Honest broker

Notes from the RC

Interesting aside from the Royal Commission, via Business Insider:

Every good Royal Commission needs a scapegoat, of course, and it seems as though Comyn is aiming to throw mortgage brokers under the bus next (there's been plenty of that going on this week). 

I have no dog in this race, by the way.

In fact, in many ways life would be easier for everyone else if mortgage brokers took the heat for the entire financial services industry.  

That said, I can't for the life of me figure out how Comyn has come up with $6,627 for an average broker fee.

Maybe it's a 'mean' figure that includes some very sizeable commercial loans?

Of course, it is true that the average broker-originated loan size and therefore fee has increased, along with the average mortgage size overall through this cycle.

But by my reckoning the typical broker fee would be something with a two in front of it at a commission of about 0.6 per cent. 

Maybe Comyn is adding in five years of trails for a typical loan duration, I'm not sure.

In which case, they can't seriously be suggesting that mortgage brokers do half a decade of ongoing client care work for free? 

Or maybe they are - nothing much would surprise me these days.

Without trails brokers would simply be looking to churn loans every couple of years as they do in certain other countries, which is hardly a desirable outcome. 

Rage against the machine

There was also a general outcry about a small handful of brokers earning big dollars.

The fact is that there are some big deals written out there, so a small number of brokers will earn good money. 

And anyway some people will earn big dollars in any industry.

That's as it should be.

And, by the way, if someone has a big year of income then the tax office takes back about a third of it.

Figures assembled by the Mortgage & Finance Association Australia (MFAA) in 2017 showed an average gross commission income for mortgage brokers - before operating costs - of $142,000.

Hardly excessive once the costs of running a business are factored in. 

Now, banker executive remuneration, on the other hand...