Mortgage Broker vs Financial Adviser | Differences in Australia

It’s not unusual for people to get confused between mortgage brokers and financial advisers. Both are providing advice on financial related matters and both often act as brokers – an intermediary figure between you and a third party institution. 

Both who I call if I need help with property financing? Or who is the go-to person for super-related investment advice? 

Related Information: Rural Mortgage Brokers and Refinance Your Loan

What is a mortgage broker?

A mortgage broker helps people get loans for property purchases. They help borrowers negotiate and liaise with lenders – typically banks and financial institutions. So, a mortgage broker is your go-to person when you are buying property or refinancing a loan on a certain property. 

In Australia, mortgage brokers need to have a license to practice. The Australian Securities and Investments Commission (ASIC) regulates and licenses mortgage brokers. Licensed brokers have an individual “Australian Credit Licence Number” which is normally displayed on their website. 

What is a financial adviser?

Financial advisers can help you plan and manage your investments in accordance with your financial goals. They can also help you set up such goals and advise on investments that could lead up to achieving them. Part of their job is also to provide information about risks. 

As property can also be an investment, they may advise on that, however, as opposed to a mortgage broker, they won’t liaise with lenders on your behalf. 

Financial Advisers are also bound by registration rules and, in order to provide financial advice, they must hold an Australian Financial Service (AFS) license – also managed by the Australian Securities and Investments Commission (ASIC). 

What do mortgage brokers do?

 In practical terms, mortgage brokers can help you:

• Work out how much you can borrow
• With the application and assessment process
• Find the most suitable lender for your needs
• Explain the difference between lenders

What do financial advisers do?

In practical terms, they can help by:

• Describing prevailing market conditions and possible investment choices
• Recognizing and understanding the objectives of clients in terms of cash flow, retirement goals and family circumstances
• Formulating investment strategies aimed at both short and long-term financial objectives
• Strategising tax management to minimise clients’ tax liabilities – this can be done with the help of an accountant 
• Evaluating clients’ financial well-being in a ‘holistic’ way, including healthcare, insurance, real estate, retirement, and inheritance planning

What is the difference between using a mortgage broker and liaising directly with a bank?

When liaising directly with a bank, you have only one lender as an option. A mortgage broker typically represents several banks and financial institutions and can offer you many different options.

It’s worth noting that mortgage brokers are bound by the “best interest duty” – which means they must act in the best interest of their clients. 

How do mortgage brokers and financial advisers get paid?

Most mortgage brokers get paid a commission by the lender their clients sign up with. Financial advisers may charge a fee directly to the client or may receive a commission from suppliers they work with.

Clients are welcome to clarify payment details directly with brokers and/or advisers who have an obligation to be truthful and transparent about their payments. 

Mortgage Broker vs Financial Adviser – Final Thoughts

While both professionals deal with money matters, mortgage brokers and financial advisers have different roles and provide different services to their clients. At some point in life, it’s likely that most Australians will need and engage with both. In fact, these professionals can even work together.

In summary, if and when you need help to negotiate a loan for property purchase purposes, mortgage brokers provide the most suitable service. Financial advisers are most suitable when you need general investment advice on your wealth planning.  They are both very important and helpful.