The credibility of the finance industry has taken some hits in recent years, but your business doesn't have to be a casualty.
A combination of factors is putting brokers at risk of a bad reputation, but there are ways to make your business stand out from the pack.
Tish Naughton, founder of Black Sheep Finance and winner of this year’s Anthill 30under30 Award, says a handful of rogue brokers mean the rest need to work harder to prove their worth.
“We’ve got a bad reputation, and I was actually ashamed to call myself a mortgage broker for a period because of all these people that just churn.”
The commission-only structure and low barriers to entry in the industry attract “a certain kind of person”, says Naughton.
“It’s the type of person who’s just looking for a get-rich-quick scheme, and if that’s how people are promoting the industry then of course we’re going to get a bad reputation.”
Brokers who want to set themselves apart from any negative stereotypes need to go above and beyond a basic value proposition, says Naughton.
“Most brokers focus on finding the best rate as a point of difference, but a person doesn’t come to you because they want a loan, they want a house. So my focus is how do I help someone pay off their loan quicker, how do I help someone leverage their debt so they can buy an investment property, how do I help a person achieve their goal.”
This point of difference, says Naughton, allows her to charge a fee-for-service, and in doing so distance herself from negative perceptions around commission-only.
Naughton applauds the MFAA’s moves to raise industry standards, including the implementation of its mentor programme, but encourages brokers to take it upon themselves to extend their knowledge base.
Naughton has a diploma in financial services, another in management, is studying towards one in financial planning, and is also a certified exit planning adviser, but she stresses that further study doesn’t necessarily have to come from formal qualifications, so long as brokers take the time out to expand their skillsets.
The increase in lender ownership of broker channels is also a cause for concern, she says, and could heavily influence the public perception of “independent” brokers.
Adelaide-Bendigo Bank head of third party Damien Percy agrees.
“Our great industry exists and adds value, not just because the brokers do the running around for consumers, but because they are seen as independent advisers to consumers with a range of products and they offer advice based on the consumer interest without fear or favour.
“That’s at the absolute core of why this industry exists and anything that, either actually or just through consumer perception, puts that at risk, is best avoided.”
Percy doesn’t see it as something that is of immediate concern, but says evidence in history and the financial planning sector is enough to make mortgage brokers “nervous”.
“The day the consumer wanders into a major mortgage broker and is not sure whether the fact that they’re owned by XYZ bank is going to affect the decision is the day that the sector itself starts to be placed at risk.”
A change in regulation to allow brokerages not owned by banks to advertise themselves as independent would help to keep the industry honest and put consumers’ minds at ease, says Percy.
“If people want to go to a mortgage broker they know is owned by NAB, for example, then all the more strength to them, but they should know that, and for the good of the sector we would hope that the funders who own distribution ensure that the overall reputation of the sector isn’t compromised by them putting undue influence on distribution.”
Cannon agrees, and adds that old banking relationships and "special deals" offered to brokers who lodge the majority of their deals with the a single bank also put brokers' independent image at risk.
Percy stresses that the onus is on lenders to help maintain a positive image of brokers amongst consumers.
"There's a special obligation on the part of the funders to not taint the sector by behaving inappropriately. I don’t think they will, but it's something that needs to be kept in mind."
