While Connective director Mark Haron felt that Treasury’s draft mortgage broker bill went "too far" in some regards, he highlighted the benefits likely to come through the adoption of additional legislation.
Instead of resenting that the best interests duty applies to mortgage brokers alone, Haron emphasised that the point of difference can be presented in such a way as to claim even more market share for the channel.
“Rather than have the argument around [if it should apply to banks as well], we should be carrying this best interest duty as a badge of honour, to be able to say to customers, ‘I act in your best interest. You go to the bank, they can't act in your best interest because they can only offer their own products,’” he said.
According to Connective, acting in the best interest of a customer includes securing them a loan that is affordable in terms of size and structure, meets their set of objectives at the time they got the loan, and is applied in a compliant manner. Further, Haron noted there is a whole range of features that a customer could prioritise over simply wanting the cheapest option.
“We need to keep in mind ‘best’ in terms of ‘best interest.’ Not ‘best’ in terms of ‘best product’ or ‘best price,’” he said.
“We’ve still got a bit of work to do with government and the legislature, because in some respects they see best interest as in the cheapest. We think that best interest – and I’m sure it’s the government’s intention here – is putting the customer’s interest ahead of your own.”
Another benefit arising from the bill is that it will give the industry an even better position from which to head into the 2022 remuneration review.
“It gives us a stronger base from which to say, ‘We now have laws. We are now an industry that is conscientious of this, understands what’s going on, and are better managing the remuneration,” Haron explained.
However, fully utilising the imminent legislative changes hinges on brokers showing customers all that they are doing for them.
Addressing both one of the topics raised in the ASIC report on the consumer experience of getting a home loan, as well as the concerns underscoring the best interests duty, Connective group legal counsel Daniel Oh recommended that brokers heavily document every step of the process with their clients.
“We know that you brokers are sifting through all the lenders you’re accredited with, all the various options and products out there, and you’re going to your customer with the one you recommend for them,” he said.
“Unfortunately, with this new legislation, you may need to actually document that process, or at least show your customer that you’re thinking about more than one product."
Oh suggested brokers send their customers the preliminary assessment where they did a product comparison, to confirm the many options considered, as well as email summaries of conversations to have customers confirm by reply they agree with what had occurred.
He continued, “It’s become even more evident now that the more you take notes, the more you record things – especially your conversations with customers – the more you can protect yourself down the track if they turn around and go, ‘Hang on, that’s not what I said.’"