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MFAA Prosper : Mortgage and Finance Brief 05
Credit rep: Benefits Credit representatives will be relieved of much of the burden and cost of compliance work. "For example, all Mortgage Choice franchisees and their employees will operate under Mortgage Choice's ACL," says Sheppard. "The advantages of this are that our brokers will spend less time and energy on 'red tape', which frees them up to concentrate on the rest of their business." Mortgage Choice will support credit representatives with a Compliance and Corporate Standards department that looks after brokers' licensing requirements and acts as a one-stop shop of knowledge, which brokers can access at any time. Advantedge also supports the credit representative model. "We believe that for the majority of brokers, the credit representative model will be the best model for them," says Weston. "When the UK mortgage market under went similar regulation in 2002, many brokers started out as licensees but found the extra work involved was a distraction from their core business and later chose to become the equivalent of credit representatives." Credit rep: Challenges As a credit representative, you will have a 'big brother' watching over you to ensu re that you meet your responsible lending obligations. The jury is still out on whether a business that is ow ned by an ACL holder is more valuable or saleable than one ow ned by a credit representative, so making a decision based on whether it will be a good exit strategy should be considered carefully. Ultimately, the decision will be based on how much you value the independence of you r ow n business decision-making compared to the amount of compliance work you are willing to undertake in the run ning of your business. Regardless of which model you choose, brokers will all be responsible for continuing professional development and complying with responsible lending obligations. Sheppard says this is good for the industry overall. "Regulation should lift the quality of ser vice the industry provides to customers, which will teach consumers to put more tr ust in brokers as a profession," she says. “ The decision will be based on how much you value the independence of your own business decision- making compared to the amount of compliance work you are willing to undertake.” Case study 2: Credit rep Pauline Sultana of Pride Mortgage Services in Sydney's Penrith. "I don't believe I would have been able to manage the complexity of licensing. By becoming a credit representative under the Choice Home Loans offer, Choice will manage all the NCCP obligations, so I am free to focus on my clients and building my business." Case study 1: Own licence Justin Delanty of Lending4U in Tasmania. "Lending4U is looking to appoint business partners and representatives in other states in the not too distant future, so it made sense to apply for our own licence. The benefits I see are being in control of your own systems and procedures. I think it adds credibility to our business in a consumer 's eyes by holding our own credit licence." Other industries Mortgage brokers are not the first professionals in Australia to undergo a licensing regime. The Financial Services Reform Act introduced in 2002 encompassed insurance brokers and financial planners. What model did insurance brokers choose? For the most part, insurance brokers opted to get their own licences, as they are traditionally independent- minded business owners. Over 4000 insurance broking licences were issued. Since then, some 'authorised licensee' models have emerged, recruiting authorised representative insurance brokers, but this remains the exception rather than the rule. What model did financial planners choose? Financial planners mainly opted for the representative model, as they were long accustomed to operating as agents of dealer groups. Less than 800 financial planning licences were issued. However, in recent times some planners have re-examined the quality of the services provided by their authorised licensees -- particularly around the fees that licensees charge. Source: Gold Seal 38 | Mortgage & Finance brief InPractice
Mortgage and Finance Brief 06