Royal Commission, Banks, Mortgage Brokers & Financial Planners – where to now?
The Royal Commission into the banking industry and subsequently financial planning and mortgage broking sectors has been interesting to say the least.
We’ve all been shared into some of the horror stories in lending practices as well some very appalling ones, like selling income protection insurance to mentally challenged individual.
As individuals, we have at our disposal a multitude of specialists who can help us juggle, maintain and structure our financial needs.
We can go to a mortgage broker who can ‘help’ source the most competitive loan.
Then we can go to a financial planner to help protect our assets.
A lawyer will draft a water-tight Will to make sure all your assets are dealt with as per your wishes once you’ve left us.
And even the banks play a part here. For those who are not inclined to deal with 2 or 3 different people, potentially the bank can offer you a one-stop shop for all your needs.
The fall-out from the Royal Commission has most definitely seen some winners and definitely many losers – who are winners and who are the losers? That’s not my position to say.
However, judging by the number of class actions being prepared (mainly at the banks), I can say with some certainty lawyers are one of the winners!
My point in this article is not to bank bash or comment on the outcomes of the Royal Commission – it is what it is – as they say.
Rather, I’d like to take another angle. And that is, in any situation, us as individuals do have a duty of care to ourselves – in other words personal accountability, ownership and responsibility.
All too often I come across clients who blame their negative financial situation on everyone – i.e.
“the mortgage broker said I could borrow this amount, then the bank lent it to me – these people should know better and have acted irresponsibly”.
We need to remember – whether it’s the bank or mortgage broker or who ever else, these people are in a business and their goal is to make money.
Despite what the public may think, lending institutions and the people who help get these loans (mortgage brokers etc) need to operate with high professional standards and by in large, they do so.
BUT – as individuals, we need to stop blaming these businesses when things are not going right for us – again, you as the borrower, need to take personal accountability, ownership and responsibility.
Now of course, things do happen which are out of our control – yet, there seems a tendency for many people to even shy away from what is in their control.
Let me elaborate.
Think about his for a moment – an accountant is truly your trusted advisor. He or she does not have a vested interest in which loan you apply for or which insurance company provides you with life cover or even which law firm will handle your Estate Planning needs.
The accountant’s main objective is not only to provide compliance services, yet also to ensure the individual understands their financial situation and to provide guidance on how to avoid unwanted financial surprises.
Take for example a person wanting to take out a loan to buy a new home or investment property.
In many cases, this person may simply either go straight to the bank or they may go through a mortgage broker.
And while mortgage brokers now have a strict procedure to follow and the banks are asking for much more documentation – at the end of the day, their objective is to secure you as their client.
An accountant on the other hand is there to be impartial and objective – he/she gains nothing if you go to lender B instead of lender A.
So, in this case, the accountant will spend time with you in not only ascertaining your borrowing and servicing capacity, he/she will also look at how best to structure the loan, how much to pay per month to ensure the least amount of time spent in the loan, is a family trust required etc.
However, most importantly, your accountant can help you understand the financial commitment you are getting into which we believe is an important part of the process and helps you take some personal accountability & ownership.
The point being that using your accountant as the starting point, rather than telling them once you’ve already taken out the loan and bought the house (which is usually the case), can potentially save you from many headaches and hurdles down the track.
The unbiased, frank and open advice received from your accountant will set you up in a much favourable financial position as time goes on.
And this is where personal ownership, accountability and responsibility comes into play – it simply means us as individuals need to do our own due diligence – and your accountant can help with this.