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It's right that new brokers should have to get a Certificate IV and diploma – but wrong to place too much value in these qualifications.
I write in response to a recent article on The Adviser website, in which the Consumer Credit Legal Service WA said brokers should be required to have university degrees because current qualifications are "manifestly inadequate".
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Higher education isn't going to achieve a better outcome in practical terms. A university lecturer isn't going to have the experience to solve real world problems.
All it would do would be to place an additional barrier to entry into what's already an ageing profession. The biggest challenge for new brokers is they usually don't earn much in the first few years. A degree requirement would delay new brokers in how long it takes for them to start earning an income.
It's difficult to imagine what content there would be in a degree that would actually improve a broker's practical skills in the field. It's more likely that a broking degree would be similar to a commerce degree. While this would give brokers a better understanding of economic conditions and how loans are funded, it would not make them better at loan writing, nor the practical day-to-day solving of clients' finance problems.
A Cert IV and diploma are a better alternative to a uni degree. They are heavily focused on meeting compliance standards and some basic technical skills. Their weakness, however, is that they're not particularly in-depth relating to good loan structuring to meet client objectives. Many of the questions are worded to lead to suggest a solution that I'd consider bad structuring and outcomes for clients.
What these courses do well are legislation and compliance requirements. Those things are easier to assess than loan writing and advice skills, which can only be learned out in the real world.
Even then, a good loan writer doesn't necessarily make a good adviser. A lot of brokers are simply never taught these skills, and my reading of the course materials and anticipated answers from several Cert IV and diploma course providers makes it clear that they have little to no knowledge of this area.
I support the decision by the MFAA and some aggregators to make a Cert IV and diploma mandatory. Having said that, the diploma sets the bar too high for new entrants. Most don't have the skills to complete it without assistance and as such it should be deferred until after new entrants have had some real time in the industry.
As a result, the MFAA's requirement of a diploma when joining is unrealistic. The MFAA defers the diploma for 12 months for people under the Certified Mentor program, but this doesn't suit many people as it has a high upfront cost when new entrants have the least amount of cash flow.
Whilst the MFAA's Certified Mentor program is a great step in the right direction of broker education, it doesn't really address the development of a broker's skills in the areas of best practice in loan structuring. It certainly goes far beyond the existing Cert IV and Diploma programs in practical skills, but the course does not formally discuss lending on a strategic level. It turns out good mortgage brokers, but it's up to the individual mentors to impart knowledge to create outstanding credit advisors.
The Certified Mentor program is several steps in the right direction, but it's not the right path for everyone and it's not the whole journey.
The components missing in existing education programs are clearly imparting good problem solving skills and practical implementation of solutions that give consideration to the clients' needs and objectives. Good mentoring and support is the most appropriate way to impart these skills, rather in a classroom or online environment. The challenge is to ensure that the mentors are up to the task. Unfortunately, existing educations programs around this are designed to produce compliant loan writers, rather than strategic lending advisors.
Unfortunately, a degree is more likely to distract from this outcome, rather than achieve it.
Peter Tersteeg, managing director, Sage Lending Solutions
Peter Tersteeg has been a property investor for almost 15 years, which led him to establish a finance broking business which specialises in assisting other investors achieve their financial goals. Peter credits much of his success to his immediate and extended group of mentors. He now returns the favour by mentoring new brokers, several of whom have been nominated for the MFAA's "Young Gun" awards.
When Peter is not thinking about his clients' properties or adding to his property portfolio, he is an avid scuba diver and spends as much time as he can in the cold waters of Port Philip Bay, Melbourne, and the warm waters of Asia searching for grey nurse sharks, hammerhead sharks, and manta rays.
