ASIC’s remuneration review could see lenders and aggregators increase their scrutiny of mortgage brokers, who would be identified using a “unique number”.
The sixth proposal of ASIC’s review of mortgage broker remuneration states that lenders and aggregators should improve their oversight of brokers and broker businesses.
ASIC expects aggregators to actively monitor the consumer outcomes being obtained at a broker and broker business level, including those relating to loan pricing, features, clawbacks, refinancing and default rates, and distribution of loans among lenders. Aggregators are expected to retain this information and provide it to ASIC as the regulator looks to continually monitor outcomes across the third-party channel.
“The aggregators will need to gather more information on their brokers, where their loans are going and what type of loans they are writing. Aggregators will need tools to audit and ensure brokers are doing the right thing by the consumer,” Outsource Financial CEO Tanya Sale told The Adviser.
“ASIC will be asking the aggregators what processes they have in place to ensure that the consumer outcomes are being met,” Ms Sale said.
While this creates additional work for aggregators, it could also have a significant impact on the way brokers run their businesses. However, Ms Sale believes brokers should embrace change and consider the opportunities.
“Don’t look at the glass half empty. Realise we are going to make an even bigger impact now. We will have even further information and processes to help us better understand the wants and needs of consumers,” she said.
ASIC has also recommended that lenders increase their oversight of aggregation groups. Lenders are expected to provide consistent reporting to aggregators to allow adequate oversight of brokers.
If implemented by Treasury, these recommendations will mean lenders, aggregators and brokers will need to implement new reporting processes to meet the new regime. This was highlighted in ASIC’s review, where the regulator states that “a consistent process” must be used by lenders to identify each broker or broker business. The regulator suggested using a “unique number” provided by the aggregator to identify each broker.
Ms Sale believes the provision of “good consumer outcomes” must include educating clients.
“How can we provide good consumer outcomes if the consumers don’t understand the lending process?” she said, adding that aggregators have “a big part to play” in providing the tools to their members to be able to educate their clients.
[Related: Aggregation market to 'mature' to disrupt]
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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.