Speaking during a public hearing with the Productivity Commission, Commonwealth Bank general manager of retail sales and services Angus Sullivan said the credit market did not need more people providing mortgages and that the Productivity Commission’s proposal to change the licensing regime so advisers can provide credit services under an AFSL isn’t needed.
“With 16,000 brokers out in the marketplace, we’re certainly not in a position where we need more people to serve Australians well in meeting their mortgage needs in terms of broker comparison,” Mr Sullivan said.
“For me it’s certainly not a quantity issue.”
Mr Sullivan added that it would also be difficult for anyone to appropriately provide both financial advice and mortgage services.
“It would be quite hard, in my practical experience, to find an individual who would be able to easily get across both domains,” they said.
However, Mr Sullivan subsequently said he did “not have a particularly strong view one way or the other” and that the proposal to “put a professionally trained wealth manager into a sphere where professional training is less emphasised” would not add risk for consumers.
He went on to say that there may be “more direct ways” of dealing with quality of mortgage broking services than the PC proposal.
Speaking before the Productivity Commission last week, consumer advocacy group Choice said it would support a change to the licensing regime so long as existing regulation requiring financial advisers to act in their clients’ best interests is extended to the provision of credit services.
“If that duty would continue to apply and they would be able to provide mortgage advice without requiring a separate licence then we think there is merit in considering that,” said Choice chief executive Alan Kirkland.
Clarification: A previous version of this article suggested that CBA “rejected” the Productivity Commission proposal to allow licensed financial advisers to provide credit advice without an Australian Credit Licence. The article and headline have subsequently been amended to introduce additional quotes from the transcript and clarify the bank’s nuanced, if somewhat contradictory, stance on the proposal.
What a dumb idea – we will see planners say to a client “let’s take $400,000 out of your home equity and I will invest It for you”
You thought we had trouble with Storm
For a client on the top MTR with excess cashflow, aggressive risk profile, and plenty of years to retirement, what’s wrong with tax deductible borrowing at 3.6% to invest in a concessionally taxed investment portfolio returning 8-10% with no margin calls?
The Storm model was [i]double[/i] gearing and was therefore much higher risk and subject to margin calls. It was promoted to people on modest incomes and retirees. Completely different situation.
You raise a good point in that Storm is the catalyst for Credit licensing. However, hang on FASEA will stop that, FoFA was mean’t to prevent that as well and best interest obligations too. Sorry the world didn’t fall apart prior to Credit Licensing regime coming into affect.
The FPA will now just cut and paste this as a press release given the payments they get from Commonwealth Financial Planning. As it has been said by CBA as it is now policy of the FPA. So it will be done.
I guess soon the CBA will be calling for Planners to have a degree as a solution to preventing a Royal Commission and that will be FPA policy as well…oh wait that’s been done already.
I think as an industry we need to make up our mind about whether commission is a conflict or not.
Im no FPA fan but its the pot calling the kettle black saying they are in CBA’s pocket because they receive fees from them while crying about LIF…
SD I can answer that for you. The first is that there is growing divide between the charging method of advisers and the remuneration activities of the FPA. Insurance commissions and past grandfathered commission are legally required to be disclosed whilst the FPA hides their commission as “member” fees. Secondly, conflicted remuneration, commission on investment products are now obsolete whilst the FPA feels it’s ok for the FPA to continue to get hidden payments from CBA/CFP. The third issue is the FPA actively promotes themselves as the peak professional body. I haven’t seen any planner advertise they are professional nor would they be so arrogant. The fourth issue is we are sick of over regulation and maybe some us want them to be leaders, for them to behave in the same manner as other professional bodies, if they are ever to be taken seriously by the Government. Until then they are the puppet masters of CBA.
Surprise Surprise!
The CBA don’t want any more competition to reduce their profit margins.
As usual this has nothing to do with what is best for consumers but everything to do with the FSC members protecting their income streams while eradicating or stifling the competition.
So Choice want Financial Advisers to be subject to best interest duty when providing credit advice, but they are happy for mortgage brokers to not be subject to the same requirement for the same advice?
Actually Adam they want Mortgage Brokers to be subjected as well. In this context they were saying that just because an FA provides credit advice it doesn’t mean BID wouldn’t apply.
Registered Tax Agents (accountants) receive an exemption from Credit licensing obligations. However for a planner to give very specific advice and say Dear Consumer we recommend you payout your Westpac Home Loan Number 1 their are certain warnings etc that are required. This a move, more around reducing red tape as opposed to planners actually wanting to provide credit advice.
Yep, it smells of CBA best interest aka profit erosion, reduced competition etc. same old story, CBA culture which is the root of all our current situation. Think about the history and current situation- lets see if management is forced to face prosecution for past and present activities.
A mortgage is one of the biggest financial products a client will own yet very few advisers actually provide advice in this area, particularly around strategies to repay the loan sooner. Personally, I see it as a big growth area for smart advisers who want to help clients with cashflow management and debt reduction.
Totally agree
Advisers are well placed to understand the clients objectives and provide advice on both the asset side and debt side. knowing your client and best interest requirements would only enhance client outcomes.
There’s plenty of advisers also doing mortgage broking right now. Sure, it takes a while to do the specific training on products and processes, and get all the relevant accreditations. But once completed there’s a lot of synergy between the two fields.
No surprise that CBA wants to reduce mortgage broker numbers. Mortgage brokers enhance competition and provide customers with a better deal than going direct in most cases. For CBA that is profit erosion.