Hayne report should add to wave of reforms for consumers
The Commission for Financial Capability believes the ripple effects of the Australian banking inquiry report will help put Kiwi consumers back at the centre of the financial services industry.
Tom Hartmann, Managing Editor of CFFC’s Sorted website, says recommendations by Commissioner Kenneth Hayne QC for mortgage brokers to be paid by customers rather than banks would turn the mortgage broking business model on its head, and that could be a good thing for consumers.
“Currently, if you’re working with a mortgage broker you have to ask ‘Who are they getting paid by? Whose interests do they serve?’ Banks can look at mortgage brokers as their customers, instead of the borrowers, who can get lost in the mix,” says Hartmann.
“New Zealanders can’t grow their futures if they get advice that is conflicted, products that are not designed for their benefit, and results that are weighed down by exaggerated fees. To thrive, we need a financial services industry that supports and empowers consumers to reach their best possible position."
He acknowledges that there are some “heroic” mortgage and insurance brokers who work in their customers’ best interests, but they are operating within a system that does not always have consumers at heart.
“There would be some pain as a new business model is developed that is more customer-centric, but it’s a change that has to happen.”
Hartmann noted the Hayne inquiry followed the New Zealand inquiry of the insurance industry, led by the Reserve Bank and the Financial Markets Authority, which made similar findings regarding insurance brokers’ conflict of interest.
“There’s a movement going on to remodel the financial advice regime – changes are on the way and the industry needs to get on the front foot and make a new system work in a way that’s sustainable for the industry while prioritising customers’ needs. If they don’t, regulators will step in to defend everyday borrowers, savers and investors.”