I-Financial proposes licensing 'third option'
By
Kevin Eddy
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1/09/2010 6:00:00 AM
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11
comments
Brokers who do not wish to become a credit representative of their aggregator may not have to obtain their own credit licence, according to a financial services company.
Craig Morgan, managing director of the I-Financial Group, said there is a 'third option' for brokers which "combines the benefits of both of the other options and removes the downsides of the other alternatives": essentially, becoming a credit representative of a company other than their aggregator.
"Brokers should select their aggregator based on business need and what the aggregator brings to the table by way of products, commissions, training and support," Morgan said. "On the other hand, their licensee should be selected on the basis of being able to provide a compliant regime that is operationally-focused and does not unduly hinder the broker’s business nor restrict their access to a wide range of products and services."
Morgan added that the I-Financial Group is planning to launch a 'centralised licensing model', which will allow brokers, financial planners and accountants to access an ACL and/or an AFSL in this way without changing their current aggregator. He continued that pursuing this strategy could also see the broking industry avoid some of the issues that have beset the financial services industry.
"The fear that remains for many brokers around becoming a credit representative is a repeat of what has happened within the financial planning sector under the FSR regime," he said. "Where product aggregation and licensing are centralised we have seen clear evidence of constraint of advice and 'product pushing' by licensees and advisers. In fact, this has caused so much concern for consumer groups and the Government alike that financial planners will now be banned from receiving commissions on investment products.
"In short, a broker has perhaps a one-time opportunity to select the aggregator that best suits their business and the licensee that best suits their needs – even if they are two entirely separate organisations," he added.
Latest Comments
Total:
11
comment(s)
Kate Keating on
01 Sep 2010 11:49 AM
The NCCP regime regulates activities, not business entities so it is difficult to see how this propoal can work given the obligation is on anyone who provides credit assistance (brokers) to be either licensed or appointed as a credit rep of an ACL holder. Brokers need to be very careful of "alternative" approaches.
Steve on
01 Sep 2010 12:57 PM
Kate* Aren''t they still saying that you will be either a rep or hold your ACL just with someone different to your loan aggregator. As you have said the broker is responsible so as long as they are either an ACL holder themselves or a representative of someone whow is. If this company is holding an ACL & appointing the broker as a rep than should be no different to an aggregator. The question will be if your aggregator will be willing to accept & allow loan lodgement under their banner although they should. They may worry that they can not trust the integrity of the ACL holder to make sure its reps are acting accordingly. However that said that would also mean that an aggregator that allowed any ACL holder to use them in effect could be the same risk. In the end not their problem as the ACL holder is the one that burdens responsibility to ASIC & any penalties. All the aggregator must do is make sure anyone setting loans holds one of those 2 options.
Dalts on
01 Sep 2010 01:08 PM
It''s a shame you chose to print this piece. The cloud of confusion around licensing is thick enough without making adding to the denseness. This proposal fails on so many levels.
Steve on
01 Sep 2010 01:31 PM
Sorry just want to clarify one line of my previous post as it may be taken the wrong way & that i think it will make them the same as an aggregator in business operationss It should read "If this company is holding an ACL & appointing the broker as a rep than should be no different to an aggregator appointing reps."
Ray on
01 Sep 2010 03:53 PM
The biggest problem for me is that my Aggregator and ACL do not have the range of lenders that I was able to access for my clients pre-1st July. My clients, and me, are at a disadvantage.
But, my Aggregator has now conceded that a broker may be a credit representative of more than one ACL holder. Therefore, if one ACL is not providing the range of lenders, which allows the broker to provide "proper and appropriate" advice to his/her clients, why can''t that broker use the lenders of another ACL to complete the full range of lenders he needs to properly service his clients?
Licencing was introduced with much fanfare to benefit applicants, but right the opposite is true. Brokers are restricted by their Aggregator''s panel of lenders.
I will investigate this alternative option, as I want to provide a full service to my clients, and not be manacled by an Aggregator with a self-interest agenda.
Steve on
01 Sep 2010 06:07 PM
Ray* i agree in that i am not happy that i can only use the lenders on my aggregators panel to be representative of them. However as the name suggests you are a representative so i don''t believe they are doing it for self interest other than the fact they are responsible for me. If they are responsible for me & i use other lenders they have not completed due diligence on than i can understand why they would say well i don''t want to be involved if that lender does something wrong getting the broker rep in trouble, which than drags me the aggregator & ACL holder down. The best action to take in that case is either as you said pursue option of multiple representation if possible? move to having own ACL as soon as possible or talk to your aggregator about the lenders you want from other panels. You may find they actually would be happy to list them. This has been successful in the past. I will certainly be looking into all 3 options as you said the only way to truly give clients proper service is to be able to offer the widest panel of lenders.
Spinner on
01 Sep 2010 11:24 PM
Excellent article. On the money.
If you are a rep to an aggregator, they hold the license.
If your an experienced broker, you will be subject to rules the aggregator sets which will be to the lowest common denominator - new entrants.
With respect, there are parallels in the credit rep role to that of a mobile lender of a franchisee who is servant to the all powerful franchisor.
Don''t risk it.
Kate Keating on
02 Sep 2010 07:54 AM
Under the NCCP Act, brokers can be appointed as credit reps of as many ACL holders as they wish. Each of the ACL holders must agree to the appointment. Withholding of authorisation, however, without very strong grounds, would be viewed as anti-competitive and breach trade practices legislation. So ACL holders need to have cross authorisation policies and procedures in place so brokers who choose to be credit reps can be appointed by more than one ACL holder
VisionMortgageSolutions on
02 Sep 2010 10:50 AM
We''re a sub-aggregation group and our biggest concerns with become a credit rep of our aggregator were 1). The cost and 2). Restriction of lending panel. We''ve elected to get our own licence and authorise our members as credit reps instead. My understanding has always been that once you are a credit rep, that the primary ACL holder can withhold authorisation for you to seek additional ACR status on the grounds of your agreement with the primary ACL holder if that agreement has non-external panel clauses etc. My biggest concern about individuals seeking multiple ACR status is the crossover of responsibilities of the ACL holders. Who is then responsible for the ACR''s general business activities?
Kate Keating on
02 Sep 2010 12:29 PM
VisionMortgageSolutions, the primary ACL holder should not withhold authorisation for other credit rep appointments as that breaches market practices legislation. Where the credit rep holds multiple appointment for a range of ACL holders, the ACL holders involved are jointly and severally liable for the conduct. Brokers clearly need guidance on this issue as there are significant competition issues involved.
VisionMortgageSolutions on
02 Sep 2010 02:52 PM
Hi Kate, agree with your commentary if the rules were defined purely around ACL, however if a broker has signed an agreement with an aggregator which prevents that broker going off-panel, then the act of a broker seeking to become an ACR of an off-panel lender would breach their aggregation agreement. As for the joint liability issue, I''d say that one is a minefield. To comply with ASIC we must define a process for our credit reps to follow, so what happens when a broker holds multiple ACR status and is then beholden to several potential processes? Additionally, this means that the broker must be regularly audited by several different licencees.