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Mortgage brokers have been going through an evolutionary period since the new National Credit Protection Legislation came into effect on January 1, and the challenges they face resonate with the financial planning sector.
Clare Wivell Plater of compliance and risk management consultancy Goldseal said that while mortgage broking is less complex than financial planning, the sector is facing similar challenges — such as disclosure of commissions and the appropriateness of advice.
“There are now mandatory disclosure requirements that entail three or four different disclosures at various points during the mortgage transaction,” said Wivell Plater.
She added that Goldseal is currently working with the Mortgage and Finance Association of Australia to help smaller brokers with all the policies and procedures they must have in place. As part of this process, Goldseal is preparing template disclosure documents that brokers can use.
Goldseal has seen significant growth in the mortgage broking area of their business, said Wivell Plater, due to requirements relating to registration with ASIC and the need to attain a credit licence from July.
“While the credit licensing legislation is a lot simpler than the Australian Financial Services Licence (AFSL) legislation, it still requires brokers to have minimum training standards and it is completely changing the customary way that disclosure is undertaken in the mortgage industry, which has largely been voluntary in the past,” said Wivell Plater.
She added that the risk management procedures are also very similar for AFSL licensees and the convergence between financial planning dealer groups and mortgage brokers makes a lot of sense.
“People are going to have to decide whether they want to attain their own licence or want to be part of a larger group, so there are definitely opportunities for service groupings — similar to financial planning dealer groups — to be established,’ said Wivell Plater.
But she said mortgage brokers are not necessarily looking to financial planning dealer groups, since the manner of packaging, marketing and delivering mortgage broking services is different to financial planning — and mortgage aggregators already sit in that support space.
“The part that aggregators play is assisting with commission processing and so forth, and making sure there are economies of scale for lenders. But it means that for those aggregators that wish to attain a credit licence, they can provide a home for mortgage brokers,” she said.
