A spate of board resignations and the abrupt departure of its CEO in 2016 highlighted the turmoil that the once-dominant association is finding itself in. Brokers are now actively voicing their dissatisfaction at being left in the dark on the reasons behind major leadership changes. So, is this the beginning of the end for the MFAA or the dawn of a new era? This special report examines how the association has performed over the last 12 months and, more importantly, outlines what the MFAA must do if it to win back the confidence of brokers.
Understanding the origins of the MFAA is critical to any examination of its current state.
The organisation’s roots can be traced back to the mid-‘80s and the Mortgage Bankers Association of Australia (MBAA), which, at that time, was almost completely controlled by the mortgage insurers.
Following the 1987 market crash, the Queensland chapter of the MBAA got together and came up with a strategic plan that would look after the needs of the non-bank lenders. Non-banks had been hit hard by the crash and many didn’t survive. Those that did realised they needed an association to give them credibility. They took control of the organisation and created the Mortgage Industry Association of Australia (MIAA).
As the Australian mortgage industry evolved and the early ‘90s ushered in a new era with new players (in the form of brokers and aggregation groups), the MIAA welcomed them and adapted accordingly. But the organisation’s roots were firmly planted in the lender camp.
“It was never setup to be an association just for brokers,” Firstmac founder Kim Cannon says. “It is the mortgage industry association. Brokers were a critical part of it but it was established for the industry, where the industry could act as a think tank, a central body dealing with regulation,” he says. “In recent years it has lost its way. I actually contemplated cancelling our membership this year.”
In the early 2000s, the MIAA rebranded as it looked to align itself with a rapidly changing industry. It changed its name to the Mortgage and Finance Association of Australia (MFAA).
The MFAA of today is very different to the group established in the late ‘80s. The mortgage market has changed significantly. Brokers now originate more than half of all home loans; it is not surprising that the association has evolved to be more inclusive of brokers. However, mortgage professionals would be mistaken for thinking that the MFAA is exclusively for brokers. But it’s easy to see how they could come to that conclusion.
Today the MFAA website states that it is “the peak national body providing service and representation to over 12,000 professional finance brokers (mortgage and finance brokers, mortgage managers and aggregators) to assist them to develop, foster, and promote the mortgage and finance industry in Australia.”
Meanwhile, the MFAA constitution requires that the board must always have a majority of brokers as directors.
While its 2016 broker-focused ethos may fit the times, the MFAA has arguably retained a legacy that is threatening its relevance and, in many ways, eroding its credibility with mortgage brokers. The MFAA has attempted to be all things to all people: an industry body for banks, non-banks, aggregators and mortgage brokers. However, this all-inclusive model clearly isn’t working for all parties; brokers are demanding more advocacy from the MFAA, while lenders and aggregators want their voices heard too.
In November, The Adviser asked brokers in a straw poll to rate the MFAA’s 12-month performance.
Of the 700 brokers who responded, 67 per cent said the MFAA’s performance over the last year was ‘very poor’, while a further 13 per cent said it was ‘poor’. Only 12 per cent of brokers rated its performance positively.
What went wrong?
So, where did it all go wrong? By and large, brokers were optimistic when Siobhan Hayden was named the MFAA’s new chief executive in October 2014. She immediately set out on a national tour to meet as many brokers as possible, held think tanks and broker forums and vehemently defended brokers from mainstream media attacks.
However, not all of the association’s initiatives were embraced by brokers. In April 2016, the MFAA announced that its ‘Darwin and Beyond’ conference had been cancelled due to poor interest from brokers. Then, in June, Ms Hayden suddenly resigned, which came as a shock to many.
“I’ve been an MFAA member for over 15 years and found Ms Hayden to be one of the more engaging and effective CEO's,” one broker commented at the time.
“As a member, I would hope that the board will provide further details around this matter.”
However, other than citing “strategic differences”, the MFAA gave no explanation about Ms Hayden’s departure. A leadership team consisting of Evan Thomas, Stephen Hale and Stephen Bisgrove was quickly formed while the association searched for a new chief executive.
In early September, Mr Bisgrove stepped down from the leadership team after growing frustrated with interference from the board and claiming the MFAA was not providing its members with the support they needed.
According to Mr Bisgrove, there was much more the MFAA could have been doing for brokers in terms of education and support in light of the ASIC remuneration review.
Mr Bisgrove told The Adviser that the board had been “meddling” and “changing constitution”.
“They are more worried about governance and how they look than running the MFAA for the true member and getting in front of ASIC,” he explained.
Brokers took to The Adviser story to comment on Mr Bisgrove’s departure and share their frustration.
“The MFAA are going to have to do some serious damage control to rebuild their brand. If they think they don't then they need more help than I thought,” one broker said.
“We demand more transparency from the MFAA, especially during the ASIC review. Given recent events the existing members of the board (who supposedly represent our industry) need to pull their heads in and get this sorted ASAP.”
By the end of the year, brokers had grown increasingly critical and increasingly frustrated with the lack of communication from the body.
Fortunately, the publication of The Adviser poll showing how brokers really felt about the MFAA was enough to provoke a response from the association, which admitted that 2016 had been a “difficult year”.
In a letter to members, MFAA chairman Cynthia Grisbrook noted the results of The Adviser poll and explained that the association had spent significant time rebuilding and reviewing its activities and capabilities.
“This year has also seen an unprecedented level of regulatory issues, which has meant our efforts have been directed more than ever on meaningful engagement with government. Unfortunately, as a result of this, member communication has suffered.”
Ms Grisbrook explained that she had led a series of broker roundtables in five capital cities around the country, to give members the opportunity to hear more about MFAA’s advocacy activities and provide feedback from the industry’s perspective.
Again, brokers flocked to The Adviser story to post their comments. This time the tone of their remarks had changed and issues such as potential conflicts of interest were brought into the discussion.
Conflicts within the association
The MFAA is now at a critical juncture in its history. The real issue lies in the confusion over whom the association represents. Brokers are understandably demanding an association that can represent their interests and advocate their profession, especially regarding their dealings with the lenders. But directing their grievances at the MFAA could be misguided, given that its founding fathers were lenders (not brokers).
Joe Mennea, CEO of Financial Consulting Australia, provided an example of how he believes the MFAA could be viewed as conflicted in the eyes of brokers.
“When CBA said they wanted to reduce commissions, the MFAA said: 'Yeah, that's fair enough. We understand.' And I thought: 'That’s not fair enough! What's going on there?'
“That’s when I discovered they are actually getting paid substantial sponsorships from the lenders. So, I think there is a bit of a conflict there. Because, if you are in the association and I am paying you to fight for my cause (more often than not against the lender), then where is your loyalty if the lender is paying you $200,000 a year — against my measly $600? How can I expect you to fight in my corner against them, when they're paying you the bulk of your money? So, there's that conflict.”
According to Mr Mennea, these are the sorts of issues that are confronting industry associations at the moment.
“They struggle to provide a real value to broker businesses but they are a necessary evil because you do need a lobby group and you do need a voice.”
Here lies the problem. In its bid to appease numerous masters, the MFAA is ultimately struggling to keep everyone happy.
Alex Filipovic, franchise owner of Nectar Mortgages, made an important point that cuts to the heart of the matter – who the MFAA represents.
“I believe an industry member association needs to clarify who they represent, i.e. brokers or lenders,” he said.
“The industry is now getting to the stage where the partnership between brokers and some lenders may become strained due to online approval technology. For that reason, I can’t see how a member association can fairly represent both parties.”
Mr Filipovic’s comments reflect how the initial role of the MFAA – to represent non-bank lenders – has outgrown its purpose. Brokers are now demanding their own industry body, which in many ways the MFAA has failed to become.
Many brokers believe the role of the MFAA is to support and promote mortgage broking through consumer awareness. In fact, the MFAA’s website clearly states that one of the benefits of membership is visibility: “Our advertising campaign ensures MFAA members are always promoted to consumers in the media.”
But, Brisbane-based broker George Samios, who was crowned The Adviser’s Young Broker of the Year in 2016, said there is much more industry bodies could be doing for their members in this regard.
“We all pay them our fees every year and they could be doing a lot more to help benefit us,” Mr Samios said. “Why can't they advertise on TV and radio and push people to go to a mortgage broker? With all the money we pay them, I don't really see any money going on advertising for us.”
In a 2014 interview (The Adviser, August 2014), former MFAA chief Phil Naylor said raising consumer awareness was an area he wished the association could have done better.
“Our benchmark is the Certified Practice of Accountants (CPA). The CPA has consumer recognition of about 74 per cent, while we’re hovering at around 15 per cent.”
The relevance of associations
However, the MFAA is not the only association facing challenges. Recent scholarly efforts have been made to examine to what extent all professional associations risk becoming irrelevant as the world around them changes.
Early in 2016, a report was published by RMIT University and Chartered Accountants Australia and New Zealand that explored the issue in some depth.
Titled Relevance and Professional Associations in 2026, the paper includes a number of scholarly essays that identify ways in which professional associations can respond to challenges and maintain their relevance.
In a section titled The Future of Associations, Ross Dawson notes that professional associations “are now facing the greatest change in their long history” and that the rise of a networked world is pushing associations, which had previously demonstrated the power of connection and collaboration, into the shadows.
However, the arguments expressed in the paper cannot entirely be related to the MFAA, for it is not truly a professional association. It is an industry association. The fissure between the MFAA and brokers may lie in their growing need for a body that represents them as a profession, rather than an association that includes them as part of a broader industry.
The future of a mortgage industry association is most certainly relevant, one that represents all players including banks and brokers. But what the recent crisis at the MFAA has shown, more than anything, is that mortgage brokers require their own organisation that can meet the changing needs of their growing community.
Change on the horizon
Former MFAA chief Phil Naylor led the association for 12 years before his retirement in 2014. Many of his biggest achievements went unnoticed. Under his leadership the MFAA pushed for better industry standards and ensured all parties, not just brokers, were included when the NCCP was introduced in 2010.
Prior to stepping down, Mr Naylor summarised what he believed to be the best attributes of the association: “I think the big strength of the MFAA has been its ability to successfully morph and reinvest itself, and I’m sure that will happen again.”
Mike Felton has now taken over the top job from interim CEO Chris McRostie. If Mr Felton is to succeed in the role of chief executive, he must address the issues that are plaguing the MFAA and not sweep them under the carpet. That will mean opening a can of worms.
Ultimately, the MFAA must decide what it is, and communicate its message clearly. It must decide who it will serve – lenders or brokers – because the current model is conflicted.
Mr Felton’s leadership, above all, will require the courage to make hard decisions.
The Adviser hoped to give Mr Felton the opportunity to articulate his vision for the future of the MFAA and how it can better serve its members. However, he decided not to comment.