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.”
Comments
A Best Interests Duty for mortgage brokers is a logical step, and is not far removed from what most mortgage brokers have been doing for some time anyway. The big problem is it only applies to activities covered by an Austrailan Credit Licence (ACL).
Many mortgage brokers now also promote life & disability insurances, which are not covered by an ACL. So none of the normal BID and disclosure rules apply in relation to mortgage brokers' (frequently bad) insurance advice.
If a Mortgage Broker is advising on Life and Disability Insurance then he / she will likely also be licenced as an Authorised Rep under an AFSL holder whereby the Mortgage Broker is basically also an ASIC Licenced Financial Planner (there are some some dual licenced Brokers / Advisers around). Alternatively the Mortgage Broker has a Financial Adviser "in-house" within the business group.
No, they just offer the mortgage protection insurance, bundled life, tpd, trauma, which is very limited for example only 11 trauma events are covered, there is no soa, no disclosure of commissions they receive. This insurance is crap insurance, but most people will take it on as they will say the bank requires it! RR what you write is the way is is supposed to work, bot in reality it dosent.
just get rid of the ACL regime and combine the AFSL and ACL
So,, this is a huge feast to be had. For lawyers. How many of these brokers were recommending apartments to clients via a developer, then gearing them up based on the equity of the family home?. How many have used limited recource borrowing for SMSF's and devoured a persons savings and doing all of this while rceiving kickbacks from developers? How many brokers are also driving cabs or cafes and are there with limited training and knowledge advising a customer exposing them to significant risk that could devastate their family?
With the property sector now well and truly in the gun, a vicious regulator seeking to use brokers as scapegoats to avoid blame for bad policy that encouraged this nonsense abd with uncaring ministers not wanting to shoulder the blame for a sinking economy, I think you know what we suspect. A brokers backside is on the line. PI will increase as the lawsuits begin.
What about an unlicenced organisation offering loans to retired people at 5.15% interest rates by unqalified staff, and no oversight of their compliance because they are unlicenced. AND the government know about this scheme and have have done nothing about it. Talk about double standards!!!!
The only possible way to track this would be the completion of a full needs analysis and a Statement of Advice clearly defining the recommendation and why it would be the most suitable option for the client.
In the Statement of Advice, it may require not only as assessment of why the product is suitable to the clients needs, but also whether the type of loan or mortgage would have the potential to impact other members of the family.
In other words, this comment highlights the ridiculous notion that a financial planner must consider future impacts of the advice to other family members, the majority of whom they may never meet, don't have a relationship with and who have nothing for consideration to be provided to their possible future circumstances.
The unworkable position that financial advisers are now finding themselves in regarding the ridiculous and duplicated compliance requirements for the provision of advice is starting to be defined as complete overkill and adding tremendous cost to the provision of advice for no identifiable benefit to the consumer.
The compliance and advice space has been an unworkable over reaction and over shoot and is counter productive to the provision of advice.
It is the right time to reconsider where all this has now arrived at and to come to a workable, sensible and cost effective solution in order for consumers to all benefit and to encouraged to seek advice at a reasonable cost.
We all know that consumers who seek and receive quality advice become more educated and aware of their own circumstances, options and can then make an informed decision in their best interests.
Financial Advisers have been made the scapegoat for many failings across the corporate sector and it is time they are given some reprieve from the the incredible business and personal impacts of over regulation and costly duplication.
The only possible way to track this would be the completion of a full needs analysis and a Statement of Advice clearly defining the recommendation and why it would be the most suitable option for the client.
In the Statement of Advice, it may require not only as assessment of why the product is suitable to the clients needs, but also whether the type of loan or mortgage would have the potential to impact other members of the family.
In other words, this comment highlights the ridiculous notion that a financial planner must consider future impacts of the advice to other family members, the majority of whom they may never meet, don't have a relationship with and who have nothing for consideration to be provided to their possible future circumstances.
The unworkable position that financial advisers are now finding themselves in regarding the ridiculous and duplicated compliance requirements for the provision of advice is starting to be defined as complete overkill and adding tremendous cost to the provision of advice for no identifiable benefit to the consumer.
The compliance and advice space has been an unworkable over reaction and over shoot and is counter productive to the provision of advice.
It is the right time to reconsider where all this has now arrived at and to come to a workable, sensible and cost effective solution in order for consumers to all benefit and to encouraged to seek advice at a reasonable cost.
We all know that consumers who seek and receive quality advice become more educated and aware of their own circumstances, options and can then make an informed decision in their best interests.
Financial Advisers have been made the scapegoat for many failings across the corporate sector and it is time they are given some reprieve from the the incredible business and personal impacts of over regulation and costly duplication.
Here comes ASIC to regulate Mortgage Brokers out of existence. Meanwhile Bank employees don't need to adhere the BID of clients seeking a mortgage.
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