FNS40815: Certificate IV in Finance and Mortgage Broking - Unsuitability Test - Finance Assessment Answer

Assignment Task:

Task 1: Identify and Interpret Compliance Requirements 

Mortgage brokers face important compliance requirements, the foremost among them being the reasonable lending provisions of the NCCP Act. The penalties for non-compliance include loss of license (for businesses) and removal from the industry (for individuals). If fraud is involved there may also be the criminal penalties of fines and/or imprisonment. Compliance requirements are not static. It is therefore important to stay up to date with them.

Mortgage brokers also need to keep up-to-date with the actions of the regulatory authorities such as APRA and the Reserve Bank. Their actions may not amount to direct regulation, but through their effects on interest rates and bank lending these authorities can have a very direct impact on the business mortgage brokers are able to do.

• A key requirement of the responsible lending obligations is the ‘unsuitability test.’ What must a mortgage broker do to comply with the unsuitability test?
• List the sorts of items a client’s requirements and objectives could include (as indicated by ASIC).
• Leading credit providers and other financial organisations have code of ethics, sometime called codes of conduct. Select one of them and summarise it by itemizing its main principles.
• Some of the compliance requirements are difficult to meet. Unfortunately, also there have been some ‘rogue’ mortgage brokers who have failed to comply – to the disadvantage of their clients.
• The financial planning industry has been plagued by non-compliance in the largest planning groups, with the image of the industry being substantially tarnished as a result. It may not suffer greatly because of the absence of an alternative source of financial advice.
• This is not so with mortgage brokers. They are just establishing their reputation and consumers always have the alternative of going to the lenders directly.
• Select three tasks you perform on a regular basis that are subject to compliance requirements.
• Identify the compliance requirements that are relevant to the three tasks selected, indicating the name of the relevant legislation, regulation or code of conduct.
• How does your organisation monitor your compliance?

Task 2: Deliver and Monitor a Service to Customers

1. Use the internet or any other source to find a definition of empathy.
2. List three open-ended questions that assist in developing empathy with a client? How do such questions indicate empathy?
3. List and explain the steps involved in an ‘active listening approach’
4. Describe three ways in which a mortgage broking organisation can attempt to ‘overservice’ clients?
5. How would you keep a client informed about the progress of an application as it passed through a creditor provider’s hands? What approximate timing might be involved?
6. Describe how you might attempt to resolve conflicts with clients.
7. How do you can prepare clients for the hiccups that can happen while their credit application is being processed
8. The chapter on Operating a Mortgage Broking Business contains an example suggesting that a mortgage broker acting in the best interests of clients should act as a Protector rather than an Expert. What are the implications for this in regard to (i) advice given to clients and (ii) recommending the most suitable loan products?.
9. How could you prepare yourself to deal with client concerns?
10. Give examples of the following legal breaches: breach of the duty of care, false and misleading conduct, unconscionable conduct & conflict of interest without disclosure.
11. Once a desirable market segment has been identified, a mortgage broking business can put its mind o developing suitable marketing strategies. List examples of different strategies that might be used.
12. What steps can be taken to keep up to date with product changes and ensure that this knowledge is properly disseminated?
13. What are the procedures for dealing with client complaints in your organisation?
14. What normal protocols should for protecting the confidentiality of client files?

Task 3. Contribute to workplace hazard identification

Occupational health and safety hazards are often considered only in terms of physical injury, perhaps the result of working with heavy machinery, working in an excessively noisy environment, or slipping or falling. Just as relevant, however, is work-related stress. This describes the physical, mental and emotional reactions of workers who perceive that their work demands exceed their abilities and/or their resources (such as time, help/support) to do the work.

For the questions that follow, please read ‘Overview of Work-related Stress’ from the NSW Government. It may be found at:

Other ‘Tip Sheets’ from the same website may also be useful:
(a) How would you define workplace stress? 

(b) Suggest at least two ways in which work-related stress may affect client relationships.

(c) Suggest at least four approaches you can take to reduce workplace stress? (Hint: you may find suggested ways if you key ‘handling workplace stress’ into a search engine).

(d) Explain the distinction between ‘job demands’ and ‘job resources’ risk factors.

(d) Identify two ‘job demands’ risk factors that are relevant to your workplace and describe what detrimental effect they might have.

(e) List the job demand factors you have identified previously and for each one select one or more job resources that might be used to mitigate these risks.

Select one of the job resources listed and suggest how you could apply it in your work situation.
Select a significant risk issue, other than OHS issues, that has an impact on the way you perform your duties and explain how it is managed.
List the three criteria of triple bottom line reporting. What is the likely effect of this form of reporting on management decision-making at all levels?

Select the annual report of a leading financial organization such as a major bank and, after identifying the organization, summarise what it says about its environmental impact.
Briefly indicate the environmental protection assistance that your business organization is able to receive from your State or Territory environment protection agency.
Describe the benefits of team meetings.

Consider your own role in team meetings and describe the approach you and other members should take to information sharing.

Give examples of the types of risks that should be considered in all team meetings.

(f) Explain why leadership is important in risk management.

Task 4: Manage Personal Work Priorities and Professional Development 

• Describe Covey’s Quadrant 2.
• List three of your work activities that should belong in Covey’s Quadrant 2.
• Suggest ways that you might utilize to ensure that proper time is spent on Quadrant 2 activities so that stress is avoided.
• Digital diaries are now available as both computer and mobile phone apps. Describe the place of digital diaries in managing personal work priorities.
• Describe the importance of setting goals in terms of personal well-being.
• What does Stephen Corvey recommend for “re-creation” (a Quadrant 2 activity)
• What are the common characteristics of work goals?

One of the outcomes of spending more time on Covey’s Quadrant 2 is that we have more time for professional development. Desirable professional development includes a range of activities begin with reading the morning press to undertaking a degree course at university. Increasingly these days, it may also involve doing a course through the internet.

Setting professional development goals is part of the goal-setting we should undertake in our working life. If we have personal goals we are more likely to make things happen. Also, research suggests that goal setting relieves stress and increases physical wellbeing

List three activities you might consider undertaking to increase your competency (in addition to formal professional development training) to comply with ethical, legal and procedural requirements.

Describe how you can obtain ideas for professional development from (i) feedback and (ii) competency standards.

Where do you see yourself in three years time? List three skills or competencies you will need to arrive there. Against each skill or competency nominated, suggest how you will attain it.

Suggest ways in which mortgage brokers may network to assist other mortgage brokers.

Task 5: Develop and Nurture Relationships with Clients, Other Professionals, and Third-Party Referrers

• David Maistre has defined professionalism as an unqualified dedication to excellence in serving clients and their needs.’ This has important implications for how client relationships are established and maintained.
• Mortgage brokers are also able to develop and benefit from relationships with other brokers because their main competition is not with each other. Rather, it is the banks and other financial institutions. Networking within the industry is therefore important.
• Meeting other mortgage brokers requires much the same techniques as meeting clients, other professionals, and third party referrers. The relationship depends on the development of rapport and the ability to contribute to the relationship in key knowledge areas.
• What needs to be demonstrated at the outset in a client relationship? When is it appropriate to demonstrate competence?
• Imagine that you are explaining the function of mortgage broking to a client. What words would you use?
• Explain the importance of a code of ethics in the relationship between a professional and clients.
• Drawing on your own experience or the experience of a more experienced colleague or manager, describe a situation where a need was identified to use language and concepts appropriate to cultural differences. How was the need met?
• For a relationship with a client to continue, they need assurance of continuing mutual benefit. The continuing mutual benefit is also important in relationships with other professionals, including relationships with ‘outsiders’ such as accountants, real estate agents and other professionals.
• List two other types of professionals your organization uses to develop client relationships and indicate in each case how it is able to provide them with a benefit in the relationship.

Task 6: Promoting the Effective Use of Credit

Read the following scenario then answer the questions that follow.

Roslyn qualified as a schoolteacher some years ago but failed to take up a teaching position after graduating because she became a single mother. Fortunately, she has been able to live with her widowed mother, but now that her daughter has reached school she is taking up a position as a schoolteacher some suburbs away. Because of the distance of her new school from her parent’s home, she will need to buy a car. After careful consideration, she has chosen a small hatchback that has an on-road cost of $15,800. She will be working full time with a starting salary of $50,000. She knows little about finance and has come to you for advice. She would prefer to finance the full cost of the car because she has little in savings.

Task 6.1.

1. Suggest two financing options that Roslyn might consider.
2. Explain the main features of each.
3. Choose one of these options and explain your choice. Are there any disadvantages that need to be considered?

Task 6.2.

1. Write a letter to Roslyn letting her know about your preferred, explain how she will make payments and giving your reasons for choosing it as the option more clearly meeting her needs. You should take care to proofread your letter.
2. Roslyn is concerned that the lender will apply for a credit report.

Task 6.3

1. The procedure and cost involved in obtaining a copy of her credit file.
2. The right of a lender to access credit report information.

Task 6.4.

1. Draft a letter to Roslyn providing advice about her plan.
2. Case Study — Evaluating and processing a loan application

Task 7: 

Prepare a loan application on behalf of mortgage broking clients

Read the following case study then answer the questions that follow.

Ross and Melissa Cooper are a young couple who have been married for five years, during which they have been renting an apartment while saving to buy an apartment of their own. They do not have any children at this stage. After some months searching, they have found a small two-bedroom apartment that suits their needs. The purchase cost of the property is $480,000, and they have provided a deposit of $60,000. You are recommending a standard variable loan. Ross has been working at Gaines Consulting Pty Ltd. for 12 years and has a salary of $80,000. Melissa has been working at Jackson Equipment Hire Pty Ltd for 8 years and has a salary of $70,000. Neither has had previous employment, apart from casual work when they were younger.

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