La Trobe Financial sees future without trail

La Trobe Financial chief investment officer Paul Wells told Mortgage Business that the potential clamp down on broker commissions off the back of FOFA is now being discussed in the industry “at the very early stages”.

“There is logic to the longer-term view that mortgage brokers and financial planners can be similarly characterised on this aspect of consumer protection and once one is in place it will be easier to implement a similar framework for the other,” Mr Wells said.

“It seems highly likely that evolution will progressively merge the distribution of numerous financial products and this sets up for remuneration convergence,” he said.

“Timing is therefore unknowable, but it’s certainly foreseeable that evolution will eventually threaten trails.”

Mortgage broking and financial advice have always been legislated separately, deliberately by the regulators.

Initially when the Financial Services Reform Act was introduced, mortgage broking was deliberately not included by the then Coalition government, being left to state regulations. And when the federal ALP government in 2008 decided to regulate credit, including mortgage broking, again separate legislation was deliberately enacted (the National Consumer Credit Protection Act), according to MFAA chief executive Phil Naylor.

“In essence, there is a fundamental difference and risk between the two professions – the ‘money flow’ is in opposite directions,” Mr Naylor told Mortgage Business.

“Financial advisers provide advice to investors on how they invest their money.

“Mortgage brokers provide advice to borrowers on the appropriate loan for the borrower,” he said, adding there has never been any indication either the previous or current government has any intention to ‘FOFA’ mortgage broking.