There has been a lot of media lately surrounding the banking and finance industry with ASIC conducting reviews into finance broker remuneration and now the Royal Commission into the industry as a whole. Whilst there has certainly been some negativity coming out of these reviews, we thought now was a good time to highlight some of the positives that have come out of these reviews.
The recent ASIC review was ASIC’s biggest ever data collection exercise obtaining data from lenders, aggregators, brokers and others to form a view of loans written by both brokers and lenders in 2012 and 2015. ASIC stated in its report that brokers can play an important role in promoting good consumer outcomes by matching the needs of the client with the right home loan product and lender, assisting the client to navigate the home loan process and improve client understanding of home loans and financial literacy.
In an increasingly regulated and complex market, clients are, more than ever, turning to brokers to assist them to obtain finance. Currently, brokers arrange almost 58% of all home loans in Western Australia, so it would seem that consumers are voting with their feet. A good finance broker will not only assist your client to obtain finance but will educate and guide your client through the process, reducing time and stress. Brokers provide clients with a wider choice of loan products across multiple lenders. By going direct to a bank, your client will only be sold that bank’s products.
The ASIC Report went on to say that brokers improve competition in the market by providing a distribution channel for smaller lenders. Smaller lenders do not have the financial capacity to maintain a large network of branches which, in the absence of finance brokers, makes them less accessible to clients. Finance brokers have been able to moderate the dominance of the big four banks, with the market share of the big four being significantly smaller in the broker channel than in the overall market (i.e. including those customers who originate their loans direct with the lender). The big four have an overall market share of 73% compared to a market share of just 53% in the broker channel (figures provided by APRA as at March 2017).
In a recent submission to Government, the CEO of the Mortgage and Finance Association of Australia (“MFAA”) asserted that finance brokers are often more experienced than employees of a bank, can offer greater flexibility (often working outside of business hours) and offer a different service proposition to a bank. It said that mortgage brokers provide greater customer continuity and drive competition to the benefit of all customers.
The key benefit for your clients in having an experienced broker assist them with their credit requirements in personalised and professional service. If your client’s are in need of finance solutions, haven them contact Launch Finance today.