Best Interest Duty, how it works for brokers and not banks
An outcome from the Royal Commission into banking conduct which will become active in 2021 will be the introduction of “Best Interest Duty”
A couple of things about BID
1. It requires the broker to put the benefit to the client above the benefit to the broker. For all the brokers I know this is a no-brainer and the reason we entered the industry, business as usual
2. It does not apply to banks. It effectively cannot apply to banks who cannot offer their competitors products.
3. That point needs exploration, so how this plays out is that banks by their very nature cannot offer you the product from the bank next door
a. Which might offer a lower deposit
b. Or might lend you more money
c. Might have a better structure
d. Or the most obvious one is – could be more economic for you!
4. The only negative thing will be the amount of paperwork that is created by any new legislation, things like statements of advice which most people have no care for, but we will see how this plays out.
So, Best interest duty legally obliges a broker to act like a broker, and actually differentiates more clearly between brokers and banks – what a wonderful opportunity to be a broker and oversee all the varied lenders and their policies and provide great outcomes for our people.