It is reported that commissioner Hayne says its unreasonable for the broker to receive a trail commission over the life of the loan when they are not actually doing anything after the loan has gone through. This fails to understand the industry IMO.
If banks who pay the trail commission are agreeable to paying the fee then surely this is an acknowledgement by the industry that the fee is integral to the whole process operating.
Of course a lot less borrowers are not going to pay $2k upfront when buying a property if there is the chance to avoid it but then they have to do a lot more work and it is a hassle, time consuming etc.
Given a home loan is probably most peoples biggest liability and financial commitment there must exist a healthy broking industry. Also surely brokers play a part in "keeping the bastards honest" in terms of competitive bank rates etc.
Whilst I understand at a theoretical level transparent upfront fees seem like the ideal where the benefits of a large transaction flow over many years the trail commission system allows the broker an adequate remuneration over time, the banks are agreeable to pay the cost as a part of doing business and the borrower pays for the service over the period of the benefit.
If the upfront fee proposal goes through then the government that passes it will regret IMO and the broking industry will shrink significantly.
Which is ironic as it was called a Banking Royal Commission.
PS I'm not involved in the broking industry but I hold MOC shares.
