Brokers accused of fleecing clients

by Mackenzie McCarty25 Mar 2013
“We’re always biased towards people we like. Subliminally, whether they’re doing it out of intention or not, they’re going to do the one that benefits them the most. If the broker likes Westpac and maybe ANZ pays them 10 basis points less, they’re going to recommend Westpac. What I find is most brokers will recommend the same product to all people. You’ll find it in the financial planning industry as well.”

However, Gillham is quick to add that he doesn’t dislike brokers as a whole. The point he’s trying to make, he says, is that the federal government needs to regulate the various financial services sectors equally.

“The purpose of my comment is that the property industry is largely unregulated in terms of building and financing properties. The biggest investment anyone makes is on their house. If it’s your biggest investment, why isn’t it regulated as much?

Anyone getting paid commissions is going to be biased, he says, and while disclosure is a good start, brokers also need to be better educated.

“It’s amazing how often I hear of brokers offering financial advice. It’s a broad brush, but this industry needs to be regulated. I know mortgage brokers are subject to compliance and I know they’re regulated. But if you’re pulling out one section of a community (financial planners), then insurance brokers, mortgage brokers, pharmaceutical reps, why not look at all of them? Don’t just target the one because we’ve had a global financial crisis.”

“Maybe you shouldn’t be able to give advice on construction loans unless you’re qualified and have done a course,” he suggests. Or perhaps, “when you start out as a broker all you can do is advise on residential mortgages up to $400,000?”

“The government is really good at being reactive to some issue, but when the sh*t hits the fan they react to something else, and while they’re at it, mum and dad get shafted. Too much regulation is not good, but not enough isn’t good either.”

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  • by Aaron 25/03/2013 9:18:58 AM

    This is a load of utter rubbish from someone who neither works in the industry nor deals with brokers. There is far more to loan selection than commissions since most of the lenders pay the same rates anyway. If what he said was true then we would all be referring business to the Resimacs to get out 1% upfront.

  • by Brado 25/03/2013 9:19:17 AM

    I would generally agree that this is true. I know many colleagues that favour one bank over another regardless of rate or service. These brokers have usually come from the banking system. However its also true that many brokers are out there just getting the most suitable loan for their clients, regardless of commission, and the statements above are a bit broad brushed to be anything more than sensationalist.

  • by Lee @ LoanMarket Shellharbour 25/03/2013 9:19:30 AM

    This seems like an outsiders comment with no thorough knowledge of current regulation, NCCP and responsible lending. I would challenge this "analyst" to walk into any brokers office and spend just one day and I am positive there would be NO EVIDENCE to support these claims