Vow Financial chief executive Tim Brown told ifa that mortgage brokers’ better understanding of the needs of everyday Australians gives them an advantage over financial planners when it comes to providing advice around life, risk and income protection products.
“Planners have not done a very good job of looking after clients in this space, brokers are just more in touch,” Brown said.
“I don’t believe planners have actually spent a lot of time looking after the needs of the largest segment of the market.”
“They’ve spent most of the past twenty years focusing on the top 5 per cent of income earners, whereas the average broker deals with mum and dad investors every day.
While agreeing that financial planners are better placed to offer advice on “equities and things like that”, Brown said mortgage brokers are more qualified to advise on all property-related investments.
Brown includes self-managed superannuation funds (SMSFs) as one of the areas where brokers have the upper hand.
“We find that too many planners are pushing clients into SMSFs,” he said. “Many trustees that don’t meet the threshold of $150,000 in super are being placed into SMSFs on their planners’ advice.”
He also said changes in the financial planning industry and diminishing number of “independent” planning practices were working in favour of mortgage brokers.
“It’s very rare these days to find someone operating completely in their own space as a financial planner, but many brokers are still ‘one-man bands’ and that appeals to the bloke in the street.”
Well Tim seems a little self interested here. It really is a specialist field and brokers have little knowledge of this area and offerings to become risk specialists.
I am really disappointed with a mortgage brokers solution for a client in Lismore who was offered a (Mortgage) Protection Plan with Australian Life Insurance. This limited trauma and life cover is not underwritten and by ticking a box for any of many current conditions (diabetes in this case), there become a full exclusion for many of the trauma conditions and the broker made comment that there are no issues here to worry about. So the insured had a stroke and the claim was denied! It was a policy covering very little after the automatic exclusions and the “trained” broker should have referred this to a specialist adviser or found another insurer. he has left the family fighting to keep there home. Very sad and damaging to the industry.
Tim Brown is surely drinking the cool aid to suggest that Mortgage Brokers are better positioned to assist so called mums and dads in the provision of financial planning advice (including RISK, SMFS etc).
Mortgage Brokers simply SELL (for a commission) mortgages as a purely transactional process. Planners however need to understand what the client is trying to achieve and assist them in a broad sense (including budgeting / estate planning / superannuation / other structures / investment planning / debt management / social security maximisation and so on) – While some planners have let down their clients and the profession also – the majority have greatly improved their client’s lives.
If I want financial advice I will see an independent financial planner not a mortgage broker. I would suggest that Tim Brown needs to seek to understand what we do prior to making any other comments.
I am a financial planner with 15 years experience and work with mortgage brokers.
The generalisations in this article appear to be one persons opinion rather than based on any evidence.
There are planners that work with the top end of town HNW set but many also work with “mum and dad” clients too.
Mortgage brokers are by and large honest and hard working but have almost across the board have no qualifications, experience or skills in the life insurance/income protection field.
Additionally, I know many advisers and talk to them regularly and not one of them “pushes” clients into SMSFs. It is usually accountants that suggest SMSFs to those that can’t manage or don’t need them.
Tim, ease up on the sanctimony and the generalisations, because its a game we can all play.
Your workforce is commission based and paid on draw downs. If they were to offer advice on insurance to their clients, I should imagine it would involve third party enforcing. “You dont get the loan unless you sign for the insurance.”
The fact that you used the term “equities and things like that” only reiterates your ignorance about the process and that you are only looking for another product to flog your captive audience.
You are more than welcome to visit my client base and see the results of the predatory lending your industry is responsible for.
Whilst I am embracing the changes to our industry, I simply cannot wait until its your turn.
What would Tim Brown actually know about client advise? Has he ever had any direct client engagement?
Surely he is kidding himself comparing an unqualified broker to a financial planner
Solution = brokers should refer clients in need of having the risk protection conversation to a suitable qualified and experienced financial planner. A fair and appropriate (and transparent and disclosed) fee for the broker could be used to reward them and encourage them.
This way the broker could focus on being a broker and the planner could focus on the risk, as well as have a total discussion also exploring other needs they client may have. For example, what if they wish to use super money to pay for cover? Then the broker would also need to be an expert in super, etc, etc. Too messy. As a planner, I know there is money to be made in estate planning (wills, etc) but I dont offer these myself, I on-refer to a solicitor (without any reward I might add – my focus is on ensuring the client is protected).
Well it had to come really. Mortgage Choice, among others has also entered the financial planning arena.
I am totally opposed to mortgage brokers entering this industry, unless they obtain the appropriate experience and qualifications necessary.
Why is this happening? The reasons are obvious. There is majority dissatisfaction with the planning industry. A product selling mentality, lack of true independence, and commission based payments, have given the public the incorrect assumption, that we are all the same.
The cowboys (product floggers) are slowly but surely being
squeezed out, but they have left a legacy of mistrust, an image that will take years to rectify.
Keep sensible reform coming, but don’t go over the top with meaningless regulation.
Nice bit of generalisation there Tim! Not too many facts, just a bit of barrow pushing. Do you think these brokers would need to get additional education or are you happy that “gives then an advantage” to “providing advice around life, risk and income protection products” because they are allegedly “in touch”? How, I am pretty sure most specialist “riskies” are at least as in touch than the average mortgage broker on what & why personal insurances are needed. Maybe you should be teaching your brokers to refer to risk specialists – problem solved!
Most loan brokers are good at working out the best loan and in today’s climate we are being driven towards being niche operators and would be best for all if we worked together as the person’s professional team.