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With more and more reports being published about the mortgage broking industry, there is one conspicuous area that has failed to be included.
There is no shortage of opinions out there about how mortgage brokers should operate, where the potential conflicts are and how the industry could improve. But what do the end users think?
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It seems very little effort has been made to find out what consumers think about mortgage brokers. One would think that this would be a logical place to start any inquiry. Particularly given that no scandals have occurred that would lead to such scrutiny in the first place.
In the financial planning space, for example, there were a handful of major scandals that impacted the lives of many Australians. There were events that led to public outcry, scrutiny and increased regulation of the industry and its practitioners.
But not so in the mortgage broking space. I’m yet to see a case where a significant number of customers who used a mortgage broker are now broke, with no life savings, and demanding answers.
Yet mortgage brokers continue to face scrutiny. The latest effort to probe the third-party channel is the Productivity Commission’s draft report into competition in the financial system.
Like previous reports into the channel, the PC documents show a fundamental lack of understanding of the mortgage broking market and how it operates. With so much attention given to financial planning over the years, this has become a convenient comparison tool for those attempting to highlight potential issues in the mortgage broking space.
For example, the PC report notes that “UBS estimated that in 2015, broker commissions cost $4,623 per loan on average”. It also noted that this was relatively high when compared to “simple financial advice”, which ASIC advised should cost between $200 and $700”.
Comparing financial advisers to mortgage brokers is inherently flawed, for a number of reasons. The most obvious one is that the money is flowing in different directions. With planning, a client pays the planner a fee for financial advice. With broking, the client uses a broker to obtain a home loan. In one transaction, the client is handing money over. In the other, they are receiving it.
Rather than comparing brokers to planners, those looking to identify the value mortgage brokers provide would be better off speaking to their clients. After all, they are the only ones qualified to decide whether the service was worthwhile or not.
To its credit, the Productivity Commission did include the results of a Deloitte survey conducted in 2016, which found that “consumers generally consider brokers act in their best interests”. This was based on a sample size of 474 consumers who had taken out a home loan through a broker in the two years to September 2016.
I’d argue that Australian consumers are not being consulted enough about the services they use, like mortgage broking, that are facing intense scrutiny and potential reform.
Rather than relying on old statistics, comparisons with other professions and questionable research, I think it is time we bring broker clients into the discussion and find out what they think.
[Related: Association heads slam Productivity Commission findings]
