Banks are dumping financial planning networks in favour of “lower risk” mortgage broker networks in their latest push into wealth management, Fairfax Media reports
In the five years to 2013, the banks’ ownership of financial planning advice jumped from 19% to 50%. However, in the wake of the ‘financial planning crisis’, they have been buying up mortgage brokers instead – which are lower risk because they do not involve regulated investments. According to Fairfax Media, the banks have doubled their ownership of mortgage brokers to about 40% in the past two years.
Mark Degotardi, chief executive of Customer Owned Banking Association is warning of the implications of banks owning brokers.
"There is already too much vertical integration in wealth management and in mortgage broking. If the biggest lenders own broking firms that employ nearly half the brokers in the market, we have a problem. There is an obvious conflict of interest," he told Fairfax.
Stephen Anthony, a director of economic consultancy Macroeconomics, also told Fairfax that banks owning brokers could muddy the waters. He says vertical integration could reduce choice and innovation and pressure prices.