Fee-for-service – i.e. paying your mortgage broker upfront – is one of many alternatives being discussed as financial regulator ASIC looks into brokers’ commissions.

This month a number of mortgage industry players published their responses to ASIC, who have previously described commissions as a form of conflicted remuneration.
In its scoping paper the regulator asked brokers, banks and consumer advocates how brokers get paid, and to describe “the influence or impact (if any) of remuneration structures on consumer decision making and outcomes?”
Some banks do increase broker commission as part of special offers: in October last year Suncorp Bank upped upfront commission from 0.65% to 0.75% of the loan volume alongside interest rate cuts and a cashback offer.

Critics of commission say this encourages brokers to place clients with lenders who may not be the best fit for them.

However the industry rejected this accusation in their responses to ASIC.

AFG, one of the biggest mortgage broking groups in the country, noted that whilst “commissions can lead to conflicts of interest in many situations, [AFG] does not believe that this is the case within the current structure of the mortgage broking industry.” 

AFG questioned whether there was any hard data that showed any negative effects of commission payments.

AFG also noted that alternative remuneration structures such as fee-for-service could have "adverse effects" on consumer outcomes, including privileging lenders with branch networks and penalising first home buyers, who may not be able to afford a brokers’ fee.
Fee-for-service, they argue, “would weaken the level of advice available to consumers and diminish the position of trust that brokers establish.”
Should brokers pay commission? Our sister title MPA wants your opinion on commissions – and you could win a $250 Coles Group & Myer gift card by giving them your views: click here to do the survey.