FNSFMB403 Broking Options Assessment 3

This assessment covers the concept of not unsuitable financial products, 3 suitability pillars, credit guide, broker's presentation format, home loan key facts sheet, independent broker criteria, and MFAA Code of Practice standards.

F NS40 8 15 C e r t ifi ca t e IV i n F IN AN CE & MO R TG AGE B R O K ING
FNSFMB403 Present broking options to client
Assessment 3

What does the term ‘not unsuitable’ mean in the context of a financial product or service?
Act i v it y 1 Answe r
It is necessary as per the NCCP act that the mortgage broker and lender should provide borrower with
such financial products or services that is not unsuitable. A financial product or service is deemed to be
not unsuitable if it satisfies the consumer's objectives and requirements, customer has the ability to
repay the loan amount so obtained without facing any kind of hardships.

Explain the concept of 3 suitability pillars as they relate to mortgage broking.
A c tiv i ty 2 A ns w er
3 pillars of suitability are:
1. Down payment indicates how much risk that a bank is taking on the borrower’s property
(Hanrahan, 2018).
2. Employment & income involves checking for where the client is employed from the last 3 years
and if the client is self-employed then their tax returns of past 2 years are checked.
3. Credit can be assessed through credit report provided with the loan application and the score
therein determines the rate of interest. This pillar is meant for determining the credit history of the
client.

Activity 3
What would a prospective client expect to find in a ‘credit guide”?
Activity 3 Answer
A credit guide contain information pertaining to the lender which includes their license number &
resolution of external disputes which indicates how issues will be resolved without going to court. Also,
the name, Australian credit license number and contact details of the lender must be their in the credit
guide. Further, contact number for making a complaint should be there.

Activity 4
A responsible mortgage broker should organise and present all information that is clear and easy to
understand for the client.
What format might a broker’s presentation take?
Activity 4 Answer
A broker's presentation should be in document format either in printed or electronic form. Presentation
software could also be used like PowerPoint slides. Also, a written report could be included a credit
guide, quote which offers various credit assistance along with the verbal information to demonstrate
directly to the client that which loan is best to be chosen by facilitating understanding of various features
associated with the loan.

Activity 5
What would a client expect to find in a home loan ‘key facts sheet’?
Activity 5 Answer
Generally client expected to find features of a home loan, associated fees and all other key information
of a loan such as repayment method, amount that can be borrowed with estimated cost (Main, 2018).
This is expected by client to facilitate comparison among various options on the basis of their needs.

Activity 6
What criteria must be present for a broker to describe themselves as ‘independent’?
Activity 6 Answer
As per the regulatory regime, a broker who has an ability to suggest the whole range of products
associates with the mortgage market are known as independent broker. This could be possible when the
following criteria has been satisfied:
 They should get any commission, gifts or benefits that are meant for influencing their conduct
towards their client.
 Their should be no indirect or direct restrictions imposed on the selection of product by them.

Activity 7
Describe what a broker should do if a client expresses uncertainty about a financial product or service.
4 .1
Activity 7 Answer
 On the basis of client's circumstances, expectations and needs, all the available options must be
explained in detail by a mortgage broker to the client (Competition and Consumer Commission,
2018).
 Also, all the queries and concerns of the client must be clarified well by the broker.

Activity 8
Identify the main standards that a mortgage broker must demonstrate under the MFAA Code of Practice.
Activity 8 Answer
Mortgage broker should-
 Act with the required level of skills, diligence and care by taking into consideration, the
instructions given by client.
 Deal in a good faith with whomsoever they came across during their professional duty.
 Not engage in acts that deceptive and misleading in nature.

REFERENCES
Competition, A. and Consumer Commission, 2018. Residential mortgage price inquiry: interim report.
Main, A., 2018. No more'wet lettuce'. Investment Magazine, (155), pp.24-25.
Hanrahan, P., 2018. Legal framework for the provision of financial advice and sale of financial products
to Australian households: background paper 7.