Login
ISCOVER
Jessica Darnbrough
Brokers and financial planners should think outside the box when it comes to determining whether or not a complex product is right for the consumer, one industry stakeholder has claimed.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
Speaking to The Adviser, CreditED’s executive chairman Kym Dalton said the industry needs to give serious consideration to implementing “mandatory consumer testing”.
“Providing concise, meaningful learning via an online series such as that provided by CreditED – which includes a measurement of comprehension via a multiple choice test – clearly assists lenders and brokers to round out their responsible lending conduct and disclosure,” Mr Dalton said.
“Mandating a concise and measured learning program isn’t condescending to consumers nor does it mean that ‘industry’ is failing to discharge their responsible lending obligations correctly. It simply means that disclosure and comprehension are not synonyms and the two elements together will better serve to protect consumers and industry alike.
“Measured comprehension, far from being an additional compliance burden or a ‘sales detractor’ – will enhance trust, customer engagement and reduce conflict and complaints to EDRs in the future”
Mr Dalton’s comments comes days after ASIC chairman Greg Medcraft indicated to the Australian Financial Review that the industry needs to think “more creatively” when providing complex products to consumers.
In an open letter to the paper, Mr Medcraft said consumers should be encouraged to use tools such as online tests to help assess whether or not a product is right for them.
“To be clear, I am not in favour of mandating any sort of investor test. Complex products offering higher yields in the current environment can look very attractive, but more complexity means greater risks and greater potential losses,” the letter read.
“Products that are mis-sold are dangerous for investors because they don’t understand the risks ... We should look at ways of making the financial services system work by both reminding issuers and distributors of their obligations and helping investors understand the risky products they are buying.”
