Speaking to The Adviser following the news that ASIC was delaying the implementation of the best interests duty from 1 July 2020 to 1 January 2021, the head of the online brokerage said he was “disappointed” that the new obligation was being delayed.
Elaborating, Lendi CEO David Hyman told The Adviser that the brokerage was “fundamentally big supporters” of the BID, as it provided the broking industry with an advantage over the direct channel.
Mr Hyman explained: “We’re disappointed that it was delayed. Fundamentally, we’ve been big supporters of it. We think customers deserve to know that when they’re dealing with a broker, their actions are actually in the customers’ best interests.
“I actually think the best interests duty is a great opportunity for the broker industry to differentiate itself from direct bank origination. One of the things that was interesting around commissioner Hayne’s recommendation [from the royal commission] and the subsequent legislation is that the duty only applies to brokers; it doesn’t apply to banks.
“While that’s not ideal... it’s a great opportunity for brokers to further differentiate themselves,” he said.
“Customers who may decide to go straight to a branch won’t be getting the same level of help, [while] customers that go through a broker are protected by the duty. So, we felt that getting it rolled out would help the broker industry grow market share. And the sooner, the better.”
The online platform, which employs both in-house lending specialists and brokers to help borrowers find a suitable loan, introduced its own best interests policy in 2017 to provide transparency and assurance to its customers.
Among the pledges made in the Lendi policy is the promise that it does not “filter, recommend or promote any product or service based on the remuneration Lendi receives from any bank or lender” and that its salaried home loan specialists are not “remunerated or incentivised based on recommending a particular product for a lender, or purely on the volume of loans they settle”.
Mr Hyman continued: “Obviously, best interests [duty] was a relatively subjective thing [in 2017], and our policy is based on our interpretation of it.
“At the very highest level, it’s about assuring customers that if they use Lendi, we will be making recommendations to their best interests and we then break that down into both our platform and our people. So from a platform perspective, what we say is the platform takes into consideration a whole bunch of different data points, which encompass your needs and objectives and financial situation. And we make loan structure and lender and product recommendations based on that data. We do not take into consideration who the lender is and how much that lender pays us, we only take into consideration your needs and objectives and your financial situation, and we try and match you with the best of your circumstances.”
Mr Hyman noted that while industry was still waiting for the final ASIC guidance (which he said was key as “ASIC’s guidance is typically how the industry models things”), he did not expect that the brokerage would need to make any major changes to its model.
“At the end of the day, from our perspective and for Lendi and Lendi brokers, we don’t anticipate major changes because we’ve built our business around the concept of best interests duty for our customers.
“While extending that to an industry-wide duty will obviously require some changes and modifications, we believe we’ve built systems and processes to handle that. The new duty shouldn’t impact us too much as our customers have been getting the Lendi best interests duty and have been doing so for a couple of years now.”
The Lendi CEO concluded by stating that while the incoming BID will help provide an advantage to the channel, the increasingly diverse credit appetites and lending policies brought about because of the COVID-19 pandemic will also draw more customers to brokers.
“I think it’s not an unreasonable bow to draw to say that COVID-19 and its additional lending layers are bringing about increasing complexity. It makes much more sense for a customer to go to a broker versus a bank for financial assistance, particularly if they’re in one of the credit segments getting extra levels of scrutiny, the parts of the market that were hardest hit by COVID-19 – things like retail, travel and tourism. It doesn’t mean you can’t get a loan in those sectors, it’s going to be much harder. And it’s going to be much more likely [to succeed] if those sectors use a broker to find out which lender is the best to go with.”