The corporate regulator will undertake a shadow shopping exercise on the mortgage broking industry to investigate whether “advice” from brokers results in “positive consumer outcomes”.
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.
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