Mortgage Brokers Slam 'Nonsensical' Investigation Into Industry
A 'money-hungry' and 'commission-driven' culture in mortgage broking has been uncovered in a new investigation, but industry professionals have hit back.
An investigation conducted by CHOICE journalist Andy Kollmorgen claims the mortgage broking industry is profit-focused and treats customer objection as a problem that needs to be actively "overcome".
As part of his investigation, Kollmorgen studied the minimum qualification brokers must obtain to work in the sector -- a Certificate IV in Finance and Mortgage Broking.
"The main thing I learned was that mortgage broking is really about sales, it's about finding customers for the big banks," Kollmorgen said.
"...it's not really about trying to match the consumers with the best home loan, it's really about generating business for banks."
It took him just 10 working days to complete the qualification and while there was talk of responsible lending legislation, Kollmorgen discredited the course, claiming it motivated students to "be a good salesman," and "bring the client across the line ... overcome client objections" rather than consider clients' interests.
But, the Director of Integrity Plus Accounting Scott Kay told 10 daily the very nature of mortgage broking means workers need to be taught basic skills like sales and marketing before they are able to work in the industry.
"Unlike accounting or financial planning, you aren't getting paid for your service, you are only getting paid once the deal goes through, so this could take two years before you close a deal," Kay said.
"You are there to help people to get the best deal but you need to learn sales and marketing first, otherwise it's not sustainable."
Kay said the complex skill of broking and managing clients comes only with time and like any career, basic theoretical skills need to be taught before industry experience can be built.
"Mortgage broking takes a long time because you only get paid commission," Kay said.
"You need to get taught quickly so you can then have a business that pays part of your living expenses. It's really hard those first few years so they need to teach sales and marketing really quickly."
The Director of Prosper One Finance Anthony Clarke also told 10 daily navigating the finance market is a difficult task and takes more than 10 days to learn to do effectively.
"It is simply so nonsensical, it beggars belief in journalistic integrity," Clarke said of CHOICE's investigation.
"Every client has unique circumstances and requirements which influence the decision about which bank to recommend. Interest rates, client objectives, future plans for the client, complexity of client’s circumstances, urgency of response, reliability of the funder and most importantly bank policy are all the sorts of things a broker must consider prior to making a recommendation."
CHOICE's investigation comes after the mortgage broking industry was slammed in the Royal Commission into Banking. A number of changes to the industry were recommended in the commission's final report, including brokers acting in the best interests of their clients.
To ensure this, the borrower -- not the bank -- was recommended to pay the broker's fee. The purpose of borrowers paying brokers is to eliminate conflicts of interest, like a broker organising a larger loan for their client than needed (in order to get more commission).
In his investigation, Kollmorgen claimed there hasn't been a significant change in the education of new people entering the industry since the royal commission.
"You are being rewarded to sell certain products so you have an incentive to sell one product over another based on the size of the commission. I think it's inherently not in customers' best interests when that is the way the business works."
But, Clarke said mortgage brokers are essential to guiding consumers through a complex and confusing industry.
"Some quick research would show you how brokers are instrumental in eroding the dominance of the big four by promoting the myriad of competition," Clarke told 10 daily.
"Brokers ARE the distribution channel for smaller funders. Without brokers supporting smaller banks, the major banks would run rampant."
Kollmorgen claimed broker's interests are not with securing their client the best deal.
"Your job, if you want to be a mortgage broker, is to go out and get some business, it's not your job to match consumers with the best possible home loan or help consumers with this very important financial decision in their lives," Kollmorgen said.
Anthony Clarke strongly disagrees with the idea that brokers are focused on self-interest and commissions. In his experience as a banker and broker, he told 10 daily he's always been dedicated to ensuring his clients are in the best possible financial situation.
"I use my expertise to provide the best possible outcome for the clients, every time. I have no incentive to choose one bank over another," Clarke said.
"The greatest thing about using a broker rather than going to a bank direct is that a broker can recommend solutions from any funder, a bank employee can only recommend their own bank’s products. This means I can deliver far better outcomes for my clients as a broker."
Kollmorgen said there are some good brokers in the industry, he said ensuring your broker has a large lending panel is a good way to check a significant number of options are being considered.
"You want a broker with educational attainments beyond this Certificate IV in Finance and Mortgage Broking, which is a very low bar."
Kollmorgen also recommended speaking to a broker's previous clients and researching them before approaching them.
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