Financial planners should know before the end of this year how the long-awaited Uniform Finance Broking legislation will impact on their ability to sell reverse mortgages in Australia.
A first draft of the legislation, which governs the sale of all credit products, including reverse mortgages, will be released for public consultation by the end of the year, according to the NSW Commissioner of Fair Trading, Lyn Baker.
The legislation is being drafted by the NSW Office of Fair Trading as a national project of the Ministerial Council on Consumer Affairs, which will eventually give it currency throughout Australia.
Speaking at a Sequal conference on reverse mortgages, Baker said that “licensing and, more particularly, probity checks in terms of fair trading” would be a key plank in the general framework of the legislation.
Another key plank is “mandatory membership of an external dispute resolution scheme to ensure that brokers operate fairly and competently”, she said.
In the absence of any draft details forthcoming from Baker, according to Sequal executive director Kieran Dell, the implications of the legislation for planners (and brokers) would “remain unclear” until the draft is released.
“We won’t know the situation until we see what the requirements are to get a broking licence, and we don’t know whether financial planners using products like reverse mortgages will be carved out of that requirement.”
Dell said the “current position of the legislators” might be for the draft legislation to require planners to have a finance broking licence to sell any credit product, including reverse mortgages.
“In this case, planners will have to either get the broking licence or place the business with a finance broker if they wish to access a credit product, including a reverse mortgage.”
However, it may also be that the legislation enables planners to sell a reverse mortgage without necessarily placing it through a finance broker, which would make the process easier for planners, who are already heavily regulated.
“Sequal believes that a reverse mortgage needs to be treated slightly differently to a standard mortgage, as it is also a retirement income product, and it therefore could be argued that it is already covered by a planner’s ‘need to know’ and other FPA [Financial Planning Association] requirements.
“Probably the best scenario, therefore, would be rather than a planner having to get two licences, a planner’s FSR [Financial Services Reform] licensing requirements could be extended to cover their ability to use reverse mortgages, assuming they are required to obtain the necessary educational qualifications in this area.”
