While the introduction of the best interest duty will not require the industry to “change its DNA,” it could trigger a series of events which work together to reshape the role of both broker and aggregator.
“Unfortunately, with best interest duty, professional indemnity costs will be increased. So to maintain the same remuneration, brokers will need to see more customers,” said Sam White, executive chairman of Loan Market Group.
“Throughout all industries, the reality is that everyone needs to become more productive. The only way to do that is to get more leverage out of your tech to save time.
“Technology, systems and platforms will become incredibly important to running any broker business.”
The increased workload and more rigorous environment will further the new trend already being evidenced in its earliest stages, according to White: brokers choosing to team up with others rather than work independently.
“My view is that in the coming years, we will see fewer brokers, but bigger broker businesses,” he said.
“Being a broker can be lonely, so I think brokers will be looking to join other brokers rather than start their own business. The importance of broker communities has never been more important. We all need spaces to share ideas with like-minded individuals.”
Consequently, as broker behaviour adapts to the new industry landscape, White believes the role of the aggregator will need to adjust as well.
“The role of the aggregator is changing, we recognise that,” he said.
“In the new environment, brokers will be looking to join businesses with training, mentorship, a physical premise.
“That’s why we’re committed to our four Loan Market promises: to save our brokers time, keep them safe, help find and keep clients and grow bigger businesses.”
Fortunately, the increased pressure placed on brokers by the best interest duty will be counterbalanced by the growth in market share White expects to naturally arise from the legislation. To him, it seems inevitable customers will increasingly turn to brokers who are legally obligated to work in their best interest over bankers prioritising what’s best for their own institution.
“The question will not be ‘Should I use a broker?’ but rather ‘Which broker?’” he said.
“I have no doubt that the brokers who can demonstrate their value will enjoy a bright future.”