The head of a major aggregator has encouraged brokers to “listen carefully” to the voices of consumers highlighted in ASIC’s new report, but also expressed concern over “assertions” made in the research.
The fallout in response to the findings of the Australian Securities and Investments Commission’s (ASIC) shadow shopping exercise has continued, with Loan Market and Aussie Home Loans the latest to weigh in.
The report – which was based off ASIC’s observations of 300 consumers who were in the process of taking out a home loan, as well as a survey of an additional 2,000 consumers – found that:
Following the release of the report, ASIC commissioner Sean Hughes said that lenders, brokers and aggregators “must step up” to make it “easier for consumers to meaningfully compare loan options”, adding that brokers should “communicate how a home loan option has been selected” for them.
Mr Hughes stated that some consumers were offered loans when “cheaper alternatives” were available, and stressed the need for greater price transparency.
In response to the research, Sam White, executive chairman of Loan Market Group, acknowledged the concerns of brokers who may have felt that their value proposition was called into question by ASIC, but encouraged the industry to take heed of the issues raised which pertain to the direct experiences of broker clients in the home lending process.
“Many hard-working brokers will feel disappointed by this report, as once again, their commitment to their customers is questioned. Nonetheless, it is of utmost importance that we understand this research,” he said.
“The report highlights areas in which some of our industry could improve and, as it contains the voice of the customer, we should listen carefully.
“We will be reviewing the findings and incorporating some of its learnings into our training program.”
However, Mr White questioned assertions in the research that equated the cheapest interest rate with the “best loan” – echoing the sentiments of Finance Brokers Association of Australia (FBAA) managing director Peter White and Connective director Mark Haron.
“I’m concerned with the assertion that the cheapest rate is always the best option for the customer as we believe it oversimplifies the client’s needs,” Mr White said.
“If all things are equal, then, of course, the lowest rate may be the best option, but we know that the best option doesn’t always mean the cheapest rate for the customer – that’s why establishing precise requirements and objectives with each customer is vital.
“For some customers, their objective is getting into the property that they want quickly, or access to an offset account, and for others, it’s about the type of loans they can qualify for.”
Mr White also weighed in on ASIC’s finding that 58 per cent of consumers were offered one or two loan options by their broker.
“I’m concerned that an inference could be drawn from these comments that a broker only researches a few options rather than using the broader panel,” he said.
“The vast majority of brokers use a technology platform that helps narrow down options from a large panel of lenders. The broker then presents that simplified subset of lender that may suit the client.”
The Loan Market head added that the research has highlighted the growing importance of technology in enabling brokers to assess a vast range of loan products and present information to customers in a “clear and professional manner”.
“In the future, it may be helpful for the technology systems to show clients more of the research and detail that sits behind these recommendations and how they are aligned to the clients’ stated recommendations,” he said.
Further, Mr White said that ASIC’s conclusion that the “home loan journey is complex, multifaceted and nonlinear” emphasises the need for greater clarity surrounding the measures that brokers need to adopt to comply with the newly proposed best interests duty.
“We look forward to digesting the contents of this important ASIC report and implementing any recommendations that could further improve customer outcomes,” he said.
Aussie’s chief customer officer, David Smith, also responded to the ASIC research. Mr Smith welcomed the findings and also noted that it would help provide clarity surrounding the best interests duty.
“At its heart, best interests duty is about transparency for customers and achieving good outcomes, and it will help give customers more confidence in the industry,” he said.
“Customers are voting with their feet – they still overwhelmingly want to work with a broker, and ASIC’s survey recognises the important role brokers play in helping borrowers achieve a home loan, especially first home buyers.”
Mr Smith joined his industry colleagues in calling into question the assertion that cheaper interest rates equate to the best consumer outcome.
“There are many other factors to consider beyond just price when it comes to choosing the right home loan, which is why the process is so confusing for customers, and where a broker is key to cutting through the clutter,” Mr Smith said.
In lieu of the findings, The Adviser reached out to ASIC for further clarification regarding what conduct it expects from mortgage brokers, with commissioner Sean Hughes agreeing to shed light on ASIC’s view of the research.
Mr Hughes’ response will be published in Monday’s (2 September) bulletin.
[Related: Industry sees bright side of ASIC findings]
Charbel Kadib is the news editor on The Adviser and Mortgage Business.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.
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