How to explain the royal commission to your customers

A senior mortgage executive offers advice on how brokers can explain the revelations to clients

How to explain the royal commission to your customers

In light of the revelations coming out of the royal commission hearings, it shouldn’t come as a surprise if customers approach brokers with some difficult questions and some scepticism.

Following the significant press coverage of AMP’s fees for no service, the fraudulent transactions of NAB’s Introducer Program, and CBA’s widespread failings, the public’s confidence in the financial sector has eroded, says You’re Welcome director and senior mortgage and finance consultant Chris Straw.

While most of these cases of misconduct involved the banks and their own staff and had nothing to do with brokers, the third-party channel is still part of the finance ecosystem and may be asked to do some explaining.

“Much of the criticism banks are getting has been about their aggressive sales culture promoting product cross-sales, and for charging fees without providing the financial advice clients thought they were paying for,” Straw said.

“While the issues are being dealt with and measures are being introduced to ensure that they do not continue, it is important that we reassure the Australian community that the broking sector as a whole is well-managed and is comprised of many good operators,” Straw said.    

Be open and honest
Straw suggests brokers be upfront about the fact that the royal commission was established to investigate if any of Australia’s financial entities have engaged in misconduct. He also said it’s important to note that there are sufficient mechanisms in place to address the issue and compensate victims of poor advice.
“The royal commission is much needed, and is a good thing for the future of the industry and the financial outcome of all Australians,” he said. “It will see financial institutions reflect on their past behaviours and will clean up many of the aggressive sales cultures that have been introduced over the years.”
Winning and keeping customers’ trust
Since banks are the ones that pay commissions to brokers, the service brokers provide is absolutely free to the client. Straw pointed out that unlike branch bankers who are not required to disclose receipts for bonuses or other forms of remuneration for selling financial products, brokers fully disclose their income to clients through the provision of the Credit Proposal document.
“Brokers are independent operators acting in the best interest of clients. We only get paid for the successful settlement of a loan application,” Straw said.  

Straw believes that “borrowing money should be a positive experience as clients borrow money to purchase things that either change or add value to their lives”.

For this reason, it’s important for brokers to continue to provide their customers with the best advice throughout the loan’s life.   

He also emphasised the need to explain to customers that there are bad apples and good apples in any industry, and to be hopeful that through the royal commission’s investigation and the government’s implementation of harsher penalties, the sector will be cleaned up and trust will be rebuilt.