Entire mortgage industry at stake from unethical behaviour

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Mortgage advisers have been told they risk causing damage to the entire industry if they engage in unethical behaviour themselves.

Monday, August 22nd 2022, 6:10AM 2 Comments

by Eric Frykberg

That is because of collegial attitudes within  the industry which mean that the actions of one person can easily be extended to the mortgage business as a whole in the eyes of the public.

The comments came from a Wellington academic who specialises in ethics, Jane Arnott. 

She said there are a variety of ethical matters, such as people's hidden biases showing through, sometimes unconsciously.

This could involve making instant judgements about people based on extraneous factors, such as dress or how an office is maintained. It was sometimes necessary to hold judgements in check to guard against this.

Another ethical question concerned the need for advisers to follow up with their clients’ welfare long after a mortgage or other deal had been finalised. 

An example of how this could go wrong happened in the insurance space and was described by the financial ombudsman Susan Taylor.

It concerned a life insurance policy worth $100,000, which was sold to a 70 year old, with very high premiums.

“'Then, nothing happened,” Taylor  said. 

“They just trucked along for about 10 years, and then the man’s son was looking at his father's finances and asked; 'What is this insurance product that you are paying so much money for, Dad?'

"A complaint was made to us that it was unsuitable advice when it was offered."

Taylor said there was an important issue at stake, since the adviser should have followed up on the initial advice that was given to the client and checked that it was still suitable.  

In the end the man's son got no redress due to a technicality.

According to Jane Arnott, this case was a very worrying one on the spectrum of ethical cases. But there was more.

"This runs the risk of huge reputational damage to the industry,” Arnott  said. 

“When I hold my workshops on ethics, I talk not just about your business reputation but the reputation of your colleagues and your peers.  

“This has to be seen as a collegial sector. If you don't have expertise in one area, you have colleagues you can refer clients to, and so  perception of the industry (as a whole)  is something that  needs to be continually built.

"It bothers me when I hear of examples like that because it just makes it harder for everybody else."

She said the task of the adviser extended past the time when a deal was first made.

The adviser had a role to remind clients later about their policies and using the rapport they built up when the deal was first agreed to discuss the best way forward. 

"Set and forget may not be as simple as just a phone call or a letter.

"(Maintaining care of a client) requires a different sort of mindset." 

In another section of the webinar, Taylor had a strong message for advisers: high ethical standards are good for business. 

“Values-based organisations make money,” she sald.

“It's not a trade off between generating profit and doing the right thing, there is plenty of evidence to show that treating customers fairly, and putting their customers interests first, ultimately is really good for business.

“Handling a complaint well .... will grow your reputation.”

Tags: mortgages

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