Felton surveys his legacy as MFAA leader
IN Partnership with
Mike Felton looks back on nearly six years leading the industry body through a battlefield of regulatory challenges, gives advice on the future and reveals his favourite fishing spots
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THIS YEAR sees the final chapter in the story for one of the most influential figures in the recent history of the mortgage broking industry, as MFAA chief executive Mike Felton has announced his plan to retire early in the new financial year, following almost six years at the helm of the association.
Felton’s tenure – bookended by the ASIC Review of Mortgage Broker Remuneration and the cancellation of the 2022 Review of Mortgage Broker Remuneration – could be described as a relentless tour of duty, but he maintains that his role at the association has been the highlight of his working life of more than
40 years.
And as the mortgage broking industry looks ahead to clear skies without regulatory storm clouds on the horizon for the first time in a decade, there is no doubt that in installing Felton to steer the ship through more than half a decade of stormy waters, the MFAA board found the right man for the job.
Felton pays tribute to the board for the way they approached the appointment as they sought to find a wartime general.
“In 2016, the MFAA board appointed a search firm to fill the CEO role, and I was approached as part of the process. At the time, the board had the foresight to anticipate the scrutiny that was coming, so the brief was to successfully guide the MFAA, our members and the mortgage broking industry through a period of unparalleled external examination and change,” Felton says.
“I have to admit that initially I was wary about throwing my hat in the ring, because the success factors were different to my previous roles. Over the course of my professional career, I had been judged by profit and loss; completion of a project; an acquisition or the establishment of a business within a set time and budget. In this role, I could see I would be judged on the difference I could make to the association, its members and the industry.”
Felton notes that he was ultimately swayed by the opportunity to make a positive impact in a fast-growing sector that represented a force for good in the Australian economy and in local communities.
More importantly, he had a passionate belief in the industry, and the experience and confidence to represent mortgage brokers as they faced an uncertain future. However, he was around three months into the role when it became clear to him that this was the perfect job to complete his career.
Established in 1980, the Mortgage & Finance Association of Australia represents over 14,000 members and contributes to a healthy, competitive mortgage and finance industry through advocacy, education and business-building support. Its finance brokers operate within a professional Code of Practice that supports the alignment of the retail mortgage market with investor and consumer trust and confidence. Together with its members, the MFAA works with industry, regulators and government to protect the sustainability of the mortgage and finance broking industry and the key role brokers play in driving competition, choice and access to credit.
Find out more
Timeline of recent regulatory reviews into financial industry
“If you don’t address the
issues head-on and actively demonstrate data-driven
self-regulation, then you risk being regulated. And with that, you completely lose control of the fate of your own industry”
Mike Felton,
MFAA
Market matters
The insurance market for nonprofits was equally difficult last year. “We have seen a hard market combined with the pandemic, and large losses in certain classes made it very challenging,” Sree says, although she notes that pricing has stabilized and auto claims are down.
Pamela Davis, CEO of Nonprofits Insurance Alliance (NIA), describes the market over the past year as “kind of two different worlds. From our perspective, we’ve grown last year. We grew about 25%, which is unheard of for a 30-year-old organization. So, we saw a market where commercial insurance companies really turned their backs on the nonprofit sector, turning away what I would consider to be very good
“Although I didn’t come from a mortgage background, I had more than 30 years’ experience in financial markets, Treasury, asset finance, risk and compliance, giving me a detailed working knowledge of the NCCP [National Consumer Credit Protection] Act, remuneration structures and global trends in relation to conflicted remuneration,” Felton says.
“Essentially, I’d worked all around the industry, but I wasn’t too much of an ‘insider’. The fact that I had not previously worked as a mortgage lender, aggregator or broker was actually an advantage, because it allowed me to initiate a series of important changes without the risk of being accused of having conflicts or favours to repay.
“This allowed me to make decisions based on what would ensure the long-term success of the industry, rather than what was popular in the moment. Coincidentally, I had also recently studied the subjects of negotiation and influence as part of my MBA with the Edinburgh Business School, which left me well placed for the upcoming advocacy that was to form an important part of our defence of the industry.
“But ultimately, I’ve worked in dynamic, high-change environments for most of my life,” Felton says. “This is really what equipped me to navigate the unparalleled scrutiny and change that lay ahead.”
United against a regulatory onslaught
Scrutiny and change did indeed lie ahead for the MFAA, and for the industry. In March 2017 – three months after Felton joined the association – ASIC released its Review of Mortgage Broker Remuneration REP 516. This was the beginning of many years of challenges for the industry.
The report highlighted two key conflicts – the “lender choice conflict” and the “product strategy conflict” – as well as a number of issues that would need to be addressed to satisfy the regulator.
In April 2017, the Australian Banking Association released its ‘Sedgwick Report’ on Retail Banking Remuneration, which included recommendations in relation to mortgage broker
“Although I have thoroughly enjoyed the last five and a half years and will always look back on them as the highlight of my career, I’m certainly looking forward to getting time back for myself and my family”
Mike Felton,
MFAA
remuneration that went even further than the ASIC report in terms of managing perceived conflicts of interest in the broker channel.
“The only way to successfully negate these issues was to get ahead of the regulatory curve. Once the regulator has you in their sights, the issues aren’t going to magically disappear. If you don’t address the issues head-on and actively demonstrate data-driven self-regulation, then you risk being regulated. And with that, you completely lose control of the fate of your own industry,” Felton says.
“We learned many lessons from the financial advice sector. One of these lessons was that ‘divided you fall’, so we had a meeting with the ABA, followed by discussions with the FBAA, COBA and AFIA to immediately establish the Combined Industry Forum.
“While the ASIC report had not recommended banning our remuneration structures, it certainly raised serious issues that had to be addressed. We had to demonstrate that we were implementing strategies to manage and mitigate conflict and were making meaningful progress. If we couldn’t, upfront and trail commissions were both at risk.
“We were able to make and implement changes through the CIF in a united manner, which demonstrated our industry’s willingness to act in consumers’ best interests to ensure long-term sustainability. In doing so, we gained critical credibility with ASIC and government, which would prove very important in the years to come,” Felton says.
Later that same year, the Productivity Commission commenced an Inquiry into Competition in the Australian Financial System, which ultimately contained significant commentary on mortgage broker remuneration structures and regulation.
Finally, in December 2017, just 12 months after Felton joined the MFAA, a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was announced. In a twist that left many industry stakeholders scratching their heads, mortgage broking somehow became a central issue of the royal commission, despite there being no data or systemic evidence that demonstrated poor consumer outcomes as a result of perceived conflicts.
“To say that my first year in the role was a baptism of fire would be a massive understatement. At that point the full royal commission and subsequent 2022 review still lay ahead, not to mention never-ending consultations and submissions emanating from the recommendations of all these various reviews, to ensure that the outcomes were fit for purpose and did not cause unintended consequences. These were often incredibly complex and challenging to communicate,” Felton says.
Changing the narrative about brokers
Felton notes that the degree of difficulty in responding to these reviews and regulatory challenges was increased by external views and perceptions of the industry.
While the available data has always clearly demonstrated that the mortgage and finance broking industry is a force for good – including market share data that demonstrates that customers obviously value their brokers – many key external stakeholders did not understand the value the industry provides. The industry was a constant target of attack by media and other stakeholders, which unfairly built a narrative of an untrustworthy sector.
According to Felton, the damage sometimes also came from “friendly fire” from within the industry as inappropriate and harmful commentary from a small minority of brokers and other commentators appeared in trade media and blogs for all to see – while regulators and government watched on.
“Fortunately, we were able to continue to communicate to regulators that despite some irresponsible commentary, the mortgage broking industry was sound and producing strong consumer outcomes.
We were blessed with excellent data, which improved further as various reforms were implemented, proving to regulators that the industry was self-regulating successfully so there was no need to throw broking out with the bath water,” Felton says.
“The MFAA spent considerable time producing industry data so we could confidently and constructively engage with detractors, using real data rather than anecdotes.
“In doing this, we managed to substantially improve the understanding of our industry, the key role brokers play in driving competition, choice and access to credit, and the outcomes being produced. Over time, this began to change the narrative about brokers in the mainstream media, which had been quite negative between 2010 and 2016.
“We faced an existential challenge. However, with our unified approach to get ahead of the curve with self-regulatory reform, strong data, and by ensuring we were prepared for major challenges with campaigns in place, we put our best foot forward and left nothing to chance as the challenges kept coming,” Felton says.
While the establishment of the CIF to ensure the industry acted in unity was critical to the industry’s credibility, Felton maintains the MFAA’s work to produce the rational data – and then emotional campaigns – to defend the industry was equally important.
Share
Share
March 2017
April 2017
July 2017
December 2017
March 2019
March 2022
ASIC releases its Review of Mortgage Broker Remuneration
March 2017
ABA releases Sedgwick Report on Retail Banking Remuneration Review
April 2017
Consultation commences on the Productivity Commission’s public inquiry into Competition in the Australian Financial System
July 2017
Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry announced
December 2017
Royal Commission Final Report released; government announces a 2022 Review of Mortgage Broker Remuneration by the Council of Financial Regulators and the ACCC
March 2019
Government announces the cancellation of the 2022 Review of Mortgage Broker Remuneration by the Council of Financial Regulators and the ACCC
March 2022
Milestones
Jan–Mar 2020
52.1%
Growth in mortgage broker market share accelerates
Jan–Mar 2021
57.5%
Jan–Mar 2022
69.5%
Source: MFAA quarterly survey of leading mortgage brokers and aggregators, January–March 2022
“A key moment was our realisation in late 2018 that, rather than relying on the powerful data we had provided, the royal commission would rely on the testimony of those who had the most to gain from a ‘borrower pays’ model. This led to the rapid development of the MFAA’s ‘Don’t Kill Competition’ campaign, which was critical to the successful defence of the industry. The campaign was funded by the MFAA, most of the large aggregators and a number of smaller lenders,” Felton says.
“The result was that both the government and opposition reversed their stated positions on the royal commission’s recommendations and agreed to approach mortgage broker remuneration in a manner that protected competition and access to credit.
“Without doubt, a defining moment was my meeting with then Treasurer Josh Frydenberg in early March 2019, when he informed me that the government would review the industry in three years, rather than banning trail commissions on new loans,” Felton says.
“And beyond that, the highlight of my time with the MFAA was my meeting with the then Assistant Treasurer, Michael Sukkar, in March this year, when we were informed that Treasury had found no systemic evidence of broker misconduct or consumer detriment and that, accordingly, the 2022 review was no longer required.
“This was appropriate recognition for an industry that had been reforming for more than five years, producing strong consumer outcomes. It was a proud moment for the MFAA team that had worked relentlessly to achieve the result and were again the only industry association in the room for the announcement.”
Optimism for the road ahead
While Felton is retiring from working life, having led a team that neutralised the existential threats for the industry, he acknowledges there is still work to be done. The industry is now in the strongest position it has ever been in, and the future looks bright, but there will always be challenges for brokers as economic conditions change, lenders evolve their practices and regulatory settings are updated.
“As I leave the association, the MFAA will continue its important work on a number of remaining key issues, including the current ‘all or nothing’ clawback structure, issues relating to channel conflict and discharges, and lack of uniformity and fairness in some ‘net of offset’ policies,” Felton says.
“In addition, while we’ve made real progress on lender turnaround issues, these will require ongoing vigilance, and all these issues will take time to work through. I have every faith that the association will continue to doggedly pursue better outcomes for the industry and will keep members informed of progress as it goes.”
Looking to the future, Felton is optimistic that the industry will continue its journey towards becoming a profession, with further growth in consumer trust and confidence translating to ongoing increases in market share, putting mortgage brokers on track to exceed an incredible 75% share in the coming years.
And while he believes the recent cancellation of the 2022 remuneration review was appropriate recognition of the industry’s reforms and implementation of the government’s legislative agenda – and of the strong outcomes mortgage brokers are producing for their customers – Felton warns it is important that the industry does not rest on its laurels and must continue to seek ways to improve.
Alongside this improvement, the MFAA will continue to lead engagement with ASIC, the Australian Financial Complaints Authority, consumer advocates and the government to ensure that any systemic issues that may arise are detected quickly and addressed early on so the industry will never have to go through another period of scrutiny like the one it has just experienced.
So, with the tour of duty complete, what’s next? A lot of fishing, according to Felton.
“I intend this to be the end of my full-time working career. Although I have thoroughly enjoyed the last five and a half years and will always look back on them as the highlight of my career, I’m certainly looking forward to getting time back for myself and my family. CEO of the MFAA has been a 24/7 role,” Felton says.
“I don’t have too many plans at this stage, but I’m confident that I’ll spend a lot more time fly-fishing on Pittwater and Broken Bay, travelling, working around the house and spending time in the kitchen preparing meals for my gorgeous wife.
“It’s been an honour and a privilege to represent this wonderful industry, but it’s time for someone else to take over the role,” Felton says. “I have absolute confidence the MFAA board will choose a fantastic candidate to carry the torch forward for the industry, and I look forward to watching mortgage broking as it goes from strength to strength over the coming years.”
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Optimism for the road ahead
While Felton is retiring from working life, having led a team that neutralised the existential threats for the industry, he acknowledges there is still work to be done. The industry is now in the strongest position it has ever been in, and the future looks bright, but there will always be challenges for brokers as economic conditions change, lenders evolve their practices and regulatory settings are updated.
“As I leave the association, the MFAA will continue its important work on a number of remaining key issues, including the current ‘all or nothing’ clawback structure, issues relating to channel conflict and discharges, and lack of uniformity and fairness in some ‘net of offset’ policies,” Felton says.
“In addition, while we’ve made real progress on lender turnaround issues, these will require ongoing vigilance, and all these issues will take time to work through. I have every faith that the association will continue to doggedly pursue better outcomes for the industry and will keep members informed of progress as it goes.”
Looking to the future, Felton is optimistic that the industry will continue its journey towards becoming a profession, with further growth in consumer trust and confidence translating to ongoing increases in market share, putting mortgage brokers on track to exceed an incredible 75% in the coming years.
And while he believes the recent cancellation of the 2022 remuneration review was appropriate recognition of the industry’s reforms and implementation of the government’s legislative agenda – and of the strong outcomes mortgage brokers are producing for their customers – Felton warns it is important that the industry does not rest on its laurels and must continue to seek ways to improve.
Alongside this improvement, the MFAA will continue to lead engagement with ASIC, the Australian Financial Complaints Authority, consumer advocates and the government to ensure that any systemic issues that may arise are detected quickly and addressed early on so the industry will never have to go through another period of scrutiny like the one it has just experienced.
Copyright © 1996-2022 Key Media, Inc.
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2012
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Curabitur feugiat eget leo id tempus. Maecenas commodo, nibh at ultricies pulvinar, ipsum erat porta metus, et tempus justo tellus euismod dolor.
2011
Curabitur feugiat eget leo id tempus. Maecenas commodo, nibh at ultricies pulvinar, ipsum erat porta metus, et tempus justo tellus euismod dolor.
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Curabitur feugiat eget leo id tempus. Maecenas commodo, nibh at ultricies pulvinar, ipsum erat porta metus, et tempus justo tellus euismod dolor.
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2019
Curabitur feugiat eget leo id tempus. Maecenas commodo, nibh at ultricies pulvinar, ipsum erat porta metus, et tempus justo tellus euismod dolor.
2021
“This allowed me to make decisions based on what would ensure the long-term success of the industry, rather than what was popular in the moment. Coincidentally, I had also recently studied the subjects of negotiation and influence as part of my MBA with the Edinburgh Business School, which left me well placed for the upcoming advocacy that was to form an important part of our defence of the industry.
“But ultimately, I’ve worked in dynamic, high-change environments for most of my life,” Felton says. “This is really what equipped me to navigate the unparalleled scrutiny and change that lay ahead.”
United against a regulatory onslaught
Scrutiny and change did indeed lie ahead for the MFAA, and for the industry. In March 2017 – three months after Felton joined the association – ASIC released its Review of Mortgage Broker Remuneration REP 516. This was the beginning of many years of challenges for the industry.
The report highlighted two key conflicts – the “lender choice conflict” and the “product strategy conflict” – as well as a number of issues that would need to be addressed to satisfy the regulator.
In April 2017, the Australian Banking Association released its ‘Sedgwick Report’ on Retail Banking Remuneration, which included recommendations in relation to mortgage broker remuneration that went even further than the ASIC report in terms of managing perceived conflicts of interest in the broker channel.
“The only way to successfully negate these issues was to get ahead of the regulatory curve. Once the regulator has you in their sights, the issues aren’t going to magically disappear. If you don’t address the issues head-on and actively demonstrate data-driven self-regulation, then you risk being regulated. And with that, you completely lose control of the fate of your own industry,” Felton says.
“We learned many lessons from the financial advice sector. One of these lessons was that ‘divided you fall’, so we had a meeting with the ABA, followed by discussions with the FBAA, COBA and AFIA [the Australian Finance Industry Association] to immediately establish the Combined Industry Forum.
“While the ASIC report had not recommended banning our remuneration structures, it certainly raised serious issues that had to be addressed. We had to demonstrate that we were implementing strategies to manage and mitigate conflict and were making meaningful progress. If we couldn’t, upfront and trail commissions were both at risk.
“We were able to make and implement changes through the CIF in a united manner, which demonstrated our industry’s willingness to act in consumers’ best interests to ensure long-term sustainability. In doing so, we gained critical credibility with ASIC and government, which would prove very important in the years to come,” Felton says.
Later that same year, the Productivity Commission commenced an Inquiry into Competition in the Australian Financial System, which ultimately contained significant commentary on mortgage broker remuneration structures and regulation.
Finally, in December 2017, just 12 months after Felton joined the MFAA, a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was announced. In a twist that left many industry stakeholders scratching their heads, mortgage broking somehow became a central issue of the royal commission, despite there being no data or systemic evidence that demonstrated poor consumer outcomes as a result of perceived conflicts.
“To say that my first year in the role was a baptism of fire would be a massive understatement. At that point the full royal commission and subsequent 2022 review still lay ahead, not to mention never-ending consultations and submissions emanating from the recommendations of all these various reviews, to ensure that the outcomes were fit for purpose and did not cause unintended consequences. These were often incredibly complex and challenging to communicate,” Felton says.
Changing the narrative about brokers
Felton notes that the degree of difficulty in responding to these reviews and regulatory challenges was increased by external views and perceptions of the industry.
While the available data has always clearly demonstrated that the mortgage and finance broking industry is a force for good – including market share data that demonstrates that customers obviously value their brokers – many key external stakeholders did not understand the value the industry provides. The industry was a constant target of attack by media and other stakeholders, which unfairly built a narrative of an untrustworthy sector.
According to Felton, the damage sometimes also came from “friendly fire” from within the industry as inappropriate and harmful commentary from a small minority of brokers and other commentators appeared in trade media and blogs for all to see – while regulators and government watched on.
“Fortunately, we were able to continue to communicate to regulators that despite some irresponsible commentary, the mortgage broking industry was sound and producing strong consumer outcomes. We were blessed with excellent data, which improved further as various reforms were implemented, proving to regulators that the industry was self-regulating successfully so there was no need to throw broking out with the bath water,” Felton says.
“The MFAA spent considerable time producing industry data so we could confidently and constructively engage with detractors, using real data rather than anecdotes.
“In doing this, we managed to substantially improve the understanding of our industry, the key role brokers play in driving competition, choice and access to credit, and the outcomes being produced. Over time, this began to change the narrative about brokers in the mainstream media, which had been quite negative between 2010 and 2016.
“We faced an existential challenge. However, with our unified approach to get ahead of the curve with self-regulatory reform, strong data, and by ensuring we were prepared for major challenges with campaigns in place, we put our best foot forward and left nothing to chance as the challenges kept coming,” Felton says.
While the establishment of the CIF to ensure the industry acted in unity was critical to the industry’s credibility, Felton maintains the MFAA’s work to produce the rational data – and then emotional campaigns – to defend the industry was equally important.
“A key moment was our realisation in late 2018 that, rather than relying on the powerful data we had provided, the royal commission would rely on the testimony of those who had the most to gain from a ‘borrower pays’ model. This led to the rapid development of the MFAA’s ‘Don’t Kill Competition’ campaign, which was critical to the successful defence of the industry. The campaign was funded by the MFAA, most of the large aggregators and a number of smaller lenders,” Felton says.
“The result was that both the government and opposition reversed their stated positions on the royal commission’s recommendations and agreed to approach mortgage broker remuneration in a manner that protected competition and access to credit.
“Without doubt, a defining moment was my meeting with then Treasurer Josh Frydenberg in early March 2019, when he informed me that the government would review the industry in three years, rather than banning trail commissions on new loans,” Felton says.
“And beyond that, the highlight of my time with the MFAA was my meeting with the then Assistant Treasurer, Michael Sukkar, in March this year, when we were informed that Treasury had found no systemic evidence of broker misconduct or consumer detriment and that, accordingly, the 2022 review was no longer required.
“This was appropriate recognition for an industry that had been reforming for more than five years, producing strong consumer outcomes. It was a proud moment for the MFAA team that had worked relentlessly to achieve the result and were again the only industry association in the room for the announcement.”
Optimism for the road ahead
While Felton is retiring from working life, having led a team that neutralised the existential threats for the industry, he acknowledges there is still work to be done. The industry is now in the strongest position it has ever been in, and the future looks bright, but there will always be challenges for brokers as economic conditions change, lenders evolve their practices and regulatory settings are updated.
“As I leave the association, the MFAA will continue its important work on a number of remaining key issues, including the current ‘all or nothing’ clawback structure, issues relating to channel conflict and discharges, and lack of uniformity and fairness in some ‘net of offset’ policies,” Felton says.
“In addition, while we’ve made real progress on lender turnaround issues, these will require ongoing vigilance, and all these issues will take time to work through. I have every faith that the association will continue to doggedly pursue better outcomes for the industry and will keep members informed of progress as it goes.”
Looking to the future, Felton is optimistic that the industry will continue its journey towards becoming a profession, with further growth in consumer trust and confidence translating to ongoing increases in market share, putting mortgage brokers on track to exceed an incredible 75% in the coming years.
And while he believes the recent cancellation of the 2022 remuneration review was appropriate recognition of the industry’s reforms and implementation of the government’s legislative agenda – and of the strong outcomes mortgage brokers are producing for their customers – Felton warns it is important that the industry does not rest on its laurels and must continue to seek ways to improve.
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