The Finance Brokers Association of Australia has urged brokers to warn borrowers about “DIY home loans” and “expose the myth” that brokers have limited qualifications.
The executive director of the association, Peter White, made the comments following an article in the Australian newspaper which touched on the launch of mortgage platform Hero Broker and made the claims that the platform was moving to “exploit the extremely low levels of education required to qualify as a licensed mortgage broker”.
The article reads that the platform would be “potentially embarrassing for the corporate regulator, the Australian Securities and Investments Commission, and the federal government who, despite years of scandals involving crooked mortgage brokers, have both done little to nothing to improve mortgage broker education levels”.
It went on to state that mortgage brokers “often making hefty annual salaries — often of $150,000 a year or more — obtaining a mortgage broking licence can be easier than becoming a hairdresser, and there is no requirement for mortgage brokers to have even completed high school”.
Speaking out about the article, FBAA executive director Peter White said that the assertion made in the article that one can become a broker in four days is “recklessly laughable”.
“Our industry knows that brokers undergo extensive studies, mentoring and ongoing educational development, and the system is such that no lender will deal with a broker without meeting strict compliance measures.”
The head of the broker association went on to say that he believes that “disruptive technology” could benefit in certain circumstances (such as short-term accommodation or car sharing), but he added that when it came to “making what is the biggest financial decision of a lifetime, [it] requires a lot more knowledge than a smartphone app”.
Mr White continued: “Only a tiny percentage of people who try to navigate the process of being their own broker will succeed; most will end in disaster.”
The FBAA executive director went on to say that he believes it’s time to expose the “myth” that a finance broker needs only limited qualifications “once and for all”.
Mr White said: “We must ensure that the public and media better understand that the initial certificate [IV in Finance & Mortgage Broking] is a starting point but not enough by itself [for someone] to be a standalone broker.
“When the media reports stupid statements like this, they have no understanding that brokers are required to be mentored for a number of years, and that most achieve further diplomas or have gained masters and doctorates in finance.
“Furthermore, to do business as a home loan broker, you are required to join an industry association and this requires extensive background and credit checks, references and ongoing development. Not everyone gets a guernsey.”
He said that this message is more important now in the light of the banking royal commission, where case studies of particular misconduct have been brought to light.
However, recent statements from financial services giant Deloitte suggest that the popularity of mortgage brokers among the public continues to defy media criticism and ongoing scrutiny.
Deloitte financial services partner James Hickey said: “People may look at general media to get an understanding of how mortgages and products might work, but for decisions they seek specific support.”
Deloitte’s Heather Baister added that in a “resounding vote of confidence” for the third-party channel, brokers have been viewed as a significant source of information for consumers.
“This is despite a lot of commentary by the media on the mortgage broking industry over the last 18 months or so, some of which has been reasonably critical,” the Deloitte partner said.
Ms Baister continued: “But what we have actually seen is, over the last 12 months, the proportion of loans being written by mortgage brokers has increased from about 53 per cent to 55 per cent.
“When we think about the consumer choices and the decisions they are making and how they wish to engage with the industry and lenders, clearly mortgage brokers are still very much at the forefront there.”
There have been increasing moves made to counter the negative headlines and criticism of the third-party channel recently, with some brokers individually haven taken steps to rebut the negative headlines and misinformation being disseminated to the public following the financial services royal commission and Productivity Commission’s inquiry into the financial sector.
Tasmania-based broker Lance Cure launched a local TV advertising campaign to strengthen the public’s perception of the broking industry, while Steve Milligan, broker and director of Mandurah-based brokerage Launch Finance, presented a white paper for Federal MP Andrew Hastie titled The Value of Finance Brokers and Positive Consumer Outcomes to “get the truth out there about why brokers are doing so well”.
More recently, the MFAA launched a major multichannel advertising campaign to promote the value of brokers to the general public.