The Convergence of Lending and Investments

Written by Michael McAlary

There is a lot of media talk about the convergence of lending and investment areas of financial services. In practical terms what does this mean for clients?

The role of mortgage brokers and financial planners

Importantly from the client perspective it means that mortgage brokers and financial planners are going to have to take a holistic view of a client’s financial position. No longer will mortgage brokers be able to ignore the financial objectives of a client when considering the type of home loan they recommend. Equally, financial planners will need to take into consideration the total financial position of clients when recommending investments or insurance. In the past financial planners have focussed on a customer’s investments, insurance and superannuation needs and have left the home loan and investment loan (for investment properties) to the mortgage broker or lender to deal with. Today, mortgage brokers are teaming up with financial planners or are obtaining an Australian Financial Services Licence (AFSL) or becoming an Authorised Representative of an AFSL holder.. Similarly, financial planners are teaming up with mortgage brokers or are getting their own Australian Credit Licence, or becoming an Authorised Representative of a Licence holder.

Home loan and insurance

The regulatory regime recognises this convergence of lending and investment, however it has a way to go before the rules are harmonised. This means that a mortgage broker advising a home loan borrower needs to consider the possible risks of that borrower. Namely, the risk of the borrower losing their job, or falling sick, e.g. the family may have a history of heart disease. If they do not consider these risks and highlight them to the client, the mortgage broker may find themselves potentially liable, if the risk materialises, e.g. the client loses their job and they cannot make their home loan repayments. The mortgage broker should then recommend that the borrower consider taking out Income Protection insurance and/or Trauma Insurance. Unless the mortgage broker has an AFSL or is an Authorised Representative of an AFSL, they cannot provide any financial product advice.

Home loan and investment products

This convergence of lending and investments is leading to new and exciting products. The Aspire product is an example. With Aspire the client is investing while they are paying off their home loan. Aspire is a new generation of home loan product that helps clients create wealth.

Regardless of whether you are a first home buyer, and investment property buyer, an owner occupier who is upgrading or are refinancing, call 02 9233 1111 now for more information on Aspire.


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