Best Interests Duty – what does it mean for you?
Best Interests Duty – what does it mean for you? MoneyQuest always works to prioritise the needs of our clients above everything else. This is an ethical standard we strive to maintain and will continue to do so.
Recent Best Interests Duty legislation now sets that principle in law – here’s what it means for you.
What is Best Interests Duty?
As of January 2021, Best Interests Duty became mandated by law. Aimed at protecting borrowers from unethical financial behaviour, this legislation ensures that all mortgage brokers put client needs firmly ahead of their own and any others.
Similarly, brokers are obliged to keep clients well informed if they request an unsuitable loan.
As finance specialists, we always protect your best interests when recommending a home loan, whereas a lender has no legal obligation to do so.
How does Best Interests Duty work?
Mortgage brokers are legally required to provide loan options that provide maximum benefit to the client, rather than ones that might pay the broker a better commission rate and not be as advantageous to the client. Previously, a loan only had to be ‘not unsuitable,’ whereas now the client is legally entitled to have recommended to them the loan that gives them the best possible outcome.
It’s not simply about offering the lowest interest rate or fee. Best Interests Duty takes a broader approach and acknowledges that the right loan option also takes loan features and benefits into account.
How does Best Interests Duty affect me?
Your mortgage broker should research and compare a range of products before giving you any advice. Rather than a one size fits all solution, any loans put forward to you should meet your specific needs and financial situation, as mutually agreed from the outset.
The legislation brings peace of mind and fresh assurance to all clients looking to secure a loan.
How does Best Interests Duty affect lenders?
The change in standards does not apply to lenders. If you approach a bank directly for a loan, you are not protected by law in the same way as if dealing with a broker. A lender will present only its products to you, with no obligation to make sure they provide the optimum outcome for your circumstances, compared to other lenders.
Disclaimer:
This article is written to provide a summary and general overview of the subject matter covered for your information only. Every effort has been made to ensure the information in the article is current, accurate and reliable. This article has been prepared without taking into account your objectives, personal circumstances, financial situation or needs. You should consider whether it is appropriate for your circumstances. You should seek your own independent legal, financial and taxation advice before acting or relying on any of the content contained in the articles and review any relevant Product Disclosure Statement (PDS), Terms and Conditions (T&C) or Financial Services Guide (FSG).
Please consult your financial advisor, solicitor or accountant before acting on information contained in this publication.
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The Money Quest Group (MQG) is one of Australia's leading boutique mortgage broking businesses, with a network of more than 600 brokers nationwide. Known for their exuberant culture and superior support, MQG provides brokers access to a range of financial products from more than 60 lending institutions and suppliers, and exclusive access to in-house benefits and services.
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