The regulatory scrutiny and continued legislation of the broking industry “will be on the agenda from here on in” and could extend to commercial brokers, the chief executive officer of AFG, David Bailey, has predicted.
Speaking to The Adviser, the chief executive (CEO) of aggregator Australian Finance Group (AFG), Mr Bailey, noted the open consultation on ASIC’s best interests duty guidance, adding that he believed the regulatory scrutiny that this sector has been under in recent years is now the new normal.
Reiterating AFG’s stance on the best interests duty guidance, Mr Bailey said: “I think it’s a positive thing, the best interests duty. We have to remember there’s no other group of individuals in the residential mortgage industry who have been given an opportunity to say: ‘We are working in a customer’s best interests and we have to give it to them by law’. You can’t get that from a branch and you can’t necessarily get that from a fintech. But you have to get it from a broker. So, I think we should be embracing the opportunity.
“The nuance will be in the regulation and that’s what people are talking about in Canberra and with ASIC and the regulators at the moment.
Mr Bailey commended ASIC on its collaborative approach when working with the industry over the past few years, particularly since the royal commission, adding that he believed this ongoing working relationship would be crucial moving forward, too.
He elaborated: “Mortgages and residential lending is one of the biggest sectors of the economy and brokers write more than 55 per cent of those loans. So, it shouldn’t be a surprise that regulation of this space will be on the agenda from here on.
”I’m not expecting this regulatory wave to stop, I just assume there’s going to be a new wave coming through. For example, we’re going to have best interests and then ASIC will be coming on and having a look at it and seeing how industry is responding to it.
“Our position has always been that we want to work with the regulators to ensure they understand this industry and understand the issues that the brokers would face on a day-to-day basis, so they can then fold that into appropriate review and monitoring processes,” he said.
“I just think we’re in a new world, to be honest, and I don’t think it will stop at mortgage brokers. I think commercial brokers will be the next wave. I think it’s inevitable.
“Most brokers – whether commercial brokers or residential brokers – are working to best interests on a day-to-day basis. This, now, is really around having a record and demonstrating that those conversations, and those discussions with clients, are happening.
“I don’t know when this [next wave] will happen, but I think it would be pragmatic to prepare for it.”
Given this increasing regulatory burden, Mr Bailey outlined that aggregator support is increasingly important to brokers.
“This increasing regulation means brokers are looking to their aggregator to help them with their compliance. The terminology we’re using is: ‘We’re going to keep you safe’,” he said.
“Our role is to provide guidance and keeping brokers safe and making sure they stay between the lines. There is uncertainty in this marketplace and we know brokers are very, very good at serving their customers and it’s really, really important that they continue to do that properly, and we can provide them with the tools to enable that.”
The AFG CEO concluded: “We’re focusing on how we keep the brokers safe to enable and ensure that the advice they are providing around the mortgage product and the consumer is best practice. That’s part of our focus at the moment, it’s part of our technology build and it’s part of our best interest disclosures (which we will tweak when the reg guides are finalised).”
[Related: AFG profits up despite slip in volumes]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
The major brokerage has reported a record increase in home loan p...
The social media giant has commenced processing applications for ...
Purple Circle Financial Services has reported a record increase i...