After the Australian Securities and Investments Commission released its report into broker remuneration last year, Michael Saadat, ASIC senior executive leader for deposit takers, insurers and credit services, told ifa sister title The Adviser that the commission would be undertaking a shadow shopping exercise in this financial year.
The shadow shopping of brokers, thought to include the experiences of hundreds of broker clients, aims to understand the inputs and advice given to mortgagors.
In an update this week, Mr Saadat said, “While broker remuneration practices may have an impact on home loan choice, ASIC recognises that a range of other factors influence which home loan products are purchased, and that the purchase experience may vary across purchase channel (i.e. via broker compared to directly from a lender).
“As part of our ongoing review of mortgage broking practices, we are undertaking consumer and broker research to better understand the home loan purchase process, particularly to determine what factors (beyond broker commission) affect how and which home loan products are purchased, and whether and how consumer outcomes could be improved.”
The objectives of the shadow shopping exercise are also being evaluated under the lens of “good consumer outcomes”, with ASIC this week revealing that the objectives of the project are to “gain insight around how consumers purchase home loans”, identifying “critical events” in the purchase process, understanding the “key inputs and decision-making criteria at critical events” and determining how behaviour is “influenced” during the purchase process.
ASIC will also seek to understand “how the broker shapes which product is purchased and whether the advice offered results in positive consumer outcomes (e.g. making an informed choice, purchasing products that meet needs, being provided with the right amount and relevant information to be able to make a choice)”.
Another of ASIC’s new projects will focus on reverse mortgages, with a public report to be released in the first few months of next year.
I just bet you that Asic’s recommendations after this review of mortgage broking practices will be to cut mortgage broker commissions as this will undoubtedly improve consumer outcomes. Just as they will with LIF.
Exactly “Power to the banks”, i agree with you.
And it stinks of O’Dwyer continually trying to kill off Advisers and Brokers to feed her Institutional buddies.
Advisers and brokers seriously need to get rid of O’Dwyer – she is a cancer to our profession.
Agree with the sentiment but you need to reframe the argument. The sensationalist press has done such a hatchet job on advisers and brokers that no-one cares about their survival. O’Dwyer is sticking the knife in now because they are easy PR targets. However it is consumers who will ultimately suffer. It is pointless complaining about the damage to our “industry” or “profession”. The spotlight needs to be shone on the damage O’Dwyer’s changes will cause for consumers.
I understand they should receive a fee for establishing the mortgage, after all, they need to be remunerated for their work. But why they should also receive a trailing commission without having to justify it escapes me. While it is a commercial payment from the lenders to retain broker support, there is no value to the customer. Perhaps these payments could be considered during the RC into banks.
And whats the difference between that and ongoing insurance commissions…?
For the record I agree.
Ongoing insurance commissions generally pay for regular reviews and adjustments to cover as clients’ requirements change, and assistance with claims when needed.
trail commissions on mortgages also pay for the same, 20k top ups and or product changes and variations which take substantial time and effort for which there is no payments made to the broker by either the bank or the client
just because financial planning is imploding don’t cast aspersions on other professionals, last year FOS reported nearly 600 disputes lodged against FP’s 7 were lodged against mortgage brokers
take the log out of your eye before ….
That information is completely incorrect. #fakenewsmrkonichiwa
Real stats for those interested:
FOS accepted 22,475 disputes in 2016-17. Of these, there were:
10,973 credit disputes (43%)
8,756 general insurance disputes (35%)
1,861 deposit-taking disputes (7%)
1,331 payment system disputes (5%)
1,292 investments and advice disputes (5%)
1,018 life insurance disputes (4%)
– Of credit disputes (24% or 2,633) involved home loans
– Of investments and advice disputes, 25% involved mixed asset funds (investing in multiple asset classes such as cash, bonds, shares and property), and the main issue was inappropriate advice (24%). In life insurance, almost half (48%) the disputes involved income protection insurance, and the main issue was denial of claim (26%). (Total 1,292)
This is why you’re now getting hit with the naught stick.
Just face facts, there’s bad eggs in both industries. the difference is, they’ve been cleaning out FP for a few years now and their attention is now speading to other areas.
With respect, the hours spent on that is incomparable to what occurs at claim time. Upwards of 50 hours can easily be spent on a claim, trail comms seldom cover what is involved from this perspective.
Awesome, they are out of control. I sat in one meeting where the mortgage broker was advising the 30 yr old clients that they definitely need an SMSF so they can buy an off the plan apartment in Brisbane and, then they can also buy an off the plan apartment in Brisbane outside of super. She couldn’t even be bothered disclosing the massive conflict of interest she had which was the commission she received from the property purchase via the developer and the funding to buy it. Needless to say I counselled the clients against it and cut the mortgage broker away. I know where the dodgy people from Financial Planning have gone, they’ve gone into mortgage broking.
This example isn’t necessarily bad mortgage broking. It is unlicensed financial advice. Exactly the same as what a lot of accountants and real estate agents do. Unlicensed financial advice is where the real damage is being done to Australian consumers. ASIC needs to refocus its efforts on stopping rampant unlicensed advice, regardless of who is providing it.
I asked the guy at the TPB when he happily took my money when we could expect that real estate agents are going to be registered, given that the prior weekend I had been told what a great tax strategy the property I looked at would be. TPB was confused.
yeah they are out of control that’s why the government is regulating you into oblivion because there is a problem with mortgage broking, yeah right. folks. please see the cold hard light of day, financial planning in it’s current form is a disaster
everyone thinks so. most of all your masters. and it doesn’t matter what you think because your masters don’t care, and the masters think you lot [b]suck[/b] and have to go back to school again, even if you already have a degree
jokes on you, and everyone is laughing at you because your industry is a disaster
and your best comebacks are to send an email to Kelly O’Dwyer. really that’s your comeback? you are going to write an email to Kelly O’Dwyer
please you gotta do better than that.
Yea and what qualifications have you got mate. I bet the only education you have is a cert III and if that at all.
only a cert IV, that is held in high regard by ASIC, enough said pal
They’re coming for you, get ready and pucker up.