In a statement, Aged Care Steps said ASIC had recently confirmed that changes to the pension loan scheme outlined in the federal budget will mean advice on the pension loan scheme will fall under the authorisation of the Australian Credit Licence regime.
“This means that unless an adviser is authorised under an Australian Credit Licence, they cannot provide advice on the pension loans scheme and will be limited to strategy advice on the use of equity release options in general,” said Aged Care Steps director Louise Biti.
“If not authorised and clients wish to investigate which equity release product is appropriate (including the use of the pension loans scheme) advisers can refer them to a licensed credit broker who understands the pension loans scheme or to the Centrelink Financial Information Service.”
While the legislation has not yet passed, it is slated to become effective from 1 July 2019.
As an experienced reverse mortgage adviser of 15 years, I have long released equity release as the “fourth pillar” of retirement income. Along with that comes a requirement to have competency in Centrelink and aged care rules and regulations. As per the UK market where equity release is now regarded as a main stream lending product, advisers will be required to sit for a course over 1-2 days, with ongoing CPD, and achieve an accreditation.
Specialisation is important for products used by older Australians and ASIC must surely see the need for accreditation to achieve responsible lending to retirees.
So people could go to a Mortgage broker (no best interest obligations) and get the old bait and switch into a nice commission paying Reverse Mortgage as opposed to an adviser that would charge them a fee for the advice. It’s only a matter of time the rates of Reverse Mortgage fall to a comparable level.
Just to inform you that
1) a credit adviser has regulatory requirements to ensure the loan is “not unsuitable” for the client’s needs – similar to best interest obligations.
2) a Commission for an average reverse mortgage loan is somewhere between $540 and $900 – a lot different than an financial adviser who charges an advice fee.
3) A reverse mortgage has a higher rate of interest as the lender has no regular repayments and may wait 10+ years to receive their return
ACL LOL yes that will protect the consumer and they’ll be informed of Centrelink and Aged Care implications (not)
So now it seems that Centrelink (via the PLS) is a product? WTF.
And since when is a pure Accountant authorised to advise on Social Security.
A more reasonable approach would be:
– Allow Financial Advisers to discuss PLS re: Social Security, Aged Care, and cashflow implications
– Then Financial Adviser advises the client to speak with their solicitor to understand the legal and estate planning implications re: hocking their home to the Fed Govt.
The current ACL proposal is amazingly deficient. Mind blowing.
Agree, under the BID the adviser would likely have to refer them to a Solictor for perhaps legal advice about the contractual terms. A mortgage broker or Registered Tax Agent (being exempt under the Credit licensing obligations) would have no such obligation.
It is mandatory for a credit adviser to inform the borrower that they must obtain independent advice on the terms and conditions of their loan
An accredited reverse mortgage specialist will discuss Social Security, aged care and cashflow with clients, as that is required under suitable lending in the National Consumer Credit Protection Act.
An adviser will also inform the client they must see an idependent legal adviser – its a requirement for a reverse mortgages – please note the solicitor is only required to advise on the terms and conditions of the mortgage documents.
Importantly each borrower is shown and given a copy of the forward projections of their loan, detailing the forecast net equity over 5, 10 and 15 periods. This forecast is used an indicative capacity to pay for aged care if needed, or a discussion around inheritence to benefiiaries
This is failed before it gets off the ground. It’s a joke considering Treasury and their review into income streams have floated this as the income stream of the future. So people could go to a Mortgage broker (no best interest obligations) and get the old bait and switch into a nice commission paying Reverse Mortgage as opposed to an adviser that would charge them a fee for the advice.
Two points to note. 1) Registered Tax Agents (Accountants) are exempt so that tells you what ASIC thinks about Financial Planners
2) This is policy measure that directly impacts all Australians and Advisers. Yet the FPA has remained silent on this issue, no objection, not interested in advisers opinion. Is this because of their close relationship with competitors to this program….the Big Banks? A direct conflict of interest caused by the Professional Partner Program. Silent on this issue and not a word on the Dover issue. Not an apology to the members about the disrupt they’ve cased as a result of handling the Henderson issue. You’d have to question the value of renewing FPA membership fees in June.
The WTF??
ASIC is there to enforce, and at times interpret, legislation, not make it. Without a change to the NCCP Act how is ASIC going to avoid the current exemption included in it for credit offered by “public authorities or instrumentalities or agencies of the Crown in right of the Commonwealth, in right of a State or in right of a Territory”
Are you serious?