Best Interest Obligations (BIO) – Mortgage Brokers & Financial Advisers in the same boat

Financial Advisers may not be aware of the fact the Mortgage Brokers will have a similar BEST INTEREST DUTY, CONFLICT PRIORITY RULE, & CONFLICTED REMUNERATION framework imposed on them through legislation, effective the 1st January 2021.

Similar to s961 of the Corps Act, the relevant legislation is s158 of the NCCP (Credit) Act in which the obligation is on the individual Mortgage Broker, although the Credit Licensee (ACL) “must take reasonable steps to ensure that the credit representative” (mortgage broker) complies with the requirements.

It is one small step in the alignment of the Mortgage Broker and Financial Adviser worlds.

In my conversations with various Aggregators/ACL holders, I have been impressed to see how they have embraced this regime and are proactively working through implementing new policies, procedures, tools and supporting their Brokers to meet the new requirements. Like any monumental changes at an industry level, there is some work still to be done.

The point stressed many times was the obligation rests squarely with the individual Mortgage Broker, whilst the Licensee “must take reasonable steps to ensure that the credit representative” (mortgage broker) complies with the requirements.” Civil penalties apply for any breaches.

If we can use the Financial Planning industry as a quasi-crystal ball for the Mortgage Broking industry, the possibility of any further imposts (such as a Code of Ethics) might come down to how well the BIO are implemented and adhered to. 

Will the Single Disciplinary Body earmarked for financial advisers also be rolled out to include mortgage brokers? 2022 seems a while away but will be here in lees time than expected.

For any ACLs who would like to discuss their preparation for the new requirements or gain insights from how the financial advice industry has dealt with similar requirements, please feel free to reach out to me for a no obligation chat – you can call me on 0408 056 679 or email joel@myintegrity.com.au

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