The Federal Government has been urged not to consider mortgage brokers as requiring the same regulatory approach as financial planners because mortgage brokers are not in a position to influence the amount of money they manage, according to the Finance Brokers Association of Australia (FBAA).
The views of the FBAA were made clear in a letter directed to the Minister for Revenue and Financial Services, Kelly O’Dwyer and tabled this week as part of the Senate Economic Committee inquiry into Consumer Protection in the Banking, Insurance and Financial Sector.
It claimed that, unlike financial advisers, mortgage brokers could not create demand.
“Mortgage brokers cannot ‘create’ demand by encouraging a consumer to take out a mortgage against their own volition and they cannot upsell the consumer,” it said. “A consumer must be contemplating a home loan before a broker’s services are sought out (and if they do use a broker they will continue to source the product directly from an issuer.”
The letter said this could be contrasted to financial services “where the range of products and services is much broader and demand can be driven by the financial adviser/issuer”.
“For example, consumers can be drawn in through promises of paying off debt more quickly through investing, retiring earlier and generating above average returns on their investments,” it said. “If they have little money to invest they can be encouraged to gear (borrow to invest).”
“Financial advisers are more directly remunerated on the value of money they manage. Whilst it is true the brokers also receive more remuneration on higher loans, they are not in the same position to spruik up the amount because the consumer has a particular commitment in mind.”
“The FBAA wants the Government to focus on the differences between the two professions to avoid considering regulatory options against mortgage brokers based on irrelevant observations from financial services,” the FBAA letter said.
