Could this happen? Mortgage broking

Every muppet seems to be a broker now. Not sure what's more bloated, it or the PT industry.

I've made my thoughts clear on brokering before.

Short term 0-5 years:
I expect reforms NZ style that will see a lot of "part timers" ditch the industry due to cuts to trailing commissions & increased regulation

Mid term 5-10 years:
I expect broader financial industry reforms and a crack down on brokers who currently go beyond the realm of assisting with loans and are providing financial advice rather than lending advice. I think overall the financial industry is really messy at the moment and there is far too many people stepping outside of their portfolio.
A broker shouldn't be giving financial advice
A financial advisor shouldn't be giving tax advice
An accountant shouldn't be giving legal/structuring advice
A solicitor shouldn't be giving advice on tax advice.

Long term 10 years+:
Brokering strikes me as an industry that is ripe for digital disruption, if I could efficiently shop my loans to multiple banks and tailor my needs easily, I wouldn't need a broker to middleman the transaction. Eventually I think banks will decide its in their best interests to cut brokers out of the picture and we will either see much easier, more transparent loan processes OR we will see digital broker services that are similar to how we shop today for say, flights, where you basically apply, the service shoots off that app to a half dozen financial institutions and they can choose to make an offer to lend you money or not & you then get to pick which one you want.

I'm sure there will always still be ~some~ brokers just like there is still travel agents, but it will likely be more cost competitive not to use them and the commissions wont be anywhere near as lucrative or hidden as they are today.

 

Why not?

I am a solicitor that gives tax advice.

 

You're also a CTA. I have no issue with folk such as yourself who wear many hats / juggle multiple qualifications (as long as there isn't a conflict of interest) my objection is more with brokers who start giving financial advise or shopping centre accountants who make recommendations about say asset structuring and protection (e.g. trusts to mitigate risk and other things accountants shouldn't be commenting on but do... Super seems to be a big one here) Correct me if I'm wrong here & this is largely due to my vague terminology of "tax advice" but an admitted solicitor doesn't need to be TPB registered to give tax advice IF competent on tax law, but they can't prepare or actually lodge tax forms without TBP registration. << I could be wrong there though.

To re-word my statement, broker, financial advisor, tax agent & solicitor are all different roles. They can be performed by a single entity:
If that entity is qualified to perform each distinct role
AND
If there is no conflict of interest.


I probably shouldn't be using the term "accountant" either. Tax agent I believe? is the correct title.

 

Yes you are correct. Solicitors can give tax advice, if they are competent in tax, as tax advice is legal advice after all. The CTA is no licence - it is like being a CPA, it doesn't give any authority. And lawyers can't lodge tax returns unless they are registered tax agents.

I agree with everything you said above too - so many brokers are giving tax advice and not realising it. So many tax agents are giving legal advice and not realising it. And there is probably a lot of lawyers and tax agents giving credit advice and not realising it.

 

Awesome ...silly policy which presents an opportunity for me.

Personally....it would be better if the govt simply just regulated the industry and set a guideline of percentages which will be charged and consistently across all banks. That way the broker can concentrate on getting the best loan for the customer rather than what is good for them. Not all brokers act this way...but a lot do....

 

If it is one isolated fraud RC is not required. But currently there are en masse sinister activities taking place which we hear of everyday viz. insurance, brokering, vertical integration, investment banking, fund management, super, financial advise, rate rigging.

It is all at a cost to the tax payer since the banks are too big to fail. Breaking up the integrated structures will reduce the risk to economy and the cost to tax payer in case of some economic catastrophe.

Looks like all the independents are leaning towards RC, MT might not have a choice.

 

@Plutus i see where your coming, but....

I think it's great the good investment brokers understand taxation and its effect on loan structuring. Think about if every broker in here was not allowed to make any comments about it. How much loss deductions do you think they have saved as a collective group? Heck most people on here would have happily paid a deposit with cash instead of equity.

I know we can then say that's what there accountant is for but I think that just creates another barrier. I think a broker SHOULD give GENERAL advice and ask there clients to confirm with their accountant as opposed to saying nothing and letting them guess that's what they should do.

Just my 2 cents

 

But they don't understand taxation. That is why licencing is needed 1. for the education and 2 for the insurance.

 

I'm not suggesting they know the ins and outs but the basic principles which can save clients tens of thousands IMO is critical.

What are you suggesting Terry? Your esteemed colleagues on here without the qualification don't factor taxation considerstions into loan structuring?

What sort of world would we live in if you were only allowed to give advice specific to your qualification? Most of the best advice I have revcieved in my life was from people not technically qualified to give it to me.

As long as it is supported with "this is general advice and my understanding of the effects this will have on your taxation. I reccommend you confirm this With your taxation advisor" IMO is fine and to be honest if I used a broker that didn't advise me of this and let me try and find it out myself I would be majorly peeved and not going back.

 

I am sure they do give tax advice, but a little knowledge can be dangerous.

I have seen brokers say that interest is deductible when it isn't, seen some recommend redrawing before moving out and renting to enable more interest to be claimed, some have even said deductibility of interest depends on who is on title.

Such as disclaimer is dangerous:
"this is general advice and my understanding of the effects this will have on your taxation. I recommend you confirm this With your taxation advisor"

Most clients have no idea about qualifications or knowledge. They think of the broker as an 'adviser' and will rely on what they say without checking with a qualified adviser.

Broker's shouldn't mention the word 'tax' at all. They can suggest loan structures based on their knowledge, but they should not suggest they do something for a tax reason. That is up to the client to check with their tax advisor.

What would have happened to you had you asked a broker how to split your loan upon the subdivision? Could have been messy and you could have lost money on missed deductions.

 

I cannot argue that a little knowledge can be dangerous and I do understand your view.
You are also correct in that most people would assume a mortgage broker would be a know all of all that is finance (Working in IT, everyone assumes if it plugs into a powerpoint that I basically know everything it can do and how to fix it if it isn't working).

I still maintain though that they should understand the principles and should be able to advise the reason they are doing something, which includes using the word tax.
What happens if a client questions why you want them to pay money from the offset into the PPOR loan and then split it and use that as a deposit for an IP?
Most people would say "ummm why don't i just use the money from my offset?".
Surely a broker can't turn around and say "my lips are sealed" OR "Go ask your accountant why I am doing it". If they said that to me I would be thinking "Are you serious??"

 

those loan comparison websites are bullocks. For my last refinance, I trolled the loan comparison web sites to get the best deal I could find. My broker beat that deal by miles with a product that was not anywhere near the loan comparison sites. Loan comparison sites only compare a small subset of available loans. I find them useless. OTOH, our broker has saved us tens of thousands in interest payments and has worked very hard for every cent he gets from our loans.

 

when I was interviewing for a new broker, I had one bloke trying to give me tax advice. He made a real hash of it of course. The broker I selected doesn't even try to give tax advice. He gets me great deals on loans. That's what I want from a broker.

 

I don't fully understand tax principles and I am licenced. But I probably know more than most lawyers and accountants on the tax issues surrounding loans.

I don't know how brokers should answer such a question about the offset account but I don't have to worry as I am licensed. I just make sure that I answer legal questions through my law firm and not as a broker. Maybe they could say "you should probably pay down the loan and reborrow rather than take from the offset account - but you better check with your tax adviser on the tax aspects"

 

say what you will about good, bad or indifferent broker advice - but if they drive this through, mark my words - the big 4 banks will be the sole beneficiaries in the end.

 

If your lending requirements fit inside "ratecity.com.au, sort by lowest to highest" sure. In the same way etax can replace an accountant for basic returns

 

It is back to the future in reverse ;-)

What you or we are getting closer too, is like the old union days where job sites would shut down because the electrician was screwing power points to the wall and that was the carpenters job.

Our country is becoming a PC joke, crippled and riddled with useless legislation.

 

What do you propose as a solution to this?

 

Stop churning out legislation and use existing laws to correct criminal behavior, and stop trying to micro manage every single aspect of everyone's lives.

 

And allow brokers to give tax advice without training?