'Cut and paste' compliance not sufficient
By
Kevin Eddy
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7/09/2010 6:00:00 AM
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9
comments
The head of Advantedge's broker operations is warning brokers that the compliance burden under the new licensing regime is likely to be even more significant than previously suggested.
Steve Weston, Advantedge's general manager for broker platforms, argued that there are 'significant' risk management and IT compliance requirements that licence holders will need to fulfil, which will add to the ongoing 'implicit' costs of maintaining a licence - particuarly in light of the proposed level of scrutiny from ASIC.
"It is likely that most brokers will find the credit representative model most suitable for them," added Weston, "The costs of the ACL add a compelling economic argument for most brokers to consider becoming a credit representative."
He did acknowledge, however, that there would be situations in which brokers holding their own ACL would be more appropriate, such as if there is a financial planning practice tied to the brokerage, or if the business model is built around using lenders not on Advantedge's platform.
"Even so," he added, "Advantedge's position is that, in the majority of cases, brokers will be better off as credit representatives."
Weston made the comments as he unveiled the details of Advantedge's support services for brokers under the new licensing regimes. Brokers operating under its aggregation groups PLAN Australia, Choice Aggregation Services and FAST will be offered the option to obtain and trade under their own credit licences, or to apply to become a credit representative under Advantedge's ACL. Becoming a credit representative will cost $139 plus GST per month per person.
Weston stressed that Advantedge will still "provide market-leading support irrespective of model", but added that credit representatives will also have access to a dedicated compliance team of credit advice managers. He commented that Advantedge is currently hiring for this team, which he expects to consist of at least ten people by the end of the year. He also revealed that Advantedge is "investing heavily" in changes to its software platform that will help brokers process loans more efficiently.
According to a recent Advantedge survey, up to 50% of brokers affiliated with its companies are considering taking up the credit representative option, with more still undecided. Eventually, Weston expects around 80% of brokers to operate as credit representatives - a similar proportion to brokers in the UK, where brokers already operate under an equivalent licensing regime.
Weston also commented that the new licensing regime is "the best single opportunity to turn the mortgage broking business into one that's more professional", and argued that brokers who embrace the change will build even stronger relationships with their clients.
Latest Comments
Total:
9
comment(s)
Allan Faint on
07 Sep 2010 10:18 AM
It is in the agregators best interest to have as many of us as credit reps., so would Mr Watson say anything other than it will be more difficult for licence holders. He may be right about the extra work but if you want to offer a fully independant loan choice you may need more than what advantege have on their panel. By becoming a credit representative it appears Plan (and other) are trying to get back some of the funds lost in the commission reductions by restricting us to their pannel and at the same time charge additional fees. We brokers will pay more from reduced incomes.
Graham on
07 Sep 2010 10:25 AM
All brokers must comply with the new NCCP regime as set out via ASIC, regardless if they hold their own ACL or are a Credit Representative ("CR").
The difference between opting to be a CR or hold an ACL are CRs are headlocked even further by their aggregator and in this case parting with a further $1,834.80 every year versus ASIC''s $450 annual fee.
Yes, an ACL has some additional admin to take care of, but is this really worth paying an aggregator $1,384.80 (the difference) every year?
Most professional brokers will easily cope with the additional ACL admin requirements, and therfore save themselves $1,384.80 each year in the process.
One would have to question the value proposition of an aggregator in the first place, let alone this new fund raiser they have introduced.
Chris Szigeti on
07 Sep 2010 10:34 AM
I think Steve wants the Credit Reps model so he can have more control over the broker - not this little Duck !!
Dave on
07 Sep 2010 11:09 AM
Why? Lots of words to help build the new business but no "meat on the bone" as to why it would be better. While I have a lot of admiration for Mr Weston I am always a little worried when people can''t explain their reasoning.
oldBroker on
07 Sep 2010 11:50 AM
Interesting how Connective says that an ACL is best for a broker to protect their business, whereas Advantedge says a CR is best as above. Who''s right?
Peter T on
07 Sep 2010 11:55 AM
I''m currently working through my ACL and I don''t feel that it''s as bad as Advantage are making out. Certainly there''s a lot of paperwork, but beyond that, it''s not that hard to follow the appropriate processes which most brokers are already doing.
Company Broker on
07 Sep 2010 01:03 PM
Am I cynical , or not , yes most brokers that use the PLAN platform exclusivley will be better of as Credit representatives . At 139 per credit representative per month at say 1000 members equals $1.668 M per annum.
There are companies that will nbeed a licence as brokers , I just hope PLAN / Advantedge doing this with the brokers best welfare at the forefront , it does appear they are , the gross up income does provide some interest .
They were pushing the credit representative angle very hard at the seminar I went to .
QEDRiskServices on
08 Sep 2010 12:05 AM
Monetary considerations should not be the primary motivator in a decision as to whether to be a Credit Rep or a Licensee. These decisions need to be made from a strategic viewpoint.
Brokers need to remember that a Licensee is obliged to have policies in place that dictate how they will do business. These policies can be contructed to work FOR you and add value to your business. If you choose to go as a Credit Rep for a Licensee, then you will be doing things their way and not necessarily reaping any of the benefits.
If you are happy with your aggregator/Licensee and are pleased to do things in the way in which they deem they need to be done, then maybe it makes sense to stay with them as a Credit Rep and let them take care of the policies and the compliance monitoring. Really - if you are happy with that situation, why would you take on the responsibility and effort yourself?
BUT - if you want your own independence and you want to decide what your compliance and risk programmes should look like; how your business policies should support your business strategies and your directional planning, then you are not going to get that by hanging on the apron strings of a Licensee as a credit rep.
Make sure your decisions in all of this are strategic and not motivated by non-existent financial arbitrage.
Feel free to call us for a chat if you don''t know where else to turn.
Cheers
Greg
Advantedge broker on
08 Sep 2010 05:57 PM
Note, the CR model Advantedge are proposing includes access to discounted PI (expected to be around $500p.a.) and the $139pm includes EDR.
Essentially, there is very little difference, in financial cost, between choosing the CR under Advantedge or going the ACL, but it depends on individual circumstances, such as the size of the organisation, number of employees/contractors/loan writers etc. and the amount of time available and compliance effort required.