Royal Commission Fiasco
If you watch any source of media, you've undoubtedly heard of the Royal Commission fiasco that our country is currently enduring.
The Royal Commission was introduced to bring the finance industry back in check and make sure it's best interests lies with Australian consumers as opposed to taking advantage of them.
The major topics discussed included financial planning, mortgage broking, self managed super and larger sections of the banking segment to name a few.
The Royal Commission visited the mortgage broking sector a few months back. For the most part, the industry was deemed beneficial to Australian consumers. The Royal Commission visited fraudulent broker cases but the industry remained unscathed as fraudulent brokers represent a very small percentage.
Now the Royal Commission is currently targeting the big 4 banks which made headlines over the last two weeks. You may have seen CBA in particular who were quick to pass the buck and blame brokers and financial planners for their wrong doings as opposed to owning up to their mistakes.
CBA do not support the broker channel and are trying to use the Royal Commission to their advantage, here's how:
Brokers drive competition between banks which is primarily why interest rates continue to remain so low. Brokers now introduce more than 55% of all home loan applications in comparison to customers going directly to the bank. This is welcomed to smaller banks, credit unions and other lending platforms who lack the ability to compete against the big 4 banks. In some cases, 80% of smaller lenders home loans are originated by mortgage brokers, that's a huge number.
These figures concern the big 4 banks as their market share has reduced over the years which threatens their profits and stake holders long jeopardy.
Banks pay brokers a commission upon successful finalisation of a home loan. Last week CBA proposed that commissions be abolished and brokers should charge Australian consumers for their services which made media head lines nation wide.
This is truly a ploy to regain their lost market share. Abolishing commissions and introducing fee for service will kill the mortgage broking industy, reduce appetite for a consumer to utilise the services of a broker and thus reducing overall competition. Exactly what the big 4 banks want, so they can continue to dominate and overpower the market.
Just some food for thought the next time you hear anything Royal Commission related or some clarity for those who don't understand what's going on.
I'm proud of what I do and I'll continue to support and assist all my customers in any way possible, I work for you not the banks.