FoFA increased market concentration says PC
The wealth advisory industry has been the subject of increasing market concentration since the Future of Financial Advice (FoFA) reforms, according to the chairman of the Productivity Commission, (PC) Peter Harris.
At the same time, he has suggested that there is no reason why more competition could not be injected into the mortgage broking industry by allowing qualified and licensed financial planners to play a role.
In an address to the Committee for the Economic Development of Australia (CEDA), Harris made clear that the PC’s inquiry into Competition in the Financial System made clear that there were no easy answers, particularly with respect to remuneration in the mortgage brokers, but that more competition rather than more regulation might be an answer.
In doing so, he cited market concentration as having been one of the unintended consequences of the FoFA changes, stating “we would not want to add to market concentration for this [mortgage broking] service until we can determine better whether there is cause and effect”.
“Thus the draft report limits the call to regulate to bank-owned brokers,” Harris said. “But we are also considering applying additional competition across all brokers, as another possible way of reducing cost to consumers, by allowing licensed financial service providers such as financial planners to offer home loans as a product.”
“There appears to be no sound reason why qualified advisers are presently not allowed to deal in this product, but they are not,” the PC chairman said.
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