The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has now concluded with the final report tabled earlier this week. I would like to share our perspective from the Edney Ryan Group, particularly on the most recent recommendations regarding the mortgage broking industry and reiterate our stance on ethical business conduct.
We introduced Edney Ryan Mortgage & Finance into the Group in 2002 because we saw a need which was not being met by the banks. Our clients had become increasingly frustrated with the demands that banks were making on their assets to secure loans, the lack of service and flexibility they were being offered and the feeling that they were locked-in for life with no real accountability in return.
Hence, for 17 years we have provided our clients – through Edney Ryan Mortgage and Finance, led by Tricia Williams – a financing option based on a model that gives power of choice and comparison to the borrower. It has always been in the best interest of our clients and always will be.
We have experienced first-hand, time and again, clients who go to their bank for a loan, and it is not until Tricia is engaged to negotiate on our client’s behalf, that the bank suddenly becomes competitive in their lending offer. Mortgage brokers acting on behalf of, and in the interests of borrowers, has kept bank lending margins competitive.
The remuneration model of mortgage brokers is such that the banks have footed the bill for the service that we provide our clients, by way of a brokerage fee. We have always been transparent with our clients that this is how we are able to provide our services at no cost to them.
The Royal Commission would have that change. Their recommendation is that individuals would pay a mortgage broker a fee to source an appropriate loan on their behalf. This would leave a person looking for a loan with three choices as we see it:
- Pay thousands of dollars to a mortgage broker to source the most suitable and competitive loan terms,
- Do the work of a mortgage broker themselves, by spending hours dealing with dozens of lenders, comparing terms and negotiating to find the best option,
- (The most likely scenario for most individuals) Borrow from their existing bank, with whatever terms their bank offers, with little or no negotiation or comparison.
We believe this outcome would reduce competition in the lending business, ultimately resulting in borrowers losing power and the big four banks gaining both power and profit – as the fee that would have gone to the mortgage broker (which would instead be paid by the borrower), will be enjoyed by the banks as increased profit margin.
Undoubtedly, there are some in the mortgage broking industry who have acted unethically and possibly illegally. This deplorable behaviour should of course be investigated, and those businesses or individuals dealt with appropriately. It disappoints us, however, that the shadow of such rogues has been cast over ethical businesses like ours and over the entire industry – an industry which exists to ensure that small Australian businesses and individuals are being offered competitive loan terms and quality service.
Whilst we will wait to see how these recommendations are implemented by the current and future governments, for now, we continue business as usual. Across all four of the Edney Ryan Group disciplines, our commitment to clients remains as it has always been:
- Edney Ryan operates in the best interests of our clients and will continue to do so,
- We stake our reputation in our community, and the longevity of our business on our ethical conduct.
If you would like to discuss any matters related to the Royal Commission, or other affairs, please do not hesitate to contact us.