With the release of ASIC’s regulatory guidance on best interests duty, now is the time for brokers to make any necessary changes to their practice in order to be ready for the January 2021 implementation deadline.
MPA spoke with key industry players about what the duty means for brokers and how they should prepare.
MFAA welcomes final guidance
According to MFAA CEO Mike Felton, the guidance takes into account most of the key issues raised by the MFAA during the period of industry consultation.
“The MFAA welcomes the final ASIC Regulatory Guide 273 and the amendments made to the draft,” he says.
“Whilst we are still working through the detail, we believe the changes have strengthened and clarified the guidance on broker obligations and the manner in which compliance with the new legislation will be assessed.
“We acknowledge that cost must be a key element of a suitable mortgage product, but it is not the only factor.
“This guidance provides greater acknowledgment that other elements such as features, urgency of required approval and the customer’s credit profile can also be important factors when assessing the appropriateness of a lender and product.”
He adds that the language on the broker’s panel of lenders and products is now clearer – an important factor that provides better clarity for brokers regarding their obligations when making client recommendations.
The MFAA is currently finalising a comprehensive education resource for its members which will be released over the coming weeks.
Brokers to benefit from BID
For Specialist Finance Group aggregation manager Blake Buchanan, the guidance is largely what SFG anticipated and prepared for.
“Whilst it is hot off the press and will need a more detailed and thorough assessment, it is clear to me at this stage that whilst most brokers are already adhering to the principles as set out in RG 273, brokers will need to adapt by adopting different and enhanced record keeping methods,” he says.
“Brokers will be required to complete deep assessments of lending products and their features to ensure that they are both relevant to their clients’ needs and objectives and in their best interest.”
He adds that brokers are likely to benefit from an increased market share in the future due to the increased level of comfort it may offer to the consumer.
“That added layer and adherence to the duty holds us to the highest standard of lending in the market which is an excellent story to tell all consumers.”
He says suggests broker take this time to review practices, processes and tech.
“In the next quarter, brokers should have completed a full assessment of their business and processes to ensure they have enough time to implement any changes and become comfortable with these prior to January 2021.”
“Adopt better technology uses that ensure your customer experience is excellent and your adherence to these new rules are fortified with the digital tools within your CRM.”
Due diligence is crucial
CEO of Outsource Financial Tanya Sale says due diligence will be key for brokers preparing for the January 2021 deadline.
“It clearly states in the Regulatory Guide that mortgage brokers need to make “reasonable efforts to explain to the consumer why these features may not be appropriate or may not offer good value to them” – and the only way that can be achieved is by implementing a comprehensive process that includes extensive file notes and due diligence,” she says.
Sale remains steadfast in her view that brokers already act in the best interests of the client.
“Our industry has been lifting the professional and compliance standards for a few years now and what mortgage brokers are doing right now has been and is in the best interests of the client.”
“It will be fine tweaked to ensure that the additional components ASIC have implemented be addressed and actioned.”
“The most important thing now is to review it and take out what we as an aggregator have to enhance to ensure our members are fully informed of what is required of them regarding BID.”
“In saying that, Outsource will also ensure that we provide our members with the tools and resources to adhere.”
Connective says guidelines are a “good outcome”
Connective director Mark Haron says the aggregator is pleased to have clarity on what BID will mean for brokers moving forward.
“We appreciate the effort ASIC has clearly made to incorporate industry feedback and allow the industry a full six months to adapt their practices appropriately,” he says.
“The new BID guidelines are a good outcome for the industry and we’re very confident our brokers are already in a great place to comply with them.”
He says some brokers may need to adapt their practices in order to implement the guidelines. To these brokers, he cautions not to wait until the last minute.
“We encourage them to get a head start in adopting the principles, and not to wait until 1 January 2021 to implement any necessary changes,” he says.
“The changes our brokers need to implement are subtle and are really around expanding on steps that brokers already do. We’ll continue to support our brokers every step of the way to ensure they understand and can implement any necessary changes easily.
“ASIC have emphasised a need for brokers to show customers the product comparisons that they’ve done and help customers understand the options that were considered.
“However, Brokers don’t have to list why they didn’t recommend certain lenders and products and don’t have to consider lenders or products that brokers aren’t accredited with.”
The aggregator is working quickly to assist its brokers to make necessary changes and will be holding a webinar for its members on 7 July.