The final report of the Hayne Royal Commission called for a “best interest duty” on mortgage brokers that would require the industry to act in the best interests of their clients and mirrors obligations imposed on financial planners. However, Australia’s mortgage broking industry is fighting back against the reforms. From The Brisbane Times:
[AFG chief executive David Bailey]… said the best interests duty for mortgage brokers should acknowledge that brokers often dealt with simpler matters than financial planners — who already face their own detailed best interests duty.
“Just to shift and lift regulation into the mortgage broking industry probably isn’t the right solution,” Mr Bailey said…
Choice director of campaigns and communications, Erin Turner, said the duty for mortgage brokers did not need to be exactly the same as the duty for financial planners, but it should copy the “spirit” of the obligations on planners.
Ms Turner said the industry’s proposed “good customer outcome” test did not put enough emphasis on the quality of the recommendation to customers.
“They don’t want an OK loan, they want the best thing for them in their situation,” Ms Turner said.
Choice wants a best interests duty that requires brokers to understand client needs; conduct a “reasonable” market assessment; and make a written recommendation to clients.
The mortgage broking industry has already fought off the Hayne Royal Commission’s recommendation that trailing commissions be abolished and that banks stop paying upfront commissions to brokers. And now it is seeking to leverage its influence within the Coalition and overturn common-sense rules requiring the industry to act in the best interests of its clients.
Mortgage brokers must be giddy with the re-election of the Coalition. Labor’s negative gearing and capital gains tax reforms are dead. They get to keep their fat trailing commissions against the advice of the Hayne Royal Commission. And they retain as Prime Minister a key sympathiser for (and former representative of) the property lobby.
Remember, Scott Morrison worked at the Property Council as National Manager of Research and Policy from the age of 21 to 26. The property lobby runs through his veins and will continue to pull his strings, leveraging policy that suits the industry over the broader national interest.
As a case in point, Scott Morrison admitted last month that no modelling had been done on the Coalition’s First Home Buyer Deposit Scheme and that Australia’s property lobby was behind the policy. The policy wasn’t even passed through Cabinet, suggesting it was a ‘captain’s call’.
Scott Morrison also explicitly acknowledged that the intention of this FHB Scheme is to boost demand and prevent house prices from falling: “We want to see more first-home buyers in the market, absolutely, and we don’t want to see people’s house prices go down”.
The property lobby has got their man in the top job and they couldn’t be happier. And they are the ones pulling the strings.