A change is coming

Just two weeks after registration for the Australian Credit Licence (ACL) opened, figures from the Australian Securities and Investments Commission (ASIC) show that more than 3,000 brokers, lenders and intermediaries have already applied for a licence.

In fact, the first application for registration was received just 15 minutes after registration opened on 1 April 2010 – suggesting brokers are motivated by the new regulation and the benefits it will have on their businesses.

By all accounts, regulation should improve not only the professionalism of the broker industry, but the credibility as well – which could potentially open significant new opportunities to generate new revenue streams.

What remains to be seen however is which way brokers decide to go: to hold their own ACL or to operate under the banner of their aggregation group.

The propaganda campaign around licensing has begun in ernest with a number of groups looking to clarify their position. Most groups, it would appear, will offer brokers an option however they may be gently coerced in one direction or the other. There would appear to be no right or wrong path for brokers to take when it comes to licensing.

On an online industry blog, one mortgage manager recently offered to pay its accredited brokers’ licensing fee, warning brokers that they should hold their own ACL rather than being a credit representative under their aggregator or a group licence.

The cynics among us might question whether this generous offer and advice really benefits the broker or perhaps the mortgage manager that’s stumping up the fee.

The decision which way a broker goes should not be taken lightly and cannot be determined by cost alone.

There are costs on both sides, regardless of whether a broker applies for their own ACL or acts as a credit representative. Brokers who are not across all the ramifications of licensing need to be aware of all the compliance issues – and indeed the costs before making any decisions.

At present, ASIC requires all mortgage brokers to demonstrate good corporate governance by implementing clear and concise compliance and risk management strategies.

For many brokers, particularly MFAA members, these corporate governance strategies are already in place. Brokers who run their businesses with a high standard of compliance are potentially well positioned to obtain their own ACL if this is the path they choose – however, this will not be the case for all.

Regardless of what decision a broker eventually makes regarding their business, one thing is certain, regulation is coming and it will change the industry for the better.