The managing director of a national brokerage has reassured brokers that the industry is “many years away” from robo-advice mortgages, adding that anyone who thinks otherwise “doesn’t have the full facts”.
Following on from widely lambasted claims by UBS analysts that a mortgage is a “simple, commoditised product” and could therefore “be easily provided by robo-advice”, MoneyQuest managing director Michael Russell added to the chorus of those dismissing the suggestion, saying that while the product may be simple, customers are not.
Speaking to The Adviser, Mr Russell said: “No two customers are ever alike, from a home loan application perspective. In simple terms, mortgages are a simple commoditised product, but customers in this country aren't. If customers were so vanilla, home loans would be easily approved or declined, but the reality is they are not.
“Ninety-nine per cent of home loans need a lot of work. You need to get to know the client, get to know their irregularities and what their future plans are, to make sure they are in the right loan. It’s not all about rate. And that's why so many home loans applications get deferred, subject to a much more in-depth analysis by a credit assessor. Because there are very few loans that can get approved at first glance."
He continued: “You will never get a loan auto approved because it needs the broker to tell the story, paint the picture and show why these non-vanilla clients can still satisfy the credit requirement and can make their repayments.”
Mr Russell said that those who suggest mortgages can be done by robo-advice are revealing a “complete lack of understanding of mortgages customers, the mortgage credit environment, and what brokers do”.
The MoneyQuest managing director highlighted that the National Consumer Credit Protection Act 2009 (NCCP) requires brokers to not only assess customer serviceability based on their circumstances “today and historically” but also in the future.
“You now have to look forward as well, and ascertain whether there is anything in your customer's near future that is subject to change (like their job, or whether they are planning children, etc.), which could change their circumstances in such a way that it affects their ability to meet their repayments. That's a whole new discussion we have to have and it is something that robo-advice would find very difficult to assess.
“When you come down to the coalface of mortgage lending, nothing is black and white,” Mr Russell added, noting that the most successful fintechs that have come to the fore in recent years are still dependent on mortgage brokers.
“Technology is cool and fun and educating, and can help narrow down some of the options, but you still need a broker at the end of the process.”
According to Mr Russell, the only way that robo-advice could become a realistic proposition is if banks were to drastically loosen up their credit policies.
He said: “The only way robo-advice can even begin to become effective is if the banks significantly narrow and compromise their credit policies for mortgage holders. And that is just not going to happen anytime soon.
“So, we are many years away from any suggestion of robo-advice completing an end-to-end fulfilment. And those who say we are ready now need to be held accountable, because they don’t have the full facts.”
Mr Russell’s comments come just days after an AlphaBeta Advisors report revealed that the mortgage broking industry is at a low risk of automation.
According to The Automation Advantage report, just 15 per cent of the work brokers currently undertake could be undertaken by computers.
Andrew Charlton, director at the management consulting firm, agreed that “we still need people” to help consumers “think through their home loan”.
[Related: Industry denounces ‘ridiculous’ UBS report]