A New Word Order

by BN04 May 2012

Words wear out.  In a world of relentless change, words and phrases should have a spring clean to make sure they suit current circumstances.

Our industry is barely 20 years old. In some ways it's a mature industry and it could be reasonable to think that the components of our industry came about with great foresight, planning and intent. This is most definitely not how it was however.

The first challenge to traditional branch-based retail banking was from the RMBS issuers using the securitisation process.  This is the industry I was involved with and I can tell you the pace of change progressed at warp speed from 1989 to 1993.  Things evolved so rapidly that many of us literally made it up as we went along. 

Indeed, I'm going to stake a claim for "inventing" one of the terms mentioned below. I can tell you on great authority that I made it up under pressure and it's just stuck.

Mortgage broking in the form we know it today was very much a response by the banking sector to the price leading, category killer RMBS issuers.  In adopting brokers and wholesale, the ADI sector (including Credit Unions and Building Societies) needed to rapidly create a terminology to describe fresh methods, features and ways of relating to the new channel of mortgage distribution represented by brokers. 

Most would have heard of the term "paradigm shift"- indeed it's become a bit of a buzz phrase that's often used out of context

A paradigm shift is actually when anomalies arise in a set of concepts, values or assumptions that that cause a new set of concepts or values to be more representative of an activity.   You can't have two paradigms representing the same thing, so there needs to be a 'shift' from the old to the new.

I'd venture that the paradigm of broker/wholesale of 20 years ago differs substantially from that of today but the lexicon of the industry hasn't kept pace with the shift.

As an indication, here are just some of the terms that I think need some close examination and the application of some imagination

 'Non-bank lender': what exactly is a non-bank lender?  This tag is applied to  mutuals, RMBS issuers and businesses funded by subsidiaries ofbBanks.  Time for a new term.

 'Second-tier lender': Second tier has connotations of "lesser" or inferior.  I'm sure the Australian operations of global banks like Citibank, ING and HSBC don't consider themselves inferior. Something more appropriate needed.

 "Mortgage manager":   There's so much variation in the business models of businesses known as mortgage managers, the term isn't descriptive of their activities and it's also a term that would no longer resonate with consumers. It's a bit naff.  Time for a revamp.

 'Trails':  Under FOFA, trailing commissions for planners are to be banned within superannuation.   More generally, in regulatory circles, there's recognition that revenue should be received as recompense for a genuine activity.  Maintaining the term 'trails' is setting the industry up for a regulatory bullseye.

 “Aggregation/Aggregators”:  The IT industry, public utilities and news services all have aggregators.  The activities they undertake are relatively simple and light years from what the highly sophisticated risk-taking businesses that Australian broking aggregators are. Aggregators are radically different businesses than they were 20 years ago and it could be time to spring clean the term to reflect their evolution.

 In the future, I believe our industry could well do with a new word order that reflects the growth, reach and increasing sophistication of the broking activity.

 Remember:  The Future isn’t what it used to be.

Kym Dalton is a principal of SAKS Consulting and Futurology