Yesterday the ABC ran a story on CBA and mortgage broker commissions:
CBA BACKTRACKED ON MORTGAGE BROKER PLAN FOR FEAR OF LOSING MARKET SHARE, ROYAL COMMISSION TOLD
This is why the banks have a low trust score….
CBA’s CEO yesterday sold the story that if they were the first bank (of the big 4) to reduce brokers commissions they were worried about losing market share. What they didn’t say is that they’re working with the other big banks to deliberately reduce broker commissions, knowing that they are eliminating competition that will leave customers once again at the mercy of the major banks to negotiate their own loans.
CUSTOMERS WILL BE WORSE OFF
Morgan Stanley research recently found that Westpac would report the largest profit increase if trail was removed (2.2 per cent), followed by Commonwealth Bank and ANZ (1.9 per cent) and NAB (1.3 per cent).
Brokers do come at a cost to banks however they’re significantly less than the cost of operating branches and come with the added benefit of loan applications being submitted by mortgage broking professionals that have higher levels of banking experience and year on year training and adhere to a higher level of compliance in many cases.
Morgan Stanley also found that broker upfront commission payments make up approximately 4.6 per cent of CBA’s overall costs, Westpac’s at 4 per cent, ANZ’s at 3.1 per cent and NAB’s at
2.5 per cent. A tiny amount given that 55%! of all mortgages are now generated by brokers.
Any suggestions that reduced broker commissions will be returned to customers is laughable. The banks' agenda is as simple as it is obvious, say sorry for all the past sins, seek to reduce
competition without brokers, and then double mortgage margins over the next five years resulting in a massive windfall to the major banks and their CEOs.
The fact is that all our clients get better advice, lower cost loan packages, and save thousands in the process without costing them one dollar. Because today we are paid a fully disclosed commission by all banks, which is the same amount so there is no conflict to recommend one bank over another, and we've never had one customer object. Yet this isn't the story the bank CEOs are selling the royal commission and the media.
If the banks are successful in reducing trailing commissions this could reduce the number of brokers in the industry and or wipe it out entirely leaving customers without any independent advice or choice of products.
Trusting the banks that they will reduce margins and improve service to customers because customer aren't using brokers and are going direct to them is like being time warped back into 1975 and hearing a CEO from a cigarette company telling kids that smoking is good for you and we all know how that ended...