According to a Victoria-based mortgage broker, the financial services royal commission has thwarted his plans to introduce a new business model centred on providing brokers with education and training.
The director of Loan Market Bayside and winner of Best Residential Broker at the Australian Broking Awards, Josh Bartlett, told The Adviser that his plans to revise his business model in such a way that would allow him to spend more time training and educating brokers was disrupted upon the onset of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“I had different plans up until about six months ago,” Mr Bartlett said.
“I wanted to change my [business model] a little bit and start teaching brokers how to write more volume within my business, but because of the royal commission, it’s impossible to know what that would look like in six months when they release their findings.”
Mr Bartlett noted that he’s opted to wait for the royal commission’s findings to be released before basing his decision models on the industry’s current model.
“If I had changed my business model, I would have based it on the commission that’s earned right now, the fees, the trail etc,” the director continued.
“If I start employing certain brokers over the next couple of months on certain contracts and commissions suddenly change, it might not work for my business model, it might not even be worth it, so that’s the danger — it’s paralysing right now.
“I’d rather sit back and see what happens and change my structure accordingly.”
The Victorian mortgage broker also told The Adviser that he expects brokers to exit the industry irrespective of the commission’s final determination, citing recent changes in lending policy.
“I think a lot of brokers, depending on what happens, will jump out [of the industry]. I think just the changes in policy and how hard it is will make people jump out.
“Even if there are no changes to commission structures, I think brokers will start to leave the industry anyway.”
However, Mr Bartlett also highlighted the value that brokers bring to the mortgage market, using an example of an interaction he recently had with a client.
“I know the royal commission is focusing on the all the bad stuff, but I can give you thousands of examples of how I’ve given my clients amazing outcomes that they might not have got anywhere else,” the director said.
“I had a client walk in the other day and the client told me that they’d been to the bank and the bank told the client that they could borrow a certain amount, roughly $720,000, and within an hour I told them that they had to purchase for $480,000 because they wouldn’t survive.
“The client walked out very happy that I gave him the right advice. I said, ‘You can take this advice or you can go back to the bank and borrow that, but you’d be selling the house in three months’.
“They later gave me a call and said, ‘Can you please proceed with that pre-approval for $480,000? We have decided that is [what] we can afford.”
The elite broker is not alone in voicing concern about the impacts of the royal commission on broking.
More than 65 per cent of brokers are either “seriously” or “moderately” concerned that the royal commission will negatively impact the industry’s reputation, according a MyState Bank survey in April.
The survey, which polled its national broker network, found that the majority of brokers were concerned about the public perception of the broking industry off the back of the royal commission.
The first round of hearings for the royal commission focused on cases of misconduct affecting consumer lending practices, ranging from mortgages to car finance, credit cards and add-on insurance products.
Indeed, the new MyState Bank survey found that more than a third (34.2 per cent) of the 250 brokers that responded to the survey were “seriously concerned” that the royal commission would negatively impact the reputation of the broking industry, while a further 31.6 per cent said that they were “moderately concerned” about it damaging the public perception of the industry.
Around 35 per cent were undecided whether broker reputations would be tarnished.
As part of the moves to counter the negative press and undue scrutiny of the sector, the Mortgage & Finance Association of Australia recently launched a major multichannel advertising campaign to promote the value of brokers to the general public, while the Finance Brokers Association of Australia has hit out at media misrepresentations and urged brokers to warn borrowers about “DIY home loans” and “expose the myth” that brokers have limited qualifications.
For more from The Adviser’s interview with Josh Bartlett, keep a look out for the September edition of The Adviser magazine.
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