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The best interests duty could significantly increase the market share of brokers writing loans in the next three years, according to an aggregator.
Speaking to The Adviser in the latest episode of In Focus, partnered by Choice Aggregation Services, CEO Stephen Moore said broker market share could move towards 70 per cent in the next three years, which he believes could hold significant opportunities.
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Noting that broker market share increased significantly following the introduction of the National Consumer Credit Protection Act 2009 and the licensing regime for brokers, Mr Moore said history could repeat itself and similar trends may occur with the implementation of the best interests duty (BID).
“I’m feeling very positive about that on best interests duty,” he said.
Mr Moore emphasised that while brokers already currently act in the customers’ best interests, BID will ensure brokers can produce documentation to provide tangible evidence of this.
“I think it will be the best thing that’s happened to the industry. The reason why I say that, brokers have done an enormous amount to earn trust with customers to date. This is such a valuable place to be. But having that innate trust that’s been built up but then with a legal obligation to act in customers’ best interest, that is a fundamental jump.”
However, he acknowledged that BID will herald change for brokers, including increased requirements to document client interactions, which can act as “proof points” to support broker decisions if they are questioned in the future.
“It does mean change. It does mean some more documentation, but it’s a fair price to pay when we’re going to see significant growth in the broker channel,” Mr Moore said.
There is still more work to be done to comply with BID, with Mr Moore saying the industry has until January 2021 to implement the changes.
Choice has launched compliance documentation facilities so brokers can meet their responsible lending requirements as well as BID requirements.
Commenting on the documentation facility, Mr Moore explained: “That is ensuring you go through a process, we call it a guided experience, where you follow the due process, you ask all the right questions and validate on the way through.”
Mr Moore went on to assuage the fears of brokers who may have felt the introduction of the BID legislation is slur against their work.
“It’s often a difficult pill to swallow as an individual broker because as an individual, you know what a great job you do, and you know that because of the feedback you get from customers,” Mr Moore said.
“Anytime you’re asked to do more, it’s easier to misinterpret that as a slight about what you do, but it’s not about that at all. It’s about ensuring confidence in the system in the industry for longevity.”
To listen to the full In Focus interview with Stephen Moore, click here:
[Related: In Focus: Endurance and resilience during COVID-19]
