The CEO of an aggregator group is urging “all brokers” to read ASIC’s 43-page regulatory guide to gain a better understanding of the regulator's approach to the Best Interest Duty (BID), the broker's personal obligations, and the compliant approach to keeping records and resolving conflicts.
PLAN Australia CEO Anja Pannek shared her thoughts at the group’s recent professional development days around the country.
While Pannek described 2019 as being marked by significant uncertainty around the future, she believes 2020 has brought “a new level of clarity” to the industry through the provided “roadmap for regulatory reform”.
“This is a great place for the broking industry to be. We continue to work with regulators and the government understands us. I think we have a fantastic future ahead,” she said.
However, to fully benefit from the thorough direction provided, Pannek urged brokers to go through the entire regulatory guide themselves and spend time processing the 15 scenarios ASIC included to give their guidance more tangible shape.
This self-education is especially crucial given that a key element of BID is being able to educate customers.
As of 1 July, brokers must be able to demonstrate why a product they have recommended is in the best interest of their client.
For example, Pannek described a scenario where a customer approaches a broker with a credit product already in mind, such as a fixed-rate loan. Under BID, the broker must demonstrate they have educated the client on the pros and cons of a fixed rate loan, as well as have run through the different credit options also available.
“Most brokers will already adhere to these principles. The key change from 1 July 2020 will be demonstrating how you go about it,” said Pannek.
Echoing a sentiment already expressed across the industry, Pannek highlighted how requiring brokers to act in the best interests of their customers by law creates a significant advantage for the industry and a tailwind to broker market share.
“Come July 2020, you will be able to say to your customers that you will always act in their best interest. Only mortgage brokers can give their customers that guarantee,” she said.
“Credit providers can’t because Best Interest Duty doesn’t apply to them. That’s a major unique selling proposition and will no doubt drive broker market share higher over the coming years.”