A high profile financial analyst has ridiculed the idea that mortgage brokers take homebuyers’ best interests to heart and has claimed their advice is often motivated by personal gain.
In his Market Report published last week, Wealth Within chief analyst Dale Gillham called for greater regulation of the mortgage brokering industry, where he believes brokers are largely left to their own devices and clients are ‘getting fleeced’ as a result.
“Mortgage brokers are required to give you a choice as to a loan that best suit your needs. However, many will generally recommend the loan that makes them the most commission just like financial planners have been able to do,” he said.
Asked if he had evidence to back his claims, Gillham told Your Investment Property sister publication Australian Broker that he didn't, but that he had dealt with brokers for ‘a gazillion’ years.
“When I worked for Westpac, you always picked three products, the one in the middle is the one you want them to buy and so you push the middle one.”
Brokers also always have a ‘preferred bank’, whether they realise it or not, he said.
“Subliminally, whether they’re doing it out of intention or not, they’re going to do the one that benefits them the most.
“If the broker likes Westpac and maybe ANZ pays them 10 basis points less, they’re going to recommend Westpac.
“What I find is most brokers will recommend the same product to all people. You’ll find it in the financial planning industry as well.”
Gillham was quick to add that he doesn’t dislike brokers. He said it is simply worth pointing out that the federal government needs to regulate various financial services sectors equally.
“The property industry is largely unregulated in terms of building and financing properties. The biggest investment anyone makes is on their house. If it’s your biggest investment, why isn’t it regulated as much?”
