Could this happen? Mortgage broking

No, I am not saying that at all, if it is illegal now & they break the law, then use that, no need for something new.

Who goes to a broker for tax advice anyway ? And we can't protect everyone from themselves either way.

Assuming you have dealt with criminals, the first obvious thing is they do not care about laws, legislate till the cows come home, they do not care, if people do the wrong thing now, they will do it after you legislate further as well.

 

I think the point myself and @dabbler is trying to make is that general advice whether in broking or any other field is more helpful than hurtful.

Let me ask you this. Do you think brokers giving tax advice via structuring has saved more or hurt more people financially? Sure you gave some examples of it going wrong but a lot of the times the general advice would be right. I would say most brokers on here have got it right everytime.

I much prefer a society that allows this and not punish it.

It's like saying a GP can only ever comment on general health and prescribe drugs. This is not what they do, they discuss with you something they believe you may have and then refer you to a specialist. Now ofcourse if a doctor is referring you to a specialist then you want some answers there and then not be told to wait.

A work site like dabbler said has these examples all the time. My brother in law is a handy man and is a better plumber, concreter, chippy than most of the actual qualified professionals in this field.

Don't also forget that some professionals in THIER field know less about it than someone in another field. I know you can give examples of brokers giving terrible advice but I am sure many tax advisors have probably done the same. Not everyone is a competent as you @Terry_w

I would personally feel much more comfortable if someone told me one thing and it was confirmed by another. Too many times in my job alone have I been burnt because the single"professional" was wrong.

 

An example this week alone my colleague is not a certified cabler and as such electricians had to run all our new data cabling for our new head office.
They made countless mistakes, he saw them and corrected countless mistakes. He is FAR more competent in cabling yet they are the professionals and as such we have had to deal with problems caused by their incompetence.

Just look at the finance thread and read about the planner advising his clients to reduce their loan term, pretty sure eveyone called him/her dumb yet they are the professional.

My point being just because the professional says it doesn't mean it's gospel. I would much prefer getting general advice and confirming it with someone else. After all isn't that the point of PC

 

My experience runs the other way. None of these savvy brokers could get me a loan when I needed it and when I did get one, I could have done it myself. Even this one was jeopardized by over sharing my information with the bank without my knowledge or permission. The website does not want to share your personal information (beyond stock standard loan related questions) as it does not want to build personal relationships with the bank

Right now the rate comparison websites are not good at assimilating diversity of all information but these are getting better. More legislation will bring more rules and guidelines and these are easy to program thus closing the human advantage and as @Plutus has remarked, brokering will head for obsolescence due to technology, if the legislation does not get it earlier. Then there are other technologies such as P2P lending, ledger balancing via blockchains etc which highly restricted now might replace the banks (2% middleman) as far as loans themselves are concerned. Eventually brokerage will merge with specialized advice like tax, NRAS, portfolio management.

To summarize while current human brokers might provide limited advantage to a few fringe investment portfolios the disadvantages include:

• Excessive costs and commissions for relatively unskilled job
  
• Loss of privacy
• Avenue and presence of widespread rorting via fraudulent behavior and the incumbent economic risk and cost to taxpayer (GFC anyone ?)
• Loss of efficiency and profitability by artificially constraining emerging technologies.
• Procedural malaise as brokerage remuneration is misaligned with clients' needs.
  
• Dangerous (bordering on illegal) professional over reach as already highlighted by @Terry_w

 

I just remembered another example. A well know broker who is a CA or CPA (but not a tax agent I think) gave a client land tax advice which was incorrect. Only lawyers can give land tax advice legally. The poor client based their ownership structure on this advice and is now paying more land tax each year because of it.

When I explained to the client it was incorrect he said 'but he is a CPA'...

Also sometimes an off the cuff remark can be interpreted by the client as 'advice'. The broker may not have even advised the client to purchase this way, but may have just mentioned something in passing and without any depth. The client thinks that the broker is an 'advisor' so they must have known what they are talking about.

 

But is any licence or qualification needed to cable?

Tax agents and lawyers do give incorrect tax advice - look at the Aussie John case for example. But if they get it wrong they are covered by insurance.

A broker may know more about tax deductibility of interest than the local tax agent - but they don't know what they don't know, are not licensed and are not insured.

 

Yes license is required. Cabling has to be as per AS/NZS 3000 which is quite intricate (shielding, earth separation, inter/intra cable distances, connectors, load calculation, product certification ....) and even licensed electricians get it wrong. An unlicensed person would probably be creating more problems than solving. If reported to Energy Safe Victoria, there would definitely be an inquiry and more penalties might follow.

 

As @Skilled_Migrant pointed out a license is required to cable but the issue is a lot of electricians who hold this are not very good at it. Most have no idea beyond the basic understanding of laying and connecting cable, the effects of this can be catastrophic to IT.

I cannot argue against the insurance side of things and to that I would say "what is the answer". Perhaps brokers should be allowed/made to do some kind of certification in the taxation effects of loan structuring?
This could allow them basic powers to atleast tell a client why they are structuring the way they are as opposed to "speak to your tax advisor".

Imagine how well that would go down with a quick settlement! Have you tried to book into a tax accountant quickly? Haha

 

I think the only answer at the moment is for brokers not to give tax advice or mention tax at all until they become either lawyers or tax agents.

There was a similar issue with Financial Planners giving tax advice. Now they basically have to become tax agents 0582 Registering as a tax (financial) adviser – standard option

 

Aussie Home Loans broker faces jail for 'The Big Short' style tactics
Extract:

Lindsay David of LF Economics said mortgage frauds by brokers represented a tip of the iceberg and in most cases the banks are at fault for forging home loan documents.


"Basically they're the ones fudging the numbers. God knows how many dodgy loans are in Sydney and Melbourne."

He said this issue opened up the risk of the banks selling assets that are worth less than they appear to be.

"What we're worried about is an American style issue where basically the banks sell off residential mortgage backed securities as triple-A rated products when they are really junk products.

"To sell them as triple-A residential mortgage backed securities you have to make people more credit worthy than they really are."


However, the true extent of home loan fraud is unlikely to become apparent until the house price crashes, Mr David said. "That's when the music starts," he said.

 

Just checking my understanding here. Could the above also include:

A financial advisor shouldn't be giving mortgage / loan credit advice
An accountant shouldn't be giving mortgage/ loan credit advice
A solicitor shouldn't be giving mortgage/ loan credit advice

unless they are also a qualified MB with their own credit license or operating under a credit license.

 

"God knows" is not evidence. Of course it is all the brokers fault. People would never lie directly to a bank...

 

Lindsay David of LF Economics said mortgage frauds by brokers represented a tip of the iceberg and in most cases the banks are the real culprits behind fake home loan documents.

Read more: Aussie Home Loans broker faces jail for 'The Big Short' style tactics
Follow us: @FinancialReview on Twitter | financialreview on Facebook

 

We can shuffle the blame between the banks and brokers. Systemic fraud and risk exists, the quantum and responsibility can be ascertained only after an inquiry.

 

Of course there is fraud. I am sure we could all share an anecdote or 2. But to suggest it is rife without any evidence is misleading.

 

Inquiry is the only way to find out.

Till such time we will have to trust that ASIC, APRA and Mortgage and Finance Association of Australia know what they are doing and talking about rather than the brokers who are daily in news with millions of dollars of fraud.

I hope you are not suggesting that ASIC, APRA, Mortgage and Finance Association, the conservative minister who has commissioned the inquiry and the judiciary (which has convicted these honest brokers for fraud) are all indulging in misleading conduct.

 

I seriously doubt that.

Considering there are hundreds of billions in loans, I would not be worried about a few million. But no, I don't trust ASIC.

An inquiry has been commissioned? News to me. Last post you seemed to be calling for one, so that was quick work

So no, not suggesting any of the above are fraudulent. Just suggesting Lindsay David is. I have read his work and commentary extensively. I think "fraud" is generous considering.

 

The regulators and the minister definitely see adequate evidence and risk in billions of loans to get worried and commission an inquiry, vs an uninformed & unsubstantiated opinion.

Read the OP. Is Lindsay David = Nothing to look here ? Good deflection
Just curious: Any relatives or friends into MB ?

 

I did read the op which clearly states its not the mortgage brokers. You will recall

Lindsay David of LF Economics said mortgage frauds by brokers represented a tip of the iceberg and in most cases the banks are at fault for forging home loan documents.​

None of my friends or relatives are mortgage brokers. Not the real question. The real question is why you insist on bashing them when Lindsay David says its not the mortgage brokers?

 

Not only above. Many take people giving/taking financial/legal/tax advice at back yard BBQ from whoever ! ( and no one realised that)
Until something goes wrong, people just pointing fingers to each other.