In response to the Financial System Inquiry report ASIC has started its review of mortgage broker remuneration and the impact remuneration structures have on the quality of consumer outcomes.
ASIC’s review formally commenced last week with the release of its final scope to industry participants. Input from the industry and consumer representatives in response to ASIC’s scoping discussion paper issued in February this year has been used to shape the final scope of the review.
Whilst ASIC recognises the final scope is not set in stone, the review will at this stage extend to all industry participants, including lending institutions, aggregation and broking entities, associated mortgage businesses and referral and introducer businesses and all distribution channels.
ASIC has confirmed that the review will be limited to remuneration arrangements associated with residential mortgage products and will not extend to less prevalent loan products such as reverse mortgages or construction loans.
Ownership structures including vertical integration and commercial alignment through equity stakes and licensing arrangements will also form a key part of the review.
A number of industry participants have come out in support of the review and the potential for consumers to benefit from improved consumer outcomes. However, the impact of any recommendations arising from the review in respect of a move from the existing remuneration arrangements, for example from a commission-based arrangement to fee-for-service, will be widely felt.
ASIC is due to report to the Government on the findings of its review by the end of 2016. Industry participants will be keenly watching this space.