One of the hot topics from this month has been around the prospect of mortgage brokers potentially diversifying their operations into asset finance, including car and equipment loans. With more and more home loan specialists opting to take up duties within another form of financing, do Aussie motorists have reason to be concerned about their vehicle financing requirements?
Within the last fortnight, the President of the Commercial Asset Finance Brokers Association of Australia warned mortgage brokers that such a transition should not take place without the necessary training. The President, Mr Gandolfo, went on to explain that while banks remain the largest competitor for many asset finance brokers, the emergence of home loan financiers is causing its own set of problems within the sector – aside from the prospect of reputational impairment.
Mr Gandolfo is not alone in his concerns, with others in the industry noting that there is a misperception about how ‘easy’ it is to undertake asset finance work – including complex areas such as equipment financing. Some brokers are inclined to believe that the process is as simple as submitting the relevant paperwork, and then lodging applications on behalf of customers. But this couldn’t be further from the truth.
Financiers still need to be well-informed on the particular aspects of the asset in question (e.g. vehicle, equipment), including elements such as depreciation and balloon payments. Expanding further, and there are many other issues – novated leasing, salary packaging, ownership structure, commercial hire purchases, chattel mortgages, operating leases – all form their own hurdle for an inexperienced broker.
The role of an asset financier extends well beyond the mere preparation of a loan submission. In many respects, they are acting in an advisory capacity to help customers reap an outcome that delivers them growth or value. Accordingly, it would be remiss for a professional to be advising on these matters without the necessary training or qualifications.
Of course, we wouldn’t be human if from time to time we didn’t think we knew something in an area that wasn’t our particular expertise – but in the capacity as a financier, the prospect that a professional might adopt this behaviour is particularly disturbing. Not to mention, surely they would be placing themselves in a position of liability by advising on financial matters with which they are not prescribed to advise on? Or would small print disclaimers gloss over this and make it ok?
One only needs to look at the equities sector to see there have been many examples where people have been held accountable for their advice on matters they are not qualified to provide advice for. Why should it be any different for this sector?
If there isn’t enough reason to be concerned already, then news of potential changes forthcoming to flex commissions could prompt a wave of new mortgage brokers to enter the sector. Therefore, while the consumer watchdog in ASIC might be admirably addressing one blemish in the industry, they could very well be opening the floodgates that magnify the amplitude of another problem.