We are all familiar with the phrase ‘the evolution of advice’. We are hearing it more and more. In fact, here on this platform we are seeing a shared resource for financial planners, accountants and mortgage brokers. But while the number of mortgage brokers who are converging on the financial advice sector, and vice-versa, is increasing, it remains a challenging cultural and regulatory area.
The profession of mortgage broking has changed over recent years. We are seeing a significant increase in consumer awareness of what mortgage brokers do, and brokers themselves are more closely scrutinised in their dealings with their clients than ever before. The industry watch-dog ASIC is actively policing broking activities, and lenders and aggregators are getting progressively tougher with their accreditations and memberships.
But above all, with the increase in professionalism, brokers are seeing an opportunity to broaden their service offerings and break into new areas – leading to convergence.
Convergence, or the opportunity to diversify, makes sense. One thing is certain, if you are not servicing all your client’s needs – then there is a real risk they are talking to somebody else. You now have the opportunity to create stickier, more meaningful relationships with your clients, and to grow your income streams. But it’s not as simple as it sounds and there is a lot to consider before you venture down this path.
Here are three tips about giving professional advice.
1. Think about how it might work for your business
Convergence in your business can happen in many ways – you may choose to become a fully-fledged licensed planner, you could look to bring in a professional to work with you as part of your business, or you could look to build and maintain strong referral partnerships.
Whichever way you choose, it’s vital that you understand your compliance obligations under your ACL or AFSL, or both before you give professional advice.
2. There’s different kinds of advice
Financial planning is undergoing an extensive regulation reform under Future of Financial Advice (FOFA), and it is important that brokers and planners restrict themselves to giving certain advice.
Typically, brokers who are working in financial planning are offering restricted services.
When we think about mortgage brokers working with financial advice – we usually associate services such as, income protection, life, risk, super and SMSFs. It is more associated with protecting assets and protecting the client, rather than the more complex investment services and advice you might expect from financial planners.
3. Declare, or desist
From 1 July last year, financial planners can no longer be paid commission by product providers. That means that it is vital that there is a clear separation between providing financial planning advice and credit advice.
Changes to the financial planning regulations over recent years were designed to tackle conflicts of interest that were perceived to have threatened the quality of financial advice. When dealing with consumers under NCCP it’s important that you declare and disclose fully commissions and any potential conflicts of interest. Remember, your compliance obligations should always be embedded as an integral part of your sales process.
If you have questions about your compliance obligations, please get in touch with our industry leading Compliance Support Team, they are here purely and simply to help you succeed.
Murray has over 30 years of experience in the finance and financial services sector. Prior to starting Connective in 2003 he had built a highly successful mortgage broking business from the ground up. Murray has an intimate understanding of the challenges and rewards of the mortgage broking industry, and knows what it takes for broking businesses to provide exceptional service to their clients.
Murray is also a Judge in the No More Practice Transformation Series and is featured in the No More Practice 30 Day Business Challenge.
