The convergence of mortgage broking and financial planning will create a greater need for brokers to disclose commissions, according to the Commonwealth Bank of Australia.
While the FOFA-regulated planning space has a very different commission structure to mortgage broking, the convergence of both professions will naturally create the need for brokers to be more transparent with clients, CBA head of mortgages Clive Van Horen told Mortgage Business.
“I do think there will be more obligations on lenders and brokers to disclose more transparently than they do today, and I think personally that is a good thing,” Mr Van Horen said.
“Especially because you have more integration across financial advice and mortgage advice today, so many broking groups or branded groups are explicitly about providing customers with that integrated offering,” he said.
“So it is quite hard to have two different sets of standards with disclosure or commission arrangements.”
Brokers are currently subject to disclosure obligations which Mr Van Horen believes will only increase over time.
“I think directionally those will only get more, not less,” he said. “I think it is only right that customers know what the financial incentives are for their advisers to do business with them.”
According to the 2014 Financial Services Convergence Report by Mortgage Business’ sister title ifa, 72.1 per cent of surveyed respondents believed convergence was feasible, while 44 per cent were confident that most advisers will offer mortgage and debt advice within the next five years.
Of the 289 financial services providers surveyed by ifa, 79.1 per cent think it is a true proposition to be able to offer solutions – including mortgages – for all their clients’ financial needs.
Financial services lawyer and Rockwell Olivier managing partner Peter Bobbin believes FOFA is driving the convergence between broking and planning.
“Advisers have had to sit down and justify their fees,” he said.
“Pulling in the other services is an important part of that.”