Don’t compare us to planners say mortgage brokers

The Federal Government has been urged not to consider mortgage brokers as requiring the same regulatory approach as financial planners because mortgage brokers are not in a position to influence the amount of money they manage, according to the Finance Brokers Association of Australia (FBAA).

The views of the FBAA were made clear in a letter directed to the Minister for Revenue and Financial Services, Kelly O’Dwyer and tabled this week as part of the Senate Economic Committee inquiry into Consumer Protection in the Banking, Insurance and Financial Sector.

It claimed that, unlike financial advisers, mortgage brokers could not create demand.

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“Mortgage brokers cannot ‘create’ demand by encouraging a consumer to take out a mortgage against their own volition and they cannot upsell the consumer,” it said. “A consumer must be contemplating a home loan before a broker’s services are sought out (and if they do use a broker they will continue to source the product directly from an issuer.”

The letter said this could be contrasted to financial services “where the range of products and services is much broader and demand can be driven by the financial adviser/issuer”.

“For example, consumers can be drawn in through promises of paying off debt more quickly through investing, retiring earlier and generating above average returns on their investments,” it said. “If they have little money to invest they can be encouraged to gear (borrow to invest).”

“Financial advisers are more directly remunerated on the value of money they manage. Whilst it is true the brokers also receive more remuneration on higher loans, they are not in the same position to spruik up the amount because the consumer has a particular commitment in mind.”

“The FBAA wants the Government to focus on the differences between the two professions to avoid considering regulatory options against mortgage brokers based on irrelevant observations from financial services,” the FBAA letter said.

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Self interest is incredibly blinding.

Jason its massive pot and kettle, especially as a lot are trying to move into planning. They dont want to work for fee for service as there is no service, its a transaction then forgotten about like planning once was. We on the other hand do offer service now so we can adapt in terms of turning the commission off the investments , they need to cling onto the old ways as there is no where else for them to go.

Mortgage brokers forget that they ca increase loans to the max LVR to churn a commission but only draw down what the client requires.

Line of Credits that never get paid down is a choice that brokers make to ensure the trail never ends.

They are same same but different, I would agree with them if they did not receive receive trailing commission for no work at all. I don't call a monthly newsletter email and a once in 3 or 4 year personal email (because they are quiet) just to check I am still here and may need a finance review.

In a word... Horsesh!t

This smoke screen seems to be based on a proposition that mortgage broker business is all new borrowers.. what rubbish, it's mainly refinancers and people looking to unlock equity.

To the points made about demand -

Mortgage brokers regularly recommend applying for the maximum allowed LVR whether the borrower needs it or not... "think of it as an emergency fund for the future!?"

They certainly create demand for their preferred products, regardless of the net benefit to the borrower. 'If we switch your loan to XYZ Bank I can get you rate that 0.0001% lower than your currently paying!..."

And many directly link their services to the ability to create wealth through direct property investment - but that's another issue altogether.

Someone with credentials is able to write such tripe and direct it to a government minister expecting to get a logical response! You cannot be serious. People are in far more debt because of mortgage brokers than they are for taking out insurance or investing for their future. People are given mortgages they can ill afford because some shifty broker juggles the figures to make it look good.
Remember the Sub Prime problems in the US and globally? That was because of mortgages and not insurance!
Seriously, what a twit!

i just cannot understand how a the Government (and self interest groups) think its ok for a mortgage broker to be paid 0.6% of a total loan as well as ongoing commissions for looking up an interest rate and filling in paper work, when they think Risk Advisers should be paid $1,200 to set up an insurance policy which takes 2 appointments, approx 6 hours of background work , prepare a 50 page SOA that no one ever reads, act in the clients BEST INTERESTS and provide help at claim time. Not to mention all the worthless paperwork every time a minor change occurs.

Mortgage brokers don't add any value to anything and get paid a ridiculous amount for filling in a loan form and googling an interest rate.

Lots of mortgage brokers talk to clients 'generally' about FP strategies available, clearly the ones involving debt. They are under the radar and with the trail business per above, it's currently a terrific business model so no wonder they don't want anyone upsetting it. No SOA's, etc and all the cream of the lending, but that is why it is a very competitive industry and there's a broker on every corner. The guy who makes my coffee is also a mortgage broker, I'm not kidding.

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