A Cunning Ploy.........
While taking advantage of the recent good weather (?) by trailing around North Shore Golf Club, I was apprised of a cunning ploy banks have adopted in their relationships with the mortgage broker community. It may not come as a surprise to many financial advisers - nor indeed to any mortgage brokers reading this - but I was somewhat taken aback to learn that banks impose quotas on mortgage brokers in order to maintain access to mortgage funds for their clients.
So irrespective of which bank or which mortgage is most appropriate for the client, the mortgage broker has, at some point, to consider recommending a product which may not be the most appropriate for a client, in order to meet a required target - or risk losing access altogether.
I suspect this particular practice isn't new, but not being too familiar with the mortgage broker sector, it seems to me that any advice-based industry that deliberately subordinates the concept of advising and recommending the most appropriate product for a client is not performing at an optimal level.
From Wikipedia, contained in the definition of 'broker' is the sentence -
"Brokers may represent either the seller (90% of the time) or the buyer (10%) but not both at the same time"
Surely an obligatory quota must, at some point, place the mortgage broker in the position of representing the lender's interests at the expense of recommending the most appropriate product to fit with his/her client's circumstances?
In other words, the mortgage broker has taken instruction from a client who will be expecting 'most appropriate advice', but as the quota has to be met, the lender's interest prevails.
With the current revision of the Financial Adviser Act underway, and the focus on disclosure, advice v sales, ethical conduct etc., this particular ploy might be worth reviewing.