Westpac CEO Brian Hartzer has warned brokers they will be next in line to face regulatory scrutiny following an outbreak of financial planning scandals in recent years.
Speaking on a panel at the 2015 Aussie Sales Conference in Melbourne yesterday, the Westpac chief executive cautioned brokers not to assume that the current third-party model will remain the same.
“There has been a lot of scrutiny [of] financial advisers in the last couple of years for good reason,” Mr Hartzer said.
“Mortgage broking is probably next,” he said. “Don’t assume that the current model is just going to keep motoring on.”
Mr Hartzer joined Westpac in November last year, replacing Gail Kelly as chief executive officer. Prior to joining Westpac, he spent three years in the UK as CEO for retail, wealth and Ulster Bank at the Royal Bank of Scotland Group.
“In the UK, interest-only loans are now only a fully advised product,” Mr Hartzer said.
“A fully advised product means you have to be able to demonstrate the customer’s ability to pay, that you have evidence of that, and that the product is suitable.
“I think you will find the regulators are going to be increasingly asking questions about sales practices in mortgage broking.
“They are worried about us [the banks] from a responsible lending point of view and are already saying to us, ‘So the broker is your agent in this transaction; how have you assured yourself that what the broker is telling you is correct?’
“That is going to become more of a feature. My advice to brokers is don’t wait for [the regulators] to come after you. Start thinking now about how you’re going to manage that,” he said.
Aussie Home Loans founder and industry veteran John Symond, who joined Mr Hartzer in yesterday’s panel discussion, defended brokers by outlining the compliance burden that has now become commonplace across the third-party channel.
“If you were to ask our brokers what their greatest frustration is,” Mr Symond said. “The amount of time and energy they now have to put in to comply is growing and growing and they would now put in more than half an hour extra on compliance issues.
“There is a lot of responsibility now thrown on brokers because at the end of the day the regulators are saying it is the responsibility of the lender and broker to ensure that the borrower can afford that loan."
[Related: MFAA defends brokers, COBA defends itself]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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