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The move of a major accounting body into the mortgage space is a potential game changer
For years, commentators have been tipping the increasing overlap between mortgage broking and other financial intermediary professions, including many in the pages of this publication. There has been no shortage of evidence that this trend is now underway, from Mortgage Choice’s successful move into the financial planning licensing game to an increasing number of planning groups incorporating broking facilities.
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But the recent announcement that accounting body CPA Australia will be seeking application for an Australian Credit Licence (ACL) is perhaps the best example so far.
Firstly, it shows that industry associations – once firmly policy and representation bodies – are increasingly becoming commercial players in their own right, perhaps indicating an altogether different kind of convergence.
Secondly, it shows the professional services lobby is viewing mortgages as an attractive proposition, possibly suggesting the project of broking sector professionalisation is coming along in leaps and bounds.
In early June, CPA Australia’s high-profile boss Alex Malley appeared alongside ASIC chairman Greg Medcraft to announce his organisation will seek both an Australian Financial Services Licence (AFSL) and an ACL in a move intended to “shake up the financial planning industry”. The subsequent media coverage and commentary focused almost exclusively on the impact this decision may have on the financial advice sector.
Partly this is because the string of scandals and parliamentary inquiries into that industry make this aspect of the announcement most newsworthy.
However it is also because the decision to apply for an ACL went under the radar, mentioned as a throwaway line and not elaborated on in the press conference or related communications. Now, The Adviser can exclusively reveal further details of CPA’s intentions, and many brokers may be surprised to learn the accounting body is not holding back in its plans for the sector.
A CPA Australia spokesperson told us that the decision to apply for both an ACL and AFSL will facilitate “the provision of holistic advice when discussing a client’s financial affairs”. When pressed on the issue, the spokesperson revealed that this means members authorised to provide credit advice will be able to provide mortgage broking services.
“We envisage such services will be one element of the credit and overall advice offer,” the spokesperson said.
In a carefully worded warning, the spokesperson also revealed why CPA thinks there may be a warming to CPA-backed mortgage brokers. The services provided by professional accountants authorised for credit advice is valuable because they are “underpinned by their broad finance, structuring and tax expertise”.
In other words, these multi-service practitioners, aligned to a well-known and respected global association, may be able to stand out in the marketplace, compared with more narrowly qualified competitors.
However, you would imagine that not all brokers will be lining up to join CPA. The most controversial aspect of the CPA Australia Advice Pty Ltd launch was its pledge to offer “independent” financial advice services in line with the criteria set out in the Corporations Act.
Unlike the vast majority of financial planning providers (as much as 95 per cent), independent providers must have no links to financial product manufacturers and, significantly, must not take potentially influencing payments of any kind, including commissions. Asked how this approach to service provision – which many in the financial planning industry consider an extreme position – would work in the context of mortgage broking, the CPA spokesperson said there would be no exceptions.
“All advice and services provided under the [ACL] will be on a fee-for-service basis,” the spokesperson said.
“If there is a commission payable when a loan is placed, this commission will be rebated to the client – in full.”
In the past two years, the independent and non-aligned financial advice movement has gathered steam. All of the various lobby groups representing this sector of the financial planning world have pointed to an uptick in membership or inquiries, and many independent advisers say they have seen increased business as consumers are turned off by bank-associated and institutional offers.
With CPA pledging to rebate home loan commissions in full, this brings the independence debate firmly to the mortgage broking world – a fight in which many brokers and their associations will not be keen to participate. The accounting association has clearly placed a stake in the ground, announcing it will become a commercial entity and take on the advice and broking sectors.
However, before brokers go running for the hills, it should be noted that the entire CPA Advice business relies on applications for various licences that, at the time of writing, were yet to be approved. But with Mr Medcraft’s unprecedented (and questionable) decision to appear at the launch, it is unlikely those applications are in any sort of jeopardy.
