The head of the Mortgage & Finance Association of Australia has called on brokers to consider ASIC’s upcoming shadow shopping exercise into broking as an “opportunity to improve your industry”.
Speaking to The Adviser about the Australian Securities and Investments Commission’s (ASIC) impending shadow shopping exercise that seeks to establish whether “broker advice” results in “positive consumer outcomes”, the CEO of the MFAA said that the exercise represents an opportunity to showcase the “great service” of brokers.
CEO Mike Felton said: “When you are an industry that is doing the right thing, there is no need to hide from external scrutiny; you use it as an opportunity to improve your industry.
“Broadly, I think that if a broker was faced with a situation where they felt that they were being shadow-shopped, they should do what they normally do — provide a great outcome to the consumer, thoroughly consider the consumer’s requirements and objectives, provide the appropriate set of product choices that match their needs and affordability, and take reasonable steps to determine and verify their financial situation.”
Noting that brokers should ensure that the entire process is “properly documented with all disclosures required”, Mr Felton said that this was particularly important if it is for an interest-only loan.
“ASIC have been very clear on this… [so brokers] have to go to the next level in demonstrating, very clearly, that there is a clear justification on file that demonstrates why the interest-only product meets the customers’ needs, particularly in the light of the fact that interest-only has a higher cost.”
He added: “But that is what brokers do. [So], we would say: ‘Provide the great service and outcome you normally provide, and you should be fine’.”
‘Education is important, experience is critical’
Noting the recent discussions around minimum entry requirements for brokers, Mr Felton told The Adviser that he believes “education is important [and] experience is critical” for new brokers coming into the broking industry, adding that stakeholders need to work together to “accelerate the learnings of new-to-industry brokers”.
The CEO of the MFAA said: “From my perspective, education underpins professional standards, and I think it is one of the key components in moving mortgage broking from an industry to a profession.”
However, while Mr Felton said that “education is important”, he added that, “clearly, experience is critical”.
Noting CBA’s recent decision to change its accreditation requirements for new brokers, Mr Felton said: “It is in nobody’s benefit to have inexperienced brokers writing deals that are not good outcomes for consumers or for lenders. Having said that, if we expect them to have the knowledge and skills to represent the industry appropriately, we need to be investing in that education and training so that they have the required capability.
“The risk of not accrediting new brokers for two years is that it creates barriers to entry and limits their ability to earn an income and gain that experience during that period. I think it is up to all stakeholders to ensure that we do all we can to accelerate the learnings of those new-to-industry brokers. But clearly there is an issue and it is one that requires a solution… whether that solution is related to the mentoring framework or to quality metrics or benchmarks, we certainly do need to find a solution.”
Mr Felton said that he believes it was imperative that brokers “gain experience as quickly as possible and gain the education training so that they are putting out deals that have good outcomes for consumers and lenders, [which] is in everyone’s interest”, particularly given that there is “significant churn in new-to-industry brokers”, which is “not good for [the] industry”.
Mr Felton concluded: “It is in everybody’s interest that [churn] is reduced, so we do need to find solutions and I think the focus is now on that.
“We all have a role to play — lenders, aggregators, mentors and the associations — in making sure that happens as quickly as possible.”
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