Brokers add value to customers and lenders
Brokers provide consumers with choice and challenger providers with distribution.
There has been a lot of discussion and coverage lately about the role of mortgage brokers. The Banking Royal Commission has resulted in an erosion of consumer trust in financial services in general.
Prior to this, ASIC has been reviewing broker remuneration for some time and in March 2017 released a report into the matter, with a number of recommendations made and consultation ongoing.
Focusing on brokers, the key issue is whether their remuneration structure, which is commission based, creates conflicts, or whether the competition brokers provide adds value to consumers.
I don’t think I have time (or the expertise) to address all of this complexity, however what I can do is provide a fairly unique perspective from a specialist lender in a niche market.
Heartland Seniors Finance is Australia’s leading reverse mortgage provider, with an award winning product and a team dedicated to helping Australian seniors live a better retirement.
Despite having a market leading product, it is difficult for relatively small providers to compete against large financial institutions with household names. This is where brokers come in. Thanks largely to brokers, Heartland has been able to significantly broaden its distribution and as a result new business has increased by almost 600% in the last three years. A business our size simply couldn’t build the distribution to compete with large banks without it adding both a huge cost and time impost, therefore resulting in a more expensive and less accessible product to consumers.
This is great for us, but what about consumer outcomes? My view is that the answer is the same. Without our accredited brokers, these customers would have either not been aware that a reverse mortgage is an option, or had to go to an alternative provider. As there are currently limited reverse mortgage offerings in the market, this may have been potentially inferior in meeting their needs..
Heartland has helped over 15,000 Australian’s live a better retirement with our reverse mortgage. This wouldn’t have been possible without a network of brokers who provide consumers with choice of a broader range of products, which results in greater competition and, in my experience, results in great consumer outcomes.
Information provided is accurate as at 30 July 2018 and may change from time to time.