Brokers need to be smarter about marketing their independence from the big banks says Craig Morgan.
Brokers need to be smarter about marketing their independence from the big banks, says Craig Morgan, director of Independent Mortgage Planners.
Since changes in legislation last March, Independent Mortgage Planners has become one of the few brokerages that can use the term ‘independent’ - much to the ire of brokerages that wish to differentiate themselves from those owned by lenders.
Industry leaders have recently expressed concerns at the rate of lenders buying up broker channels, and the potential damage to broker reputations if consumers are unable to separate those that are lender-owned and those that are not.
“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,” said Damien Percy, head of third party at Bendigo-Adelaide Bank.
Morgan agrees with this sentiment, but argues that a repeal of the new legislation is not the answer. Brokers should take a leaf out of financial planners’ books, says Morgan, and look for new ways to market themselves.
“You haven’t been able to call yourself independent in financial planning for almost a decade. What they tend to say is things like ‘non-aligned’. I think brokers have got to start to be smart enough to use these sorts of terms because there is a clear marketing message behind it.”
Consumers are increasingly wary of brokerages owned by institutions, says Morgan, and smart brokers can still capitalise on this without wasting their breath fighting against the legislation.
“They’re taking the easy option. They need to put in the effort by coining some phrase or promoting or marketing what they are. They are not independent, but they are certainly not aligned either and that has certain value in the marketplace.
“I think it’s about ratcheting up the maturity of the conversation. It’s not that the conversation is wrong, it’s that the maturity of the language is wrong.”
Brokers who wish to call themselves independent under the current legislation need to either not take commissions or rebate all of their commissions to the client, and all brokers who operate under the same credit license must do the same.
Morgan emphasises he genuinely believes brokers are working in their clients’ best interests, but says there is no way to collect commission and still claim to have no conflict of interest, and therefore 'independent' is not the correct terminology for most brokers.
“There’s a whole heap of people ticking off on their preliminary assessment that they have no conflict of interest, yet the receive commission.
"If you read the Act, and this just hasn’t been added in the regulation because no one knows how to deal with it, the Act doesn’t say we’re supposed to mitigate conflict, it doesn’t say we’re supposed to discourse our way out of it, it just says we’re not supposed to have conflict.”
Morgan stresses he sees no value in "throwing rocks" at other brokers, simply that consumers have a right to differentiate between independent, 'non-aligned' and lender-owned channels.
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