuneration without having to disclose it to mortgage customers.
“For example, where a broker has to pay a fee, or the aggregator retains part of the commission for utilising aggregator platform infrastructure, such as a computer system, this fee could be reduced or the full commission passed through to the broker if the broker originated a loan supplied by the broker’s bank owner,” they said.
While this practice does not guarantee brokers will send more business to that particular bank, especially given the value brokers place on their professional advice, it does place them in a perceived conflict, Mr Russell said.
Mortgage Choice has taken deliberate steps to avoid this perceived conflict with its brokers operating under a 'paid the same' philosophy, he added.
“While the Commonwealth Bank of Australia has a 17 per cent stake in Mortgage Choice, we believe the only choice that matters is the one that is right for the customer and that is why our brokers are paid the same rate of commission no matter which home loan the customer chooses, as long as it is a residential home loan with one of the 28 lenders on our panel,” he said.
“Our brokers recommend the home loan that is right for the customer after conducting a detailed financial needs analysis and a comparison of the features and benefits of the various home loan products offered by the 28 lenders on our panel.”
Mr Russell said he believes Mortgage Choice’s ‘paid the same’ philosophy remains unique in the mortgage broking industry.
His comments come after he hit back last week at claims made by Yellow Brick Road chief executive Matt Lawler that mortgage broking is a ‘sub-segment’ of financial planning.