Mortgage brokers 10 years behind advisers, says exec

While the financial advice industry remains subject to much surveillance and scrutiny, the regulators are 10 years behind in bringing mortgage brokers to task, some claim.

In 2013 alone, the Australian Securities and Investments Commission (ASIC) has banned and convicted a number of mortgage brokers for misconduct, fraud, compliance issues and for providing misleading information, among other breaches.

Furthermore, the watchdog had cancelled or imposed conditions on credit licences of various mortgage broking houses for similar offences to those of troubled financial advice groups, such as compliance breaches, failure to train its staff and failure to properly assess loan applications.

The latest in a string of regulatory actions against mortgage broking firms was ASIC's imposing conditions on Award Mortgage Solutions' credit licence.

Award Mortgage Solutions did not properly assess and verify loan applications, which led to the potential for false documents being submitted to credit providers. Furthermore, the firm's mortgage brokers did not always provide proper disclosure to clients, nor did it properly appoint, supervise and train its staff and credit representatives.

However, while the financial advice sector had two major reviews in the last decade (Financial Services Reforms Act and the Future of Financial Advice package) and remains subject to continued surveillance — such as ASIC's recently announced review of risk advice — the mortgage broking industry has not had equal regulatory focus placed on the sector.

"There's no doubt that financial planners have been under the spotlight and had more regulatory reform than any sector," said Financial Planning Association chief executive officer, Mark Rantall.

"We would support a level playing field for all and we are particularly concerned about people representing themselves as financial planners when they're not licensed to do so."

The financial planning sector, according to the head of financial advice at Australian Unity, Craig Meldrum, has been regulated a lot longer and the mortgage broking industry is coming up to where financial planning already is.

"They are probably 10 years behind where financial planning is, but they are on that path," Meldrum said.

"Should accountants and financial planners be on an even regulatory playing field? Because financial planners are coming up to where accountants have already been for years — we are talking about different professions."

However, Meldrum said ASIC is one of the more proactive regulators in the industry.

"ASIC is probably doing a much better and has a more productive role than some of the other regulators," he said.

"The Tax Practitioners Board and what it does for accountants, it is not as proactive as ASIC. ASIC has been taking action with respect to self-managed super funds, property spruikers, limited recourse borrowing arrangements, as well as looking after what the financial planners are doing."