As we draw the curtains on a turbulent 2020, the broking industry heads in on what awaits them in 2021. The incoming best interests duty and other regulation and legislation changes, as well as increased broker market share are front of mind for the sector.
The managing director of the Finance Brokers Association of Australia thinks the main theme of 2021 will be the best interests duty (BID) compliance and managing increased governance.
“We need to ensure that we meet these new regulations and get it right. In 2022, there will be yet another review of broker remuneration by the Council of Financial Regulators and the Australian Competition and Consumer Commission (ACCC), and then I trust the constant and unwarranted attacks on brokers’ renumeration will end.
“The impacts of greater regulation will entail the need for further knowledge. The FBAA is enhancing its educational offerings to members through a specialised platform to ensure they have access to all the training they need for business, sales and marketing, credit, broking, commercial lending, motor lending and more.”
The CEO of Mortgage & Finance Association of Australia affirms that it will be regulation and compliance.
“Our priority in the coming year will likely be the bedding down of new regulation and particularly BID, which commences on 1 January. The introduction of BID will allow consumers who obtain credit assistance from a broker to benefit from the protection of an unrivalled higher duty, providing yet another compelling reason to use a broker. It will also ensure that our position is strengthened by a fully functional BID as the mortgage broking industry approaches the 2022 review.
“As the year progresses, brokers and lenders will also be required to adapt to responsible lending changes aimed at improving efficiency, removing unnecessary barriers to the flow of credit, and creating faster turnaround times for credit application processing. A key challenge will be to ensure that these changes do not increase channel conflict and pose other risks to brokers.”
The executive director at Connective reveals that an area it is addressing on behalf of its brokers is the disparity on clawbacks, with the proposed changes to clawback arrangements taking effect from January next year.
“Clawbacks are a component of the broker commission structure to enable a higher upfront to be paid, but the reduction in upfront commissions paid to brokers to the amount drawn down by borrowers, net of offset, that has come with contrasting remuneration policies adopted by lenders should be considered when applying the clawback reforms.
“Furthermore, if a customer has had to change their loan due to actions taken by the lender, the clawback should not apply to the broker. We will continue to work with industry bodies and policymakers to seek clarity on how clawbacks will apply and to ensure that the reforms do not unfairly apply to brokers.”
The CEO of Aussie says that he believes consolidation will continue to be the theme moving forward.
“For some time, I’ve been saying that consolidation is going to become more prevalent. You’re seeing that today, with Loan Market purchasing PLAN Australia, FAST and Choice Aggregation, and with the AFG-Connective merger. Certainly, you’ll see that in 2021.
“You’re going to see groups consolidating within each other to ensure that they can be a better business at the end of the day. It is important for growth and for ensuring that you’ve got the right efficiencies within your business, in particular from a risk point of view.”
The executive chairman at Loan Market emphasises that safety and efficiency will be the priorities for brokers in 2021 with BID taking effect.
“Brokers have been in demand in 2020 as customers have refinanced and capitalised on record-low interest rates. I see this trend continuing into 2021, with broker market share on a trajectory to 60 per cent plus.
“The importance of customer service managers will be reinforced in 2021. Brokers will understand the value of support staff trained in multidisciplinary areas and how critical they are to managing and enabling growth.”
The head of sales and distribution at AFG signals that government support packages will be winding down and brokers’ role as trusted adviser will continue as the economy recovers from the disruption caused by COVID-19.
“We are also expecting that the battle for the customer will heat up as tech players enter the market and lenders look for new ways to preserve customers.
“In terms of staffing, as our sector grabs more market share, broker businesses are finding it difficult to recruit. We are seeing a shortage of brokers, and this will be exacerbated as brokers look at expansion opportunities. New staff are needed to help with diversification into business lending, asset finance and personal loans.”
The general manager of distribution at Resimac is hopeful, stating that there are several indications that 2021 will be buoyant.
“The September quarter has shaped up strongly, and the talk of Australia being technically out of a recession is highly encouraging. Further, the government is likely to continue providing stimulus payments and subsidies to keep the economy ticking along.
“This has all led to an increase in confidence and should promote consumer spending. The recent surge of home loan activity is likely to continue through to next year, with consumers who have delayed purchasing or refinancing due to personal concerns over the impacts of the pandemic now ready to make those decisions. Consumers and small businesses that have taken on additional debt to see them through the pandemic will also be looking to consolidate their position. This is all very positive for brokers, who will benefit from a higher volume of clients seeking advice.”
The managing director at Finsure predicts that the mortgage broking industry in 2021 will follow up its strong response to the challenges of 2020 by continuing to adjust to the structural shift in consumer behaviour brought about by the COVID-19 pandemic.
“Even if we get a vaccine, COVID has permanently changed the way we live and interact.
“Brokers in 2021 will also quickly adopt to the introduction of BID, which will help them differentiate themselves more from direct channels and further increase their market share, which is at an all-time high and will continue to grow further in 2021 and follow other international markets, which are over 80 per cent.
“We expect property prices to stabilise and then increase over the coming years with the responsible lending changes helping to support consumers.”
The chief operating officer at Purple Circle Financial Services foresees that broker market share will continue to rise as customers constantly continue to reach out to brokers.
“The very core value proposition of a broker is in providing flexibility, choice and comfort through best interests, and as we know, brokers drive competition, reduce prices and are trusted.
“As a result, this will see customers continue to gravitate towards the trusted advice that is provided by brokers, thus continuing the moving away from inflexibility, complexity and ambiguity, and ultimately an increase in market share for brokers. The challenge for brokers to maximise this growth opportunity and to prosper is to continue to be agile in action, adapt to a constant changing environment, along with adopting and embracing technology.”
The CEO of PLAN Australia flags that while Australia is in a comparatively good position from a community health perspective, it is difficult to predict the path of the economic recovery. As such, access to credit will remain key.
“Government stimulus and how lenders adapt their COVID-19 policies into 2021 will be crucial to how the mortgage broking industry recovers.
“We know that for some sectors, business and personal deposits grew strongly during 2020. Business and consumer confidence are important to watch as we can see if they view 2021 as an opportunity to invest, upgrade and grow, or be more cautious. Either way, access to credit and the role brokers play as trusted advisers remain critical.”
The lending product lead at 86 400 expects that BID will be front of mind for brokers in 2021.
“It is not only the cost of the product that they need to consider when making this assessment, they need to consider loan features, credit policy, when the customer needs an approval by, and what after-settlement experience the customer wants.
“All of these things need to be weighed up to find the best lender and product for the individual circumstances. I also think lenders that make the process more seamless for the broker and customer will play a bigger role moving forward.”
The CEO of Mortgage Choice notes that the increased burden of documentation required to lodge a deal has made it difficult for brokers to maintain their productivity.
“Brokers must embrace systems and processes that help them work smarter and not harder.
“Brokers require technology that helps them meet their compliance obligations while focusing on customer service and revenue-building initiatives. Great tech, such as task management software, allows brokers to introduce new staff into their businesses and seamlessly hand over deals. A great CRM allows brokers to stay front of mind with their clients.”
The Australian CEO of Pepper Money outlines that the main concerns brokers may have in 2021 would be navigating the ever-changing regulatory landscape and ensuring customer retention.
“Brokers, aggregators and lenders have poured endless hours and millions of dollars into building a robust and consumer-friendly risk and compliance framework to ensure they do their very best to adhere to their responsible lending obligations (RLO). Discussions around removing RLOs, in addition to a number of other confirmed regulatory changes such as BID, will no doubt insert confusion into the industry and place unnecessary pressure on mortgage brokers who have already endured a few turbulent years.
“Customer retention is vital to a business’ sustainability, and any broker that is serious about building a successful business would be investing a serious amount of time focusing on strategies to stay connected to their existing customers in an effort to retain them while also looking for new opportunities to introduce new customers.”
The managing director of National Mortgage Brokers suggests that if every challenge creates opportunity, 2021 will be a year of great opportunity as we learn from all the challenges COVID-19 presented our industry.
“The aim is to now introduce permanent change to the old way of doing things.
“2020 showed us face-to-face can now include online engagement. With borrowers not allowed or not willing to meet physically, the ability to conduct business online proved the ‘in-person’ experience is not always required.
“The acceptance of online engagement by borrowers is a bonus to brokers, and lenders will certainly adopt permanent policies to allow this to occur.
“By removing travel time, often a one-to-two-hour round trip, brokers who are used to offering ‘I’ll come to you’ can now more easily find a one-hour slot in their diary. Being able to lock in an appointment sooner can be the difference of a few days, taking the borrower off the market. It also allows more interview time in a day.”
The acting head of broker partnerships at Suncorp Bank imagines that, for many Australians, 2021 will be about regaining consumer and business confidence, which will have a flow-on impact to brokers.
“Supporting customers experiencing financial difficulty, or helping those regaining confidence to progress their financial goals, will be a priority for both brokers and financial institutions such as Suncorp. Brokers will also continue to adapt to changing regulations, like the possible removal of responsible lending laws.
“Embedding BID into their businesses will be a big priority. However, it will also be an opportunity for brokers to build consumer trust and reinforce their commitment to acting in the best interests of their customers.”
The head of broker distribution at Heritage Bank says that while BID will mean big changes for the industry, the proposed changes to responsible lending legislation present an even more significant opportunity for brokers, lenders and most importantly, our customers.
“The responsible lending changes will enable a more reasonable approach allowing us to continue to lend responsibly to customers, but with more flexibility. This will see the ability to streamline the process and deliver a faster and more scalable experience.
“Lenders’ improving technology platforms and streamlining processes is a positive change for brokers, which I am sure will be welcomed by all. The agility shown by lenders and brokers over the past year has accelerated what can be achieved in the year ahead.”
The head of third-party distribution at Teachers Mutual Bank Ltd suspects that the introduction of BID will be on the minds of many brokers.
“I believe it will bring positive change for brokers, as it has the potential to uncover further opportunities for them while working with their clients. It will also allow brokers to add to their value proposition. The ability that brokers have to compare products and services to find the right fit for their clients will become a more thoroughly documented process, with the option to record conversations.
“While we wait for legislation to pass on the changes to responsible lending, I think this will also be top of mind for brokers. Potentially, this could see a speed-up of application process that will hopefully benefit the consumer in the end.”
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.
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