We call ourselves professionals, advisors and many other terms to paint a professional picture of us. This applies to mortgage brokers and banks mortgage sales persons as well. The lenders also try to dress themselves as true caring and client focused organizations. Every avid facebook comments or tweets try to express the deep concern for every clients.
These are all about marketing. In reality how truly we are professionals and what are our ethical standards?
Few days ago a friend of mine was exhausted from mortgage shopping. He talked to few brokers and many banks. They all came up with different ideas. He got different rate quotes from the same institutions when he talked to two different salespersons. Finally when he decided to go with a broker, a bank offered him substantially discounted rate and beat the brokers’ rate by significant margin.
The same bank few weeks ago told him that they have offered him the best rate and they can not go down any further. My friend finally decided to take a loss and stick with the broker – a decision which comes from high ethical and moral standards.
Now the real question is why these differences? It is a business – I get it. You can do price matching between different stores – I get that too. But why a lender or broker will offer different rates to clients with same or comparable portfolio? This is not a professional practice neither this is ethical. It is like Futureshop is selling a laptop for $100 in one store and the Futureshop about 2 blocks away selling the exact same computer for $50. This is not even business, call it as you may please.
Need higher standards not regulation:
The financial products are no different than consumer products now. (I shall not go into the discussion of who the producers are.) They should be bound by same standards. Mortgage brokers or banks mortgage sales persons are not required to practice any ethical standards. They have law to adhere to but no mandatory ethical guidelines.
CAAMP membership is not mandatory for mortgage brokers (I am not a member) but they do implement higher ethical standards. Although I am not fully convinced with their two pages ethical guideline but this is better than nothing. At least the members can be called professionals who somewhat puts clients interest first before their own. Rest of us may adopt to some ethical standards our own but these are far from being the same.
We do need this market to be represented by true professionals who are sworn to the highest ethical standards. Trying to implement Basel III at the highest levels is useless if the workers are not bound by any professional standards. Who you think sold those bad mortgages in US? bank CEO’s or the road reps? We need strong ethical standard across the whole financial industry.
OSFI can set out bunch of guidelines to follow and make them mandatory but in the hands of crooks the guideline may just become another legal boundary to cross. Without strong professionalism, ethical standard and honest willingness to observe them no guideline is good enough.
Over crowding of regulation will help to choke the system. The market will perform efficiently if it is left to the actors. Ethical expectation is not regulation but helps in preventing many foul effects of competition.
Why we need higher ethical standards:
The way the businesses are running now they are not only making the customer experience a nightmare but also they are hurting each other. Other day I was talking to a bank rep who was upset on her client as he left her bank for a lower rate offered by a competitor. She already spent money on appraisal and there was no way to recover the cost. This happens to us every time we lower our own ethical standards. Blaming the client will do no good if we are not ready to change ourselves.
Canadian Securities Administrators (CSA) took a step towards the right direction by publishing for comment CSA Consultation Paper – The Standard of Conduct for Advisers and Dealers. I doubt that this initiative will go far as just few days ago some banks abandoned banking ombudsman to get their own.