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As the implementation of the National Consumer Credit Protection Act 2009 (Cth) draws closer, broker attrition is expected to rise – but what do our industry pundits think?
WITH REGULATION LOOMING, WILL THE OVERALL NUMBER OF BROKERS DROP?
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PETER WHITE
FBAA
“I DON'T know if the looming regulation will have an impact on how many brokers the market can sustain. So long as people are borrowing, and are borrowing from both the bank and non-bank sectors – thereby encouraging competition – there will be opportunities for brokers to remain competitive in the industry. Of course, with new legislation we will see a reduction of broker numbers due to increased costs and volume hurdles by some lenders, but there is a lot of room left in the marketplace for brokers with quality product offerings and excellent customer service."
PHIL NAYLOR
MFAA
“WHILE MANY commentators have suggested broker numbers will reduce by around 20 per cent, I can only comment based on what I know and historic MFAA statistics. At its peak in mid 2007, the MFAA’s membership was around 13,800. This fell to a little over 12,000 with the impact of the GFC, consolidation and the MFAA’s own actions to cancel some memberships. However, we’re still processing between 150 and 200 new membership applications per month. Our net loss since the 2007 peak has been about 13 per cent. We expect that regulation (and other impacts) could bring about a further 10 per cent reduction over the next 12 months or so.”
TROY PHILLIPS
Mortgage Asset Services
“WHILE DIMINISHED commissions, tighter credit and steady service levels have made many brokers question their current business model, the introduction of the new legislation may actually grow the industry in the longer term. The industry will attract younger and better qualified credit professionals. Attrition is not a competitive strategy for growth, despite industry guesstimates that the size of the third party channel will top-out at about 40 to 45 per cent as a result of regulation. The third party space is no longer a cottage industry. Other players in the financial services world will see real value in a well-educated and legislated Australian market place.”
STEVE SAMPSON
Provident Capital
“THE QUESTION for me is rather: ‘How many brokers can sustain the Australian marketplace?’
"With the advent of regulation and credit licensing, there will be significant cost and compliance issues for aggregators and brokers alike, which to me means that there’ll be future industry consolidation. There are a huge amount of brokers in Australia who do not write sufficient loans to cover the cost of compliance, so I’m tipping that there’ll be a 35 to 40 per cent reduction in broker numbers over the next two to three years. I’m also tipping a reduction in commissions from major lenders that will be blamed on ‘extra compliance costs’.”
GERALD FOLEY
national Mortgage Brokers
“AT THE moment, the number of people and businesses that ‘dabble’ in finance [broking] is largely unknown, and include accountants, financial planners, real estate agents and other professionals. But after 1 July, businesses will be forced to decide whether they become licensed or start acting as a ‘mere referrer’. The first scenario is great for aggregators; the second is great for existing mortgage brokers who should start targeting local businesses. Some smaller brokers have just hung in through the GFC, and might now concede it is all too hard for them. Meanwhile, the remaining licensed brokers may find themselves busier than they’ve ever been."
