The government yesterday introduced the legislation to implement recommendations 1.2 and 1.3 of the royal commission, including best interests duty.
There are steps brokers can take now to not only safeguard their business, but thrive in the incoming era of heightened compliance, as explained by Aaron Milburn, Pepper Money GM of mortgages and commercial lending.
“Under the duty, brokers will be expected to understand and articulate their customers’ objectives, consider a range of lending solutions, and recommend the products that match the need,” explained Milburn.
“We know most brokers are already looking for the best solutions for their customers, which means the issue becomes recording and demonstrating that is the case.”
“Brokers who stay on top of the changes in the industry will surely benefit from making sure to adapt early. Those who ignore the debate may find themselves behind the eight ball once the incoming regulatory changes materialise in a way they weren’t expecting,” said Milburn.
“The good news is there are steps that can be taken now to prepare for the future.”
Pepper encourages brokers to stay abreast of the changes unfurling across the industry and to predetermine the effects of pending regulation on their individual business. If they’re concerned about the changes, they’ve been urged to reach out to their industry association.
2. Create relationships with the right mix of lenders
Best interests duty means brokers may have to be familiar with a more diverse mix of lenders who are able to assist a broader array of customers in getting the loan they need. Broadening that group now prevents being caught unaware later.
3. Review existing processes and make necessary changes
Brokers should question if their existing systems and processes allow them to accurately collect, prioritise and store a customer’s situation, needs and objectives. Further, they should ask themselves if they are effectively communicating the recommended loan product selected. Thinking through how one is going to demonstrate compliance with best interests requirements should start now, not on 1 July.
“At Pepper Money, we believe a good broker has nothing to fear from the implementation of a best interests duty, and a smart broker will already be aware of the role technology plays in ensuring customers’ needs are prioritised and delivered differently in the future,” said Milburn.