Australia has just come through the other side of the Royal Banking Commission, which has put the finance sector under the spotlight. After all the hubbub has died down, I feel, there are many misconceptions, floating around out there, with regards to Mortgage Brokers. Now, I write from my own personal view, and this is my personal opinion, having worked in the mortgage industry and finance for quite some time now. With the number of opinion pieces out there, that have been written by the Media, demonizing brokers, I feel, that it is only fair to have a few stories from people on the coal face. So here it goes.
Myth 1. Mortgage Brokers Are Not Trained Enough To Handle Your Finance
A recent article from a consumer watchdog here in Australia had one of its journalists complete a Diploma in Finance and Mortgage Broking. This for those not in the know, is the new minimum education standard to become a Mortgage Broker. The average time to complete it is 18 months, and this person to prove a point did it in a few weeks from memory.
What the article was alluding to is, that brokers go and do this course in a few weeks, are “rubber-stamped” as mortgage experts. After this, they are let loose on the world to help clients with one of the most important financial decisions of their lives. I will be honest, while the diploma is not rocket science ( but nothing in this world really is, bar rocket science). The qualification covers what knowledge a person would need to make a start in the industry.
However, this is not where the profession is truly learned. Once you have your diploma, you now have to be mentored for two years by an experienced industry broker with a minimum of 4 years of experience. In those first two years, it may be a long while before you are allowed to go near a client on your own. On top of this, you need a minimum of 25 hours of continued personal development a year in the field to stay accredited. A feat that is quite easily attained in the life of a mortgage broker. I must receive at least 15 emails a day from my different accredited lenders, inviting me to webinars, conferences, catchups, and Seminars. All of this just to make sure that I am 100% current with there products, offerings, and compliance. Imagine the training and constant work a person in a bank would need to cover that banks, residential, commercial, asset, and motor vehicle finance. Now multiply that with 20 or more as brokers need to know many different lenders policies, and stay across it.
Most Mortgage Brokers Adelaide will use an aggregator as a middle man between them and the lender. An Aggregator makes sure that brokers are compliant and meet each lender’s standards so that they can write loans with them. What this means is that annually, I will be thoroughly audited. Random client files will be selected to make sure that what I am doing is the right thing by the clients, and falls in line with ASIC and consumer law. So NO! Mr. Journalist, you are not a broker now, not one by a long shot, and to infer that we are a bunch of cowboys just winging it, you are far off the mark. Maybe stick to rating vacuum cleaners. Now you may say, “well Nolan you’re a broker, and you have a bit of a bias towards brokers”. While that may be the case, at the time of writing this article 60% and climbing, is the percentage of clients using a broker. Clients are thus voting with their feet. One of the results from the Royal Banking Commission was that AFCA(Australian Financial Complaints Authority) was established. At the end of 2018, the percentage of complaints against mortgage brokers was 0.5% out of all the claims submitted.
So in short Mortage Brokers know what they are doing, are experienced, well trained and delivering service levels that are well above the rest of the industry. I would say that that Myth is well and truly busted.
Myth 2. Mortgage Brokers Are only After Commission, And Will Put Your Interests Last.
If that were indeed the case, then the above figure of 0.5% of all complaints against brokers would be a lot higher. What should be looked at is the other 99.5% and what their motives are because they receive the vast majority of complaints. I will leave that there.
The large majority of brokers are small business owners or franchise owners in a very heavily regulated industry. One of the hardest things to do as a Mortgage Broker is to build up a client base for yourself. It takes years of hard work and dedication, and most of the time is by referral from a client that you helped before. We all know how well bad news travels, so if you are not good or not doing the right thing by clients, you will just not get the business in the first place.
In truth, the difference that Lenders pay on residential mortgages is so similar, that to push a client into something that does not suit their current situation, is just not worth it. Add to that the risks involved for the mortgage broker with regards to losing their license. It would be rare, in my opinion, that something like that would happen on purpose. So what you will find is that most brokers will endeavour to over service a client and look after them as best they can. The reason they do this is that the client will then usually stay with them for life then. They will then refer their family and friends on to them. It is just a good business model. This is why the market share of brokers is so strong. I feel it may be forces that wish to erode this that are spruiking the rumours out there. I know if I am not trying my best with regards to placing a client into what I feel is a loan that suits there circumstances, I will probably lose that client down the track. Most brokers are also in the game because they like to help people and get a “buzz” when they can tell a client that they have sorted their loan out. So to say we are just chasing commission would be utterly untrue. Myth Debunked.
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