Listening time: 2-3 minutes
Start rating: *****
Australian Credit Licence CPD
Hard truths can emerge during the tricky task of doing a proper review of a client’s living expenses.
In part 1 of our 3-part series, mortgage industry adviser Therese O’Neill examines two key focus areas for the expenses assessment phase, to help you survive regulator scrutiny and delight your clients.
Tips for evaluating customer living expenses are featured in Financial Education Professionals’ Australian Credit Licence CPD.
Therese O’Neill, a professional mortgage industry adviser and mentor, is a member of FEP’s practitioner faculty and a regular industry news columnist.
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TRANSCRIPT PART 1/3
"You know what I mean right?
Your client has completed their estimate of living expenses, and is coming as a total of $3,500 for a family of 4.
Seems reasonable enough….
Then, you pore over their last 3 months bank statements, and it becomes apparent to you that their average living expenses are looking more like $6,500 a month – and that changes EVERYTHING!
Wind the clock back 2 years, and the tests were really simple.
Are their living expenses the same as HEM, below HEM or above HEM? And for a family of 4, $3,500, they would have passed servicing with flying colours.
But this is the problem with HEM!
It assumed that most families spend the bare minimum on the essential items and virtually nothing at all on ‘non-essential spending’.
Things like no school fees, no overseas holidays, no designer brands, no fine dining!
Now, I’m no Kardashian, but I don’t mind going for an odd Stokehouse Dinner with my husband every now and again truley who can’t resist a Oroton handbag when it’s on sale.
So, in a climate where brokers and our clients are under such intense scrutiny, we NOW have to focus on 2 things:
1. We need to seriously evaluate and verify our clients living expenses so we don’t put our clients at risk of financial hardship down the track, and
2. We need to gently guide our clients through this pretty tricky part of the of the loan application process.
I’m Therese O’Neill, Industry Expert and contributing author to Finance Education Professionals. Thanks for listening".