Broker equity release credentials disputed
By
Ben Abbott
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22/02/2011 5:30:00 AM
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4
comments
Equity release body SEQUAL and the Financial Planning Association are at odds over whether finance brokers should be allowed to advise on equity release transactions.
Speaking with Australian BrokerNews, SEQUAL CEO Kevin Conlon said the peak equity release body has been “channel agnostic”, with the “scope of the advice” more important than the source.
Conlon also said he has a “high regard for the professionalism of finance brokers”.
“The industry has come a long way with new regulations and the leadership shown by peak bodies such as the MFAA and the FBAA which have been committed to professionalism,” Conlon said. “I think if brokers have at law a high duty of care towards their clients - which they do under new regulations - then provided they understand the nature of equity release transactions and their implications for consumers, they should be trusted,” he said.
However, the FPA’s general manager policy and government relations, Dante De Gori, said the association’s current position is that consumers should be getting advice on their full financial position when undertaking an equity release transaction.
“We think equity release is a complicated product,” De Gori said. He said this was due to the way the products impact financially on the individual over time, and because they were often entered into as a “last resort”, rather than as a preferred option. Family can also be significantly affected, he said.
“From our perspective, what mortgage broking and an ACL (Australian Credit Licence) doesn’t do, is take into account all the financial circumstances of a client,” he said.
Conlon argues that equity release transactions do not require the provision of a full financial plan, and that the scope of advice for such transactions could be more limited for the benefit of clients.
“For years now SEQUAL has been pushing other industry bodies to recognise there is a need to show leadership in defining what is appropriate advice for an equity release transaction in order to guide their members,” he said. “Without this guidance, quite understandably they are defaulting to providing a full financial plan to consumers. In my view that is not necessary, and certainly it increases the costs and there is strong consumer resistance to receiving a full financial plan in what is typically a $60K equity release transaction.”
De Gori said financial planners are able to scope the advice for equity release transactions, if that is the request of the client, but he said clients do need to be made aware of what they are missing out on.
He said that further guidance on scaling advice would be made as part of the Future of Financial Advice reform process. “We need to do that better. We need to be able to provide advice on certain things that clients are asking more efficiently," De Gori said. "But that’s not to mean you throw out the quality of that advice for the sake of speed.”
“I wouldn’t go and say anybody should be able to provide advice on this product for the sake of speed, because it’s a complicated product and situation, and we think the client should have absolute certainty as to what they are doing, and the consequences of what they are doing,” he said.
Related stories:
SEQUAL warns regulators away from products
Latest Comments
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comment(s)
Twiggy on
22 Feb 2011 03:14 PM
I fully support Kevin Conlon in his comments.
In researching the FPA's previous policies concerning Equity Release/ Reverse Mortgages, it is seen FPA has never wanted to be part of this market - reference its submission to the Productivity Commission on "Caring For Older Australians".
An Equity Release client was recently unaware that financial advice was not mandatory and went seeking assistance from financial advisers with the following results.
a) not interested
b) not interested
c) not interested
d) a plan will cost $800
e) adviser needs a special licence from ASIC to advise on Equity Release.
It is my belief the FPA is only now interested in Equity Release in line with the new "fee-for-service" model of 2012. The FPA charged its members $500 to attnd a SEQUAL accreditation course and most of the $500 went to the FPA, with very few FPA members attending the course.
Perhaps Dante De Gori would be interested to know there are some advisers who "double-dip" with Equity Release clients, particularly for those entering aged care - they receive a commission on the mortgage and then charge for the plan. Not much independence there.
Paul Dwyer
Melbourne and Peninsula Reverse Mortgages
countrybroker on
22 Feb 2011 03:14 PM
The FPA are beyond a joke. I do reverse mortgage and had to do numerous courses and on line training to become accredited to do them . I am also affliated with a financial planning group, and they want nothing to do with the applications for a reverse mortgage , their attitude is we will leave it to you so our clients get impartial professional service , they still give advice on taking the reverse mortgage , but do not want to be involved in the deal or application. I DO NOT charge a fee , a financial planner will in most cases charge the client despite getting an up front and trailer, the planners I deal with do not want a fee from me, and they charge a modest fee for advising their clients , shame on the FPA.
ReversePeter on
22 Feb 2011 03:18 PM
As a long term, active reverse mortgage broker, it would be refreshing to see a Financial Planner who viewed the RM product as anything other than a way to access funds for their client to purchase investment in 'their' managed funds etc etc. The overwhelming majority of my RM clients were clearly NOT in need of (nor could they afford) a 'Finacial Plan' - rather they were seeking an option to sustain a reasonable life-style in their retirement years. Sadly, in too many instances, a Reverse Mortgage is thier ONLY option to do so.
In most instances, it is NOT a 'complex' product, regardless of how stridently the Financial Planner sector try to proclaim it as such. However it is a necesaary product for a significant proportion of senior Australians. I fear for the availability of the product, should the Financial Planners get their hands on it!
Jeff Mazzini AAMC Training Group on
22 Feb 2011 05:57 PM
Reverse mortgage lending can or may trigger other issues such as having an effect on a persons pension payments and hence some middle ground needs to be achieved here. Reverse Mortgage lending goes beyond just providing a loan and hence its timely that the regulator make a determination on the required qualifications to give such advice in this area. Could it be a limited advice model with required qualifications, then that may be suitable to all parties concerned. Having been a broker and a planner in my past life and having been involved in the process of a reverse mortgage, there certainly are other issues to be considered besides just the loan being approved. This debate has been around for some time now and its timely to make the required outcomes clear to all concerned.