The Hayne report is clearly worried about the potential for commissions to distort advice to clients. This is a reasonable concern and is consistent with the damning evidence gathered by the commission that firms in the finance sector have commonly put profits before the best interests of their customers.
However, it is notable that the majority of that evidence was of misconduct in the banking/wealth management sectors – the same sectors where share prices jumped upon the release of the Hayne recommendations. Little evidence of misconduct by mortgage brokers was gathered, which is why it was surprising (to the sharemarket at least) to see recommendations that would eliminate mortgage broking as a force in the industry – and force borrowers back unto the mercy of the big banks.
Maybe some regulatory intervention is required, or maybe not. But there is no scenario in which the best intervention is to outlaw commissions. That would be an exemplar par excellence of the cure being worse than the disease.
Dr Tom Hird is a director of Competition Economists Group. Neither Dr Hird nor Competition Economists Group has advised mortgage brokers in the past.