ASIC reinforces 'know your client' with mortgage broker best interests
Mortgage brokers have been placed on notice by the Australian Securities and Investments Commission (ASIC) that they will need to understand the individual circumstances of clients as part of their new best interest duties, almost in the same sense as the financial adviser ‘know you client’ regime.
ASIC has issued a new regulatory guide covering mortgage broker best interests duty and has made clear that best interests not only applies to the mortgage product itself, but the circumstances of the client.
“The broker’s consideration of the individual circumstances of the consumer and their needs, goals and financial situation is particularly relevant to complying with the obligations,” it said. “The risk of non-compliance is substantially increased if a broker’s processes typically lead to a ‘one-size-fits-all’ outcome for consumers.”
“Brokers will need to exercise their judgment when determining what is in the consumer’s best interests. In some situations, this will include challenging the consumer’s perception of their best interests,” the regulatory guide said.
“Although it is the consumer’s decision whether to accept or decline the recommendation and proceed with an application, it is the sole responsibility of the broker to ensure the recommendation is in the consumer’s best interests.”
The guide said a variety of factors could be relevant in determining whether recommending a credit product was in the consumer’s best interests.
“In our view, this determination involves considering the product holistically and weighing up the relevant factors based on the value and benefits they offer that consumer. In most instances, you should present consumers with more than one option. Where there are multiple options for a consumer to consider, these are to be presented in a manner consistent with the consumer’s best interests.”
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
