The banking industry supports variable remuneration structures which reward the efforts of banking staff in pursuing the objectives of the bank whilst achieving good customer outcomes and managing the bank’s legal and ethical obligations to its stakeholders.
In 2017 the industry recognised that the use of variable remuneration structures was not achieving good customer outcomes. It committed to change its remuneration practices as recommended by the Sedgwick Review.
By the end of 2020 the industry will have reformed its remuneration structures to minimise the prevalence of financial targets as core indicators of staff performance. The revised structures will be balanced with other measures such as customer outcomes achievement and risk focus.
The Mortgage Broking Combined Industry Forum
About the Forum
In response to ASIC’s Report 516: Review of mortgage broker remuneration and the third-party recommendations of the Sedgwick Review, and following consultations with Government, the mortgage broking industry established the Combined Industry Forum (the Forum) to drive better customer outcomes through improved governance and remuneration practices in mortgage broking.
A summary of the Forum’s activity is available here.
The Forum consists of representatives from bank and non-bank lenders, aggregators and brokers, consumer groups (represented through CHOICE), the Australian Banking Association (ABA), the Mortgage & Finance Association of Australia (MFAA), the Finance Brokers Association of Australia (FBAA), the Customer Owned Banking Association (COBA) and the Australian Finance Industry Association (AFIA).
The Forum first met on 9 June 2017 and had, up until its first response submission to ASIC, operated through monthly meetings and five specialist working streams, focussed on developing a package of changes to governance, reporting and remuneration in mortgage broking. These reforms are in response to the six proposals of the ASIC Report and the specific recommendations of the Sedgwick Review relating to the remuneration of aggregators and mortgage brokers aimed at improving customer outcomes and driving the sustainability of the mortgage broking industry.
The work of the Forum has been led by 7 guiding principles:
In responding to proposed changes to remuneration and governance practices in the mortgage industry, the Forum, including industry associations, brokers, aggregators and lenders will:
- Support a co-regulatory approach and, to the extent possible, support industry self-regulation
- Have better consumer outcomes at the centre of its approach
- Ensure appropriate transparency of process for industry participants, government and consumers
- Promote competition at all levels of the industry
- Not aim to change the structure of the industry or unfairly disadvantage any part of the value chain
- Promote simple and achievable solutions, and
- Seek solutions that can be applied in all jurisdictions and that take account of the needs of metropolitan, regional and country areas.
The reform package contained in the Forum Report is the result of unprecedented engagement between industry bodies, lenders, mortgage brokers and their representatives, aggregators, introducers, and consumer groups, and follows consultation with regulators and Federal Government.
The Forum Report outlines the mortgage broking industry’s commitment to implement a package of reforms to improve customer outcomes in mortgage broking and demonstrates a genuine commitment for change.
The Forum will release progress reports every six months.
The first progress report from August 2018 is available here.
A media release about the first progress report is also available here.