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Financial planners not needed in credit space: CBA

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Reporter 7 minute read

Bringing financial planners into the credit space would be unnecessary, according to a Commonwealth Bank executive, as there are more than enough brokers to service the mortgage needs of Australians.

The Commonwealth Bank’s executive general manager of retail services, Angus Sullivan, was speaking at the second day of public hearings for the Productivity Commission’s inquiry into competition in the Australian financial services sector on Thursday, 1 March, when he was asked to comment on whether financial advisers should be given the power to provide credit advice.

Mr Sullivan rebutted the case put forward by CHOICE chief executive Alan Kirkland that the commission’s draft proposal for advisers to provide credit facilities “had merit” (assuming the best interests duty still applied), arguing that the mortgage needs of borrowers are currently being well serviced by brokers.

The CBA executive said: “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. For me, it’s certainly not a quantity issue.


“I don’t think the industry is short of brokers, and I don’t think a move to bring planners into the credit space [is] necessary.”

Mr Sullivan noted that complexities surrounding mortgage advice would be difficult for financial planners to manage.

“It would be quite hard, in my experience, to find an individual who would be able to easily get across both domains,” Mr Sullivan added.

The Productivity Commission has proposed changing credit licensing arrangements to allow financial advisers to provide advice on some credit facilities.

In its draft report on competition in the Australian financial system, the Productivity Commission noted that financial advisers must also seek licensing under the separate credit licensing regime in order to provide advice on credit facilities.


“Some view this as a duplication of regulatory requirements, although ASIC has provided guidance to avoid duplicating processes,” the draft report said.

“The separate regulation and processes appear to be a historical legacy, restricting the flow and potentially the quality of information available to consumers when they seek financial advice from an adviser.”

The draft report proposes changing the current licensing regime to permit advisers to provide clients with advice on “some credit facilities”, arguing that doing so will increase competitiveness in the credit space and provide clients with a better advice experience.

“The benefits of having a single or hybrid licence would appear, at least on first principles, to allow greater flexibility of service provision, overcoming the need for two licences,” the draft report said.

“There would also be benefits to consumers receiving more holistic advice in one professional relationship.”

Advisers’ best interests duty could then also extend to credit products, the draft report said, ensuring further benefits to the end client.

Vertical integration

The PC has also alleged that brokers working for lender-owned aggregators could feel compelled to provide customers with home loan products offered by the bank with an ownership share of the business.

Commissioner Stephen King referenced CBA’s ownership of Aussie Home Loans and cited figures published in the PC’s report, which said that 37 per cent of loans written by Aussie brokers were for CBA products.

“Common sense says that if you’re a broker or an aggregator working for a Commonwealth Bank-owned body, you’re going to feel some obligation, loyalty or perhaps explicit pressure to write more Commonwealth Bank product,” Mr King said.

Mr Sullivan defended CBA’s ownership of Aussie Home Loans, stating that the bank had endeavoured to maintain the brokerage’s independence and uphold customer trust in the Aussie brand.

“Our acquisition of Aussie was motivated by the opportunity to acquire a high-quality franchise, one that was very highly regarded by Australians, and one that spoke to a segment of customers to whom the Commonwealth Bank doesn’t. We saw it as additive to use.

“It’s very important to separate the two quite materially different categories of loans that were originated through the Aussie platform.

“I accept there’s a potential for the perception of a conflict of interest, but we’ve run that business quite independently of the CBA Group to ensure that the brand and the trust that customers place in the Aussie franchise is maintained through our ownership of it.”

Many in the industry have spoken out against the Productivity Commission’s draft report, with some suggesting that the remuneration figures cited are “incorrect”, others stating that the recommendation to charge fees would be “anti-competitive”, and both broker associations calling out some findings of the report (which relied heavily on figures from CHOICE consumer group and UBS reports) as “limited”, “amateur” and — in some cases — “nonsense”.

The public hearings for the Productivity Commission continue in Melbourne on 5 and 6 March, with Suncorp and the Finance Brokers Association of Australia (FBAA) providing information to the commission.

[Related: Productivity Commission looks at swathe of broker changes]

Financial planners not needed in credit space: CBA
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