The CEO of a leading non-bank lender has said that the broking industry is facing its “biggest challenge in 20 years” as the number of brokers leaving the industry outpaces new entrants.
Speaking to The Adviser, Peter James, CEO of non-bank lender Mortgage Ezy, spoke about the education and accreditation debate that has been heating up in recent weeks and warned that providing more barriers to entry could have devastating impacts on the sector.
Mr James said: “The difficult thing with that is that when you raise the bar, what you do is affect the experience level of the general broker community. It really depends on whether lenders enforce a high educational value for new entrants or require, by stealth, experienced brokers to jump through those hoops as well. What we find when that happens is that brokers of a certain age feel that they don’t really want to go back and study that which they already know, and we, as an industry, lose a huge amount of experience out the door.”
He added: “While I think that it is admirable to look at raising the bar from a theoretical point of view, experience in itself is the biggest value that a broker will actually bring to the table. There is only so much that can be learnt through books and theoretical assessment. It is the skill level that is delivered from hundreds, if not thousands, of meetings from lenders and borrowers alike that really delivers the best qualified broker, in my opinion.”
The non-bank CEO said that, in his opinion, creating higher barriers to entry would have far-reaching consequences for the broking industry.
“The biggest challenge that this industry faces are the lack of new entrants, at a young age, to it. It’s because of that that I think we face the biggest challenge that the broking community has seen in the last two decades.
“If you look at the numbers, the amount of new brokers is minuscule compared to the amount of brokers retiring or about to retire.” (However, figures from the Mortgage & Finance Association of Australia have suggested that the number of new brokers entering the market is “unsustainable” as it is rising faster than the value of new business written.)
Education or traineeships?
Mr James said that while he believes education was important, he also thought that hands-on experience was valuable.
He explained: “You see a lot of people go to university and then have a lot of difficulty finding a job afterwards because they don’t have experience. But those pursuing a trade are in high demand because they are learning on the job.
“I would like to see entrants have to do a diploma if they purely want to fast-track their career, while others might look at a three-year traineeship with less academia. I think both are valid ways to enter the profession.
“I personally believe that the Cert IV is an adequate qualification for brokers. However, I think in time, like most professions, that will be increased to something like the current Diploma, which CBA is imposing, or even degree level. But what I don’t want to see is all the minimum levels raised so that becomes the new norm, but rather assessing membership on the basis of the person themselves.”
Mr James’s comments echo those made this week by MFAA CEO Mike Felton, who told The Adviser that while he believes “education is important, experience is critical”.
The CEO of the MFAA said: “From my perspective, education underpins professional standards, and I think it is one of the key components in moving mortgage broking from an industry to a profession.”
Noting CBA’s recent decision to change its accreditation requirements for new brokers, Mr Felton said: “It is in nobody’s benefit to have inexperienced brokers writing deals that are not good outcomes for consumers or for lenders. Having said that, if we expect them to have the knowledge and skills to represent the industry appropriately, we need to be investing in that education and training so that they have the required capability.
“The risk of not accrediting new brokers for two years is that it creates barriers to entry and limits their ability to earn an income and gain that experience during that period. I think it is up to all stakeholders to ensure that we do all we can to accelerate the learnings of those new-to-industry brokers. But clearly there is an issue and it is one that requires a solution… whether that solution is related to the mentoring framework or to quality metrics or benchmarks, we certainly do need to find a solution.”
Mr Felton said that he believes it was imperative that brokers “gain experience as quickly as possible and gain the education training so that they are putting out deals that have good outcomes for consumers and lenders, [which] is in everyone’s interest”, particularly given that there is “significant churn in new-to-industry brokers”, which is “not good for [the] industry”.
Mr Felton concluded: “It is in everybody’s interest that [churn] is reduced, so we do need to find solutions and I think the focus is now on that.
“We all have a role to play — lenders, aggregators, mentors and the associations — in making sure that happens as quickly as possible.”
What do you think of the current entry requirements for mortgage broking? Should accreditation and education requirements change? Have your say by emailing firstname.lastname@example.org and by taking our poll on the matter.