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
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
