Shayne Elliott appeared before the House of Representatives Economics Committee, which is conducting a review of Australia’s big four banks, on Friday. He was pressed on whether Australian brokers should adopt a “fee for service” model instead of the current commission system.
Elliott said mortgage advisers “play a really important role in the market” and stressed “more than half of all mortgages that are originated in Australia come through brokers, so consumers like the service”.
He said: “I think the [broking industry and regulators] can sit down and consider improvements to that model, but as of today, we think they perform a valuable role that consumers actually prefer and choose to increase the amount of business they give to brokers every year.”
Elliott warned a move to replace commission with a fee for service could have “potentially unintended consequences” on the market.
MP Matthew Thistlethwaite, deputy chair of the Committee, argued lawmakers needed to introduce new legislation as brokers did not always get their clients the best deal: “Someone that has expertise will use that expertise to shop around on behalf of their client to get them the best deal. But it appears based on the evidence that has come out of the [financial services] royal commission that it doesn’t always happen.”
“We would all hope that they would act in the best interest of the customer, but that’s the problem — they don’t, and that’s where we have to step in and regulate,” Thistlethwaite added.
ANZ’s Elliott responded: “I think it can be a problem; I’m not sure it’s the problem. I think that most brokers are decent, honourable people who do the right thing for customers.
“Most brokers have a lifetime relationship with those clients, not just transactional, but I do think there can be improvements there around that, [and] I don’t doubt that for a second,” Elliott added.
Elliott’s time in front of the Committee followed Commonwealth Bank of Australia’s Matt Comyn, and Westpac’s Brian Hartzer. National Australia Bank CEO Andrew Thorburn is due to face the Committee on Friday.
