You’re probably familiar with the phrase “the winds of change” coined by the British PM Harold Wilson. Well, I’m forecasting major cross-winds of change for Australian broking.
Let’s enter the vortex by looking at the concept of broking itself.
A scoot around various online dictionaries for a definition of “broker” brings up a couple of common themes. A broker acts as an intermediary between a buyer and a seller- with the most common theme being that there are many buyers and many sellers. “Types” of brokers are generally put forward as real estate brokers or stock brokers.
Now I put it to you that you wouldn’t be much of a stock broker if you only dealt in three or four stocks. So why is it OK for a mortgage broker to deal with three or four lenders?
Bam.. another cross-wind. Because the major lenders have products, rates and services that are very frequently the most suitable for consumers.
I often see comments in industry journals about the need to give ‘second tier’ and ‘non-bank’ lenders a go. Hey, you don’t get best on field and three rousing huzzah’s just for turning up to the match- you’ve got to be good at what you do to earn the points. If other lenders on brokers’ panels have products that are the most suitable then they naturally should be considered- but not because you think they need a fair go or to stick it to the major lenders.
Which is a segue to another major flurry sweeping through the industry... segmentation.
First up, what an ugly word. Honestly, couldn’t we have come up with something better? The thesaurus has two synonyms of ‘segmentation’- these being separation and disconnection. It’s customers that count and if segmentation means that some customers will be disconnected or separated from products and services that are most suitable to them; then segmentation isn’t merely an ugly word, it’s an ugly idea.
The segmented broker club may have access to exclusive benefits. As a broker I think I’d rather belong to the club that lets the public in. No shirt, no shoes? You still get service.
When the segmented brokers also have the “opportunity” of carrying the lender’s brand in some fashion, then the subject of independence wafts in on a not-so-gentle breeze. If a broker is identified with a lender or lenders, and they only deal with three or four lenders, are they truly brokers?
ASIC has recently identified that brokers receiving commissions from lenders can’t call themselves “independent”. As an aside, at law, a broker who receives payment from a principal is often deemed to be an agent of that principal.
There are many attributes as to what constitutes a broker. Dealing with a limited number of ‘sellers’, being associated with those sellers and having exclusive access to their products are not the natural attributes of brokers.
That’s not to say that these features may not be perfectly valid for some and a viable mode of mortgage distribution. It’s just possible, however, that if we don’t fix another term to define the entities that choose to adopt the attributes above, there could be storm clouds on the horizon for the broking profession.
Remember: The future isn’t what it used to be.