In its draft report on competition in the Australian financial system, the Productivity Commission noted that financial advisers must also seek licensing under the separate credit licensing regime in order to provide advice on credit facilities.
“Some view this as a duplication of regulatory requirements, although ASIC has provided guidance to avoid duplicating processes,” the draft report said.
“The separate regulation and processes appear to be an historical legacy, restricting the flow and potentially the quality of information available to consumers when they seek financial advice from an adviser.”
The draft report proposes changing the current licensing regime to permit advisers to provide clients with advice on “some credit facilities”, arguing that doing so will increase competitiveness in the credit space and providing clients with a better advice experience.
“The benefits of having a single or hybrid licence would appear, at least on first principles, to allow greater flexibility of service provision, overcoming the need for two licences,” the draft report said.
“There would also be benefits to consumers receiving more holistic advice in one professional relationship.”
Advisers’ best interests duty could then also extend to credit products, the draft report said, meaning the possibility of further benefits to the end client.
“[Consumer advocacy group] CHOICE provided a comparison of the regulatory obligations of mortgage brokers with financial advisers, concluding that ‘brokers are being held to a relatively low standard’,” the report said.
No thanks. But there will be enough poorly advised persons who think its a good idea. ASIC has already run a third line forcing charge recently-stand by for lots of dummy shoppers
This is seeking to attack mortgage brokers’ commission which has been on the govt’s agenda for some time now. By moving then under the AFS regime the conflicted rem provisions will apply. Destroyed life advice, now let’s move on to destroying the only mechanism to promote competition between the banks- brokers….
This Govt’s reform agenda is like the US bringing democracy to other countries….
Fed up with brokers masquerading as planners. Muppets.
mortgages should become a financial product with a requirement for an soa etc
As someone that does mortgage lending and advice it would be very handy to deal with a single licensing entity. It’s a little confusing though because aggregators own clients in the mortgage space so you can’t really move or change anything without basically churning your clients. One change they need to make is to break the nexus of integrated commission payments. We charge a fixed fee for service and the conflicted payments from lenders that we can’t turn off are a major pain in the neck to rebate manually.
The majority of clients have debt that far outweigh their assets outside of the family home and so as Advisers we are restricted to talking about the smaller portion of their financial situation. I have dealt with clients that have been victims of predatory lending whereby they have not only mortgaged their present but also their retirement by mortgaging their SMSF. Where are the best interests duty for the Brokers. By allowing Advisers to give advice on mortgages, it brings it under the fiduciary umbrella which will ultimately protect the client from product flogging and strengthen the relationship.
Agree with the sentiment but I don’t think “predatory lending” is the root cause of many of these problems. Unlicensed investment advice by real estate agents and conflicted SMSF advice by accountants is the real problem. Many mortgage brokers are just riding the gravy train driven by accountants and real estate agents.
awesome bring back commission, back to the ‘good ‘ol’ bad days…
I’m a bit slow today . . . are you saying that tongue-in-cheek or do you mean bring back commissions?
I think he is “taking the piss” but you can never be sure
You can’t compare financial planning with mortgage broking when looking at regulations. FP, if advising on investments, are using the clients money, whereas brokers are assisting with clients borrow money. If the mortgage isn’t suitable the client can refinance at a relatively low cost, on the other hand if the investment goes wrong, and the client loses money it can have a wider impact on the clients life. No comparison.
“If the mortgage isn’t suitable the client can refinance.” In my experience if the mortgage isn’t suitable the client comes to me aged 64 with $300,000 in a line of credit, crying in my office, and expects me to get a magic wand out.
How about the client who over extends themselves (with the help of their mortgage broker) to buy investment apartment / property for example? Buys a million dollar property off the plan which he then has trouble renting so decides to sell. Buy price was originally inflated and the market has now corrected slightly, due to the many unsuspecting clients who fall into this trap.
Client can’t refinance as now he owes as much as the property is really worth and there are a lack of buyers to buy the property. Potential losses in the hundreds of thousands in just a few years when he does sell. I have many stories like this of clients who were ill advised and became over extended.
No comparison is right! Don’t even get me started on the hidden kickbacks going on also.
As Choice magazine said Mortgage “brokers are being held to a relatively low standard”.
For once I agree with Choice and it’s about time they cleaned up that industry to the same best interest and compliance standards that financial planners are expected to operate at.
I have to wind up two super funds as the property has not performed, it is not producing rent and the clients SG contributions do not cover the interest payments. They cannot borrow more because they are 90% lent on their personal property. The properties within the fund cant be sold as there are 30 similar properties on the market. Are you of the mindset that property doesn’t fail because I have 10 years of data I can show you. Having an asset that has a large debt that cannot be sold would have more of an impact on the client I would think.
“If the mortgage isn’t suitable the client can refinance at a relatively low cost”. Actually no, they can’t in many cases. This is often the problem with an unsuitable loan. Once the client gets into difficulty and realises they have taken on too much debt, or purchased an overpriced asset, or their serviceability assumptions were wrong, they can’t refinance.