POINT BLANK -- Staying relevant

With licensing just around the corner, there are fears that the regulation could make industry bodies redundant. FBAA president Peter White puts that myth to rest.

WHAT IMPACT WILL LEGISLATION HAVE ON THE RELEVANCE OF THE FBAA?

Legislation will not have a negative impact on the industry bodies or their brokers. Moreover, I can’t foresee it adversely affecting membership numbers.

ASIC will look to industry bodies as a critical link in the chain. The industry bodies need to make sure that all brokers comply with the licensing regulations. Even though, under the NCCP [National Consumer Credit Protection] Act, there are no requirements for brokers to be a member of an industry body, there is a practicality of what needs to be done, which makes it relevant to the impact of the legislation.

I’ve had various conversations with different lenders and, at this stage, they are not considering maneuvering away from forcing brokers to retain accreditation with an industry body. That is to say, it is still a requirement to be a part of the FBAA in order to be accredited with any of the major lenders.

ARE YOU CONCERNED ABOUT LOSS OF MEMBERSHIP WHEN LEGISLATION COMES INTO PLAY?

No, not at all. The FBAA is very fortunate both demographically and position wise. Demographically, we have a solid and mature broker base that has generally been in the business longer than the norm and has a solid business model.

The other fortunate position we are in is that we are the smaller industry body. And there is only one place to go when you are on the top of the tree – and that is down.

From our point of view, we are on the constant climb upwards. Each month we are watching our member numbers increase. I think brokers are beginning to see and respect the practical approach we take to the profession and the industry as a whole. It is one thing to be a theorist and tout somebody else’s methods, it is quite another to give practical advice.

A LOT OF BROKERS ARE STILL UNSURE AS TO WHETHER THEY WILL BECOME AN ACL HOLDER OR A CREDIT REPRESENTATIVE. WHAT IS THE MAJORITY OF YOUR BROKERS DOING?

We hosted a large seminar in Brisbane recently – with more than 150 brokers in attendance. By and large, the majority of brokers are still deliberating on what they will do.

Brokers realise that they are not making a simple decision, but one that will impact their business both today and tomorrow.

When deciding which path to take, I think all brokers should ask themselves: “If I am self-employed, why am I self-employed?”

Invariably, their answers will be: because I want to control my own destiny.

Well, if you don’t hold the licence, you don’t control your own destiny- someone else is pulling that string.

The NCCP Act is designed to be scalable. If you are a sole trader, you are not responsible for anyone but yourself. As such, the meeting and completing the compliance training and the corporate governance is easy. Anyone that says it is hard doesn’t know what they are talking about. 85 per cent of what the regulation calls for in its corporate governance, a broker would comply with on a day to day basis.

WHAT CONCERNS DO YOU HAVE ABOUT THE NEW LICENSING LAWS AND THE WAY THEY WILL IMPACT BROKERS?

I don’t have a lot of concerns. We have seen this coming for a very long time. If I did have a concern it would be that the regulators may be too heavy handed when regulation comes into play. Obviously, we do not want to see brokers hung for an honest mistake. While the industry does need to be cautious not to make general errors, the regulators also need to make sure that they are not too heavy handed.

WHAT BENEFITS/OPPORTUNITIES FOR BROKERS DO YOU EXPECT TO COME FROM LICENSING?

The single greatest opportunity for brokers in this country is being seen as a professional. Brokers have often been seen as being unreliable or untrustworthy. I think that perception, thanks to the introduction of regulation, will soon change. It is time brokers stood up and showed the country what they are capable of. It is up to brokers to show customers how professional they are and the advantages of dealing with a licensed broker as opposed to walking straight into a bank. It is up to the broker to demonstrate their skill set and also product capability.

If a customer was to walk into a bank, they can only get the best loan that bank has. The broker can now stand up and say: I am a professional and I can provide you with services that your bank cannot.

DO YOU THINK WE WILL SEE BROKER SHARE INCREASE WITH THE INTRODUCTION OF REGULATION?

Absolutely. Especially if brokers tout themselves as being professional, I think the banks will need to watch out.

The non-bank sector was driven from the early 90’s by consumer demand. Similarly, the whole need of the broker is consumer driven. We saw demand for brokers grow in the 90’s and that was when the industry was unregulated. Now, if we step up the level of professionalism by licensing the industry then you have got a whole new value proposition.

I think the banks will have a hard time competing against the broker proposition under the new licensing laws. I would rather get a loan through a broker who is independently qualified, independently insured, and stamped as a professional versus someone who sits behind a desk and only knows what their employer drills into them.