Ross Greenwood speaks to the Finance Brokers Association of Australia Managing Director, Peter White, the Commonwealth Bank has suspended its plans to sell off its wealth management business and mortgage brokerage businesses, despite recommendations from the royal commission.
Ross Greenwood: Going back to when the Royal Commission was handed down. Then subsequent to that a weeks or so later I spoke with the boss of the Commonwealth Bank, Matt Comyn. He said what had happen was that the Commonwealth Bank had made plans to sell off significant parts of their wealth management business including their mortgage broking businesses. Now, bear in mind the Commonwealth Bank owns Aussie Home Loans. It’s the biggest one that its got, but it’s also got a big share of Mortgage Choice as well. Which is another very large mortgage broker in Australia. What they were wanting to do was to sell off Colonial First Date. What they did subsequently was it that sold off its overseas operation. Its global asset management business to Mitsubishi for $4.1 billion in October last year. The year before it sold off its life insurance business so the multi-national insurer, III for $3.8 billion.
That really meant that when it came down to trying to sell, well the mortgage brokers plus a sharing count, plus also the business of Colonial First Date domestically wasn’t quite the same offering. Only issue was that Matt Comyn the chief executive of the Commonwealth Bank just after the Royal Commission said he completely agreed with the Royal Commissioner Kenneth Hayne, that mortgage brokers should not be paid commissions any longer. This is a conversation I had with him on February six.
Matt Comyn: My views on mortgage broking were very closely examined during the Royal Commission. The commissioner reviewed a number of things that I’d written in 2016. My views happened to align with the Commission’s recommendations. They were my views then, they remain my views today.
Ross Greenwood: In other words, mortgage brokers should be paid by the client and not by the bank.
Matt Comyn: Yes, that’s right.
Ross Greenwood: That’s Matt Comyn at that time. Guess what’s happened today, they have decided to scrap their plans to spin off that wealth business. As a result, the Commonwealth Bank will continue to own them. Therefore, will still continue to own the mortgage broking businesses. I just wonder how that can be reconciled. Let’s go to the managing director of the Finance Brokers Association of Australia that represents mortgage brokers. We spoke to him a little earlier in the week about all of this. Peter White, many thanks for your time, Peter.
Interview with: Peter White, Managing Director, Finance Brokers Association of Australia
Peter White: Thanks very much Ross.
Ross Greenwood: They are odd bedfellows now over the thought the Commonwealth Bank and its mortgage broking businesses.
Peter White: Yes, very odd bit. You would think that a position he took in front of the Royal Commission, that would be one that you’d be completing sooner than later in the best interest of the borrowers and the consumer outcomes. It’s a very strange decision.
Ross Greenwood: In this particular case, they have said that the reason why they have not done this is because they want to concentrate on the remediation of customers of the bank. They say already there’s been around $1.4 billion either spent or allocated to fix their programs and to repay customers. At this point, some $600 million is going back to repatriating. It might even go with their customers individually, but I would have thought the real issue here now the mortgage brokers will still continue to do their business. Given the fact you’ve actually said that you would have liked the rules to change for mortgage brokers which effectively the mortgage brokers say would have put them out of business, it’s hard to then say, all right guys back to work, away you go. Write as many mortgages you can for the Commonwealth Bank.
Peter White: It’s very strange. You got to sit back and wonder how much it has done into the pure pursuit of profit versus the pursuit of the right style of outcomes that the needed to happen in front of the Royal Commission. It’s certainly leaves us all a little bit dumped out and confused as to really where CBA stands. I think it’s probably more value to them to actually stand a position that is transparent rather than being one thing one minute and something else the next. We’ve got to put our customers first and that’s got to be the key priority.
Ross Greenwood: Also now the Chief Executive of the Aussie Home Group, James Symond. Who we’ve spoken on this program before, while while this announcement is important in terms of Aussie’s eventual ownership. It doesn’t impact our focus on our customers, brokers and team members. The fact of the matter is now after the decision of the federal government earlier this week to say that it would continue with the current remuneration structure of mortgage brokers. I presume from your members’ point of view, Peter it’s just simply business as usual.
Peter White: Yes, it’s business as usual. Regardless of which way the pendulum swings from a political viewpoint, it is still business as usual for brokers. The remuneration strategies to how they may change or if they stay the way they’re, isn’t the real driver that sits behind what the mortgage brokers are doing. Obviously they’re running businesses, an important component of it but what is being placed on the table post the finalization of the recommendations from the Royal Commission. Our industry has moved forward. There is devils in the detail as we know, but we will continue business as usual regardless of what these other groups behind the scenes will do, as they try and understand where they’re going to position themselves.
Ross Greenwood: The biggest bank in Australia Peter White is the managing director of The Finance Brokers Association of Australia. Peter as always we appreciate your time here on Money News. The one issue here of course is that with the level of new loans being written significantly lower this year as compared with last year and the year before that, as house prices have fallen. The brokers are now in an even more powerful position in some ways. In way they direct the actual flow of the lending because without the lending, the banks themselves are going to have their own profits curtailed over the coming year or so because they simply not the amount of traffic that they was going through the books as it was two years ago. I think that’s the absolute key to all of these.
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