Speaking at RFi’s 2020 Australian Mortgage Innovation Summit in Sydney yesterday, 26 February, ASIC executive Tim Gough celebrated the industry’s reception of the regulatory guidance provided for Best Interest Duty (BID).
“The immediate reaction that we’ve seen from both industry and consumer groups has been, I would have to admit, surprisingly warm,” said Gough, ASIC ‘s senior leader of credit, retail banking, and payments.
“We don’t generally put out draft regulatory guidance and receive applause for it, but it has been an apparent recognition that this seems to have set the balance about right, which is very encouraging.”
The harmony is thrown into sharp contrast when compared to how things stood just one year ago, noted Gough.
“Thinking about where things were last year… There was a lot of heat between ASIC and industry,” he said.
“I don’t know that there is a lot of disagreement between us at the moment. Maybe that’s being naive, but I think industry has come a long way.
“I think the response to the revised RG209 and the response to the draft RG for the best interest duty, suggests that we’re speaking the same language at the moment. We’re not seeing significant problems.”
The regulator has attempted to perpetuate it being perceived as an ally, through publishing the regulatory guide for BID with as much time as possible before the 1 July implementation date and “very much intending to help industry comply with the reforms”.
According to Gough, the contentious ASIC report released last year, Looking for a mortgage: Consumer experiences and expectations in getting a home loan, produced insight that was “critically important” for the formation of BID.
The executive listed how the concept of what was “best” changed from situation to situation, the inconsistency with which brokers presented the options they generated to customers, and consumers’ tendency to take a loan out with a financial institution they have an existing relationship with as being three key findings which directly played into the shaping of BID regulation.
“There was a reluctance to move away from a financial services provider you already have a relationship with. I think what we found from [the report] is by far the strongest factor influencing behaviour of those kinds of consumers is convenience,” said Gough.
“That was...critically important as we moved into the development of the best interest duty, and it has very much informed our draft regulatory guidance.”
While Gough broadly welcomed any and all industry responses over the next four-week consultation period, he highlighted a specific facet of the guidance for consideration.
“One of the things that we do say in the guidance and we’re interested in feedback on, is the cost of a product — whether that’s interest rate, fees, charges, the total cost over time — should generally be prioritised as a factor that feeds into consideration of whether a recommendation is in a consumer’s best interest,” he explained.
“There are obviously other non-cost considerations that for some consumers will be more or less important, but a starting point [for brokers] should be ‘if cost is not a priority here, why not?’ and to then be able to articulate that to a consumer if need be.”