The Financial Planning Association has backed calls for financial planners to provide credit advice, but it said that changes need to be made to ensure that the sector is not “tainted” by the issues associated with brokers.
In its response to the Productivity Commission’s (PC) draft report findings and recommendations concerning the broking industry’s effect on competition in the financial services sector, the Financial Planning Association (FPA) outlined its support for measures that would broaden the scope of financial advice, allowing financial planners to provide customers with credit advice.
The FPA has also called for reforms that would enable financial planners to provide credit advice under the Australian Financial Services Licence (AFSL), bypassing requirements for an Australian Credit License (ACL).
In its submission to the PC, the FPA recommended that financial planners be permitted to provide advice on:
Disparity in standards
However, the association has called for a number of changes to be implemented before these offerings could be rolled out.
The FPA submission reads: “While the FPA supports the intent of the Commission’s recommendation to expand the scope of financial advice to include credit products, and the consumer benefits this would deliver, consideration should be given to the following concerns associated with this proposal:
“These concerns present the risk of an inequitable market for financial planners.”
The FPA has therefore called for a “level playing field” for financial planners and mortgage brokers, arguing for mortgage brokers to be subject to a best interests duty, as financial planners currently are.
The best interest obligation should apply to all mortgage brokers, the FPA said, not just lender-owned mortgage brokers (as suggested by the PC).
As well as a best interests duty, the FPA argued that a level playing field between brokers and financial planners would also require mortgage brokers to recommend a loan that is “appropriate for their client’s needs”. Currently, the legislation requires a broker to provide a loan that is “not unsuitable”.
Financial planners not needed in credit space: CBA
While the association has backed the move for financial planners to offer credit advice, many others have suggested it is unnecessary.
Appearing before the PC last month, the Commonwealth Bank’s (CBA) executive general manager of retail services, Angus Sullivan, argued that the mortgage needs of borrowers are currently well serviced by mortgage brokers.
“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,” the CBA executive said.
“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.
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