Consumers fear brokers 'have their own interests at heart': ASIC

ASIC's annual stakeholder survey has revealed a key issue behind lagging consumer confidence is the continued belief that 'gatekeepers' act in their own best interest

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ASIC has just released its 2013 Stakeholder Survey report and,overall, it appears that stakeholders, including brokers and aggregators, hold a generally positive view of the regulator - but that warmth doesn't necessarily transfer from consumers to brokers themselves.

One area where consumers and regulated stakeholders showed a particularly marked difference was when it came to the following questions: “Do investors and consumers have access to the advice and information they need?”

Half (50%) of the regulated population agreed that consumers have access to advice that meets their needs, while only 40% of consumers agreed.

ASIC believes concerns about the reliability of advice and information from industry gatekeepers, including mortgage brokers, is a key factor behind the latter figures.

“Some investors and consumers were concerned that the various gatekeepers in the system who should be able to help them with advice and information only ‘have their own interests at heart’, rather than those of the consumer,” reads the report.

“For example, one consumer was offered three options for a mortgage by a mortgage broker and felt that vested interests influenced the information she was given.”

It was through the broker but they are tied in and give me three options and keep pushing [brand] is good.” (Investor/consumer)

Furthermore, industry associations felt that when it becomes ‘excessive’, disclosure becomes ineffective for consumers and inefficient for industry.

#pb# “ Some investors and consumers confirmed that when they wanted to read disclosure documents to gain the information they contained, they often found the task too difficult.”

I tend to read it but don’t always understand it.” (Investor/consumer)

Some consumers were also sceptical about reliance on and the adequacy of disclosure.

They have a vested interest in promoting their products perhaps to the detriment of their client’s best interests.” (Investor/consumer)

However, ASIC’s survey also investigated the financial services industry’s overall attitude towards the regulator itself and found that, overall, stakeholders were positive about ASIC’s performance, with four exceptions, including not:

  • Acting quickly to investigate breaches of the law
  • Clearly communicating what ASIC is doing
  • Rducing the red tape associated with compliance, and
  • Being sufficiently resourced to do our job.

ASIC responded by saying it’s ‘committed’ to cutting red tape and that there are more improvements in the pipeline, including considering whether class orders are still necessary and continuing to help business by easing compliance with regulatory requirements - or advising the government to scrap regulation with no clear purpose.

“For example, we are considering whether disclosure is the best way to address certain market failures and whether new information channels are more effective.”

The survey was conducted in three stages between February and June 2013. The primary quantitative stage (a questionnaire) yielded a total sample of 1468 stakeholders.

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