Industry split over equity release advice
Different opinions have emerged about whether advice around equity release products such as reverse mortgages should come from financial advisers or mortgage brokers.
Senior Australians Equity Release Association of Lenders (SEQUAL) chief executive Kevin Conlon (pictured) sparked the debate while discussing changes to the National Credit Consumer Protection Act (NCCP) introduced on 1 January, 2011, which placed mortgage brokers under stricter licensing and disclosure requirements.
“If you look at the new national regulation around credit licensing and the higher duty of care that is owed to consumers as a consequence of that regulation, there is no reason why the broker market can’t step up to the challenge of providing the advice necessary to make an informed decision,” Conlon said.
SEQUAL had lobbied for the development of an appropriate scope of advice for equity release products, which did not necessarily include full financial plans, according to Conlon.
“What consumers are looking for is complete advice, but that advice [needs to be] focused on the transaction and its implications rather than on a full financial plan,” he said.
However, Financial Planning Association chief executive officer Mark Rantall disagreed, saying these products absolutely needed to be provided within the bounds of a comprehensive plan and with a full understanding of clients’ needs.
“They [equity release products] are particularly complex with wide ranging ramifications if they’re not in the best interest of the client, so the more information and the stronger framework in terms of advice that is put around these products, the better."
Current legislation allows mortgage brokers to receive commissions on products they recommend to clients, which Rantall said was the reason why advisers were more likely to give unbiased advice.
“We support fee-for-service and advice should be given without having commissions embedded in the product, particularly when you’re looking at the demographic of the people that these sorts of products are provided to,” he added.
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