Mortgage brokers will need to move to become “mortgage advisers” or risk being left behind, the head of an artificial intelligence robo-advice platform has told attendees at The Adviser Asia Study Tour 2018.
Speaking at The Adviser Asia Study Tour 2018 on Thursday (11 October), the founder and CEO of robo-advice platform Malabar AI Limited, Donald Soo, outlined that the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry had raised several questions regarding who a broker represents and the potential conflicts of interest arising from broker commissions.
Echoing the sentiments of Deloitte’s chief edge officer from earlier this year, and building on the predictions made at The Adviser US Study Tour by author, broker and High Trust mortgage sales training specialist Todd Duncan, Mr Soo suggested that brokers will increasingly need to position themselves as mortgage advisers, rather than brokers.
Mr Soo elaborated: “Traditionally, brokers were providing clients with choice and handling the paperwork, but now a mortgage broker is doing so much more work, practically offering advice on creditworthiness, affordability measures etc. This is what the royal commission is focusing on. And the issue is that there is no real definition of what this advice is.
“I think this is why they are looking at the viability of charging a fee for service or removing commissions. Upfront and trail commissions are under pressure because the royal commission seems to believe that it is not value for money and is probably based on an old system.”
Mr Soo added that there seemed to be a “disconnect between the perception of what a broker does, and the reality”.
He explained: “The regulator wants the public to get mortgage advice and brokers have stepped in to deliver those needs. But brokers are not trained as advisers, so perhaps that is the next step, to regulate so that broking becomes a professional advice service under regulation.”
The founder of Pyrmont Wealth Management (Hong Kong) and information technology experience specialist is now creating a platform to help those in the financial services industry provide holistic advice utilising data analytics and harnessing technology.
Malabar AI, which is still in prototype, is designed to provide clients with the whole gamut of financial advisory services spanning investments, mortgages, tax advice, all under one roof. It is therefore working on a “robo-advice” solution that covers the entire financial advisory services professions (mortgage broking, wealth advice, tax advice etc) and it is hoped that it could enable brokers to harness customer data collected through the mortgage process and help them model what repayments would be and what investments would be impacted/lifestyle changes that would be needed under different conditions/life events.
The modelling solution digitises what many brokers have already been doing manually, Mr Soo said, but produces these models in under 20 seconds.
He told delegates that the system would also enable brokers to monitor the customer’s financial position.
Mr Soo continued: “When change comes, what do you do? You fight, flight or embrace the change. Coming from a financial planning industry, I know that you have to embrace the change, whatever it is going to be.
“How do we add value to a mortgage broker role? We need to position brokers as mortgage advisers. Because we need to help people with their home buying goals and the simple fact is, with the scrutiny of remuneration, and the potential for fees for service, you need to demonstrate how you are providing that value to clients.
“If you do not move to become a mortgage adviser, rather than a broker, then I think you will be left behind. But if you are going to become a mortgage adviser, you need to demonstrate the value you are providing.”
He concluded: “By growing your business through efficiency, growth and transparency will all aid in this. Embracing technology to enable you to provide more advice, utilise analytics and data to provide a more wholesome mortgage journey.”
The Adviser Asia Study Tour comprises two days (10 and 11 October) of interactive presentations and seminars revealing how the Asian mortgage market has developed AI strategies to support traditional broking models using robo-advice to enhance the client experience.
Building on themes arising from the previous US and UK study tours, the event once again aims to give forward-thinking brokers and players in the mortgage market critical insights into how their international peers dominate their respective marketplaces.
Annie Kane is the editor of The Adviser, Australia’s leading magazine for mortgage brokers.
As well as writing news and features on the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker podcast and In Focus podcasts and The Adviser Live webcasts.
Before joining Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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