As you are probably well aware, the Banking Royal Commission concluded recently and a number of recommendations were issued by Commissioner, Kenneth Hayne. There was very little surprise when some damning misconduct came to light. Most Australians pinned their hopes on the banks being held to account for years of questionable and corrupt practices, but who were the real ‘Winners’ and ‘Losers’ from the Royal Commission?
If you’ve got a few minutes and you’d like to find out, have a watch of the video at the link below. Alternately, have a read of the short summary of under the video link.
In a nutshell, a raft of dubious business practices and a stinky, unethical sales culture have thankfully been exposed. Despite, this banks were the unexpected (or expected, as us cynics would have predicted) big winners from the Royal Commission.
Aside from a few fines being imposed, banks having to return some money to customers (who were wrongly charged in the first place!) and a couple of executive jobs scalped, they have walked away relatively unscathed and sitting on a pretty decent windfall of profit in the next few years. If the recommendations from the Royal Commission are implemented – and I need to emphasise the word ‘if’ because nothing is set in stone just yet – it could result in banks making even greater profits, on top of their already very healthy returns.
Why is that? Because of the clear losers in this scenario, mortgage brokers. The proposed recommendations will see banks retaining the commission that they currently pay to mortgage brokers, potentially leading to the end of the mortgage broking industry as we currently know it.
There are around 16,000 mortgage brokers in Australia. A few bad eggs were exposed through the Royal Commission but the exceedingly, overwhelming majority are decent, hard working, small business owners doing the right thing for their customers. The mortgage broking industry currently generates over 50% of all loans created in Australia and introduces the public to offers & opportunities with alternative lenders that they would not have found if they shopped it alone. This has created ‘competition’ and the big banks don’t like it.
I’m certainly not all about bashing the big banks for the sake of it. Big banks have underpinned the Australian economy for decades. What I strongly advocate is a level playing field for small business, market competition and lending environment that provides choice for Australian borrowers. Mortgage Brokers currently hold big banks to account and provide opportunities for smaller, and often more competitive lenders to get a presence in the marketplace.