An industry to be proud of

There’s also heated debate around who or what is responsible for the negative publicity that mortgage brokers sometimes attract. Culprits range from the media to the regulators to brokers themselves. Industry figures have a range of suggestions as to what can be done to solve the alleged problem, ranging from introducing fee for advice to conducting a national advertising campaign. However, there is one thing everybody seems to agree on: an overwhelming majority of brokers are honest and provide a valuable service to the public.

So here’s The Adviser’s guide to the common culprits and how we can solve these issues... assuming, of course, there actually is a problem.

Culprit 1: National media

Bad news attracts readers and viewers, so the mainstream media loves to jump on stories about dodgy mortgage brokers, the argument goes. For the same reason, newspapers and networks avoid reporting all the good things brokers do. That creates a false perception that the average broker is untrustworthy.

Culprit 2: Trade media

A related argument is sometimes made that trade publications are responsible for giving broking a bad name. Trade publications should be putting out a flood of good news to counteract any bad news from the mainstream media. Also, why wouldn’t people question the integrity of brokers if their own magazines keep reporting about bans, expulsions and insolvencies?

Culprit 3: ASIC

One common gripe is that ASIC holds brokers to a higher standard than it does lenders – so when stories of loan fraud hit the media, they usually involve brokers. According to the argument, the regulator comes down hard when it uncovers brokers doing the wrong thing, because they make an easy target. However, it is less willing to take on banks that have deeper pockets and can fight back in court. ASIC denies this allegation, telling The Adviser it takes action whenever it encounters misconduct, no matter who is at fault.

Culprit 4: First-generation brokers

Another common argument is that the industry is still trying to recover from the damage inflicted by the cowboy brokers who used to operate before the National Consumer Credit Protection Act (NCCP) was introduced in 2009. These crooks created a bad smell around mortgage broking when the industry was still trying to establish its legitimacy. Any negative perceptions that exist today were largely created by yesterday’s brokers rather than those of today.

Culprit 5: New-generation brokers

However, some industry figures feel it is too easy to blame the previous generation. They argue that people will continue to have a negative perception of brokers while there are still unethical brokers generating negative headlines.

So how can brokers approach these issues to combat negative perceptions?

Solution 1: National advertising campaign

Priority Home Loans director Bryan Coleman says most people who have a negative view of brokers have never used one. Some people refuse to use brokers because of bad news they read years ago before the industry was properly regulated, he says. Others refuse to use brokers because they don’t understand the value they provide – and that their expertise generally comes at no cost, he adds.

Mr Coleman believes a national advertising campaign would solve the problem. He argues that mass media has greatly improved the image of the dairy industry and the meat industry, so there is no reason why it wouldn’t also work for the broking industry.

“The message has to be: mortgage brokers are a very professional industry, well trained, well regulated and have a very good service proposition to the general public. It’s an easy sell,” he says. “As an outsider looking in, if I was looking for a home loan, why wouldn’t I go for a free service that’s going to give me options and is a regulated industry?”

Mr Coleman says the campaign would need to be driven by the peak industry bodies. He says he would gladly pay a levy to fund the campaign and thinks most other brokers would too. Marketing experts would decide which media channels to use and the length of the campaign.

However, MFAA chief executive Phil Naylor says the association has conducted several national campaigns in the past and they’re not the silver bullet some might think. An advertising message needs constant repetition to sink in, which in turn demands a lot of money. Mr Naylor says the MFAA prefers to use the media to educate the public and boost the industry’s profile.

Solution 2: Back to school

The industry has greatly enhanced its reputation over the past five years because the NCCP has driven a lift in professionalism and ethics, according to Loanworx’s Pauline Ryan. She says the next round of improvement needs to come from a lift in educational standards.

Ms Ryan has a foot in both camps: she is a director of Melbourne brokerage Loanworx and also runs a training organisation called Skill Solutions. She says the Certificate IV doesn’t adequately prepare people to become brokers. She points to the number of new entrants who leave the industry within 12 months – one in four, according to the MFAA.

Her argument is that better education equals better service, which in turn produces happier customers and a better image for the industry. She wants industry associations, aggregators and training organisations to lead the push for more skills and development.

“Brokers can make an amazing level of income if they’re successful, and the key to that is their training,” she says.

Solution 3: Introduce fee for advice

Trusted Mortgage Broker director Sue Hayter says the industry has scored an own goal by promoting itself as a free service.

“The consumer perceives no value to the free advice, and therefore they are able to get information from a number of brokers who do not charge a fee for advice,” she says.

“Because the information is free, they are able to take that and go to the bank with the brokers’ information and lender comparison rates, and proceed to negotiate a rate reduction with the bank.” So the bank gets the credit for being the trusted adviser, rather than the broker.

Ms Hayter says Trusted Mortgage Broker has boosted its business since introducing fee-for-advice in January. The firm has also boosted its reputation because fewer people now shop around, she says.

Solution 4: Time is on our side

Aussie Home Loans franchisee Paul Farrell is one of many brokers who believes the tide is turning in the industry’s favour.

Like many, he attributes today’s image problems to yesterday’s rogue operators. “Back then, in the industry’s early days, it was unregulated and there was an opportunity for some bad eggs to operate,” he says.

But Mr Farrell says standards have improved – and this message has been spreading as borrowers have turned to brokers in increasing numbers. The third-party channel’s share of the mortgage market is forecast to continue increasing, which means even more people will get the message. In other words, time is on our side.

“The way we’re going at the moment, with greater emphasis on professionalism and education, the industry is now improving that [negative] perception,” he says. “The negative perception is slowly disappearing and I think over time the consumer will realise this.”

Solution 5: Stop ‘selling’ and start ‘helping’

Mortgage Choice franchisee Ben Herden says people can react negatively when they feel someone is trying to sell them something. So brokers need to present themselves as service providers and clearly explain every step of the process to the client, he says.

“I think borrowers still see us as salespeople pushing an agenda, so we’re being incentivised to push one product over another or there’s something more at play,” he says.

Mr Herden says he and his staff make a point of explaining the broker proposition early in the first client meeting. They also walk clients through the commission system and make them understand why one lender has been recommended over another. They provide further reassurance by putting all the relevant information in writing, he says.

“We don’t believe that we’re salespeople at all – we’re here to help them,” says Mr Herden. “A lot of people tend to relax when we tell them we’re not here to push one product over another.”

Solution 6: Problem? What problem?

AFG’s general manager of sales and operations, Mark Hewitt, is surprised by the idea the public might have a negative view of brokers. He says he’s seen no evidence of such a perception during his 20 years in the industry. “We’re very proud of our business, the role our brokers play and the way they conduct themselves,” he says.

Homeloans’ general manager of sales, Greg Mitchell, also believes the industry has a positive reputation. He says the public understands that an overwhelming majority of brokers provide an honest and valuable service.

“I think the ability for a broker to go to someone’s house – sometimes out of hours – and be that conduit between a number of different lenders to get the consumer the best product, I question whether the image is that bad,” he says. 

View from the associations

Does the industry have an image problem or not? There’s disagreement between the two peak bodies. MFAA chief executive Phil Naylor says brokers aren’t regarded any worse than other professions out there, while FBAA president Peter White says brokers can sometimes be the victims of unfair perceptions.

Mr Naylor says the industry is well-regarded by the public, despite the occasional negative headline.

“From time to time I think the media, including the trade media, focuses on the bad things that happen, but overall it doesn’t have an image problem,” he says.

Mr Naylor backs his view by pointing to the public’s embrace of brokers. About 47 per cent of loans are now sourced through brokers – and that figure is rising.

“If you’re not gaining a lot of customers, obviously you’re not highly regarded. The fact the broking sector has grown that market share in about 20 years is unbelievable. Not too many industries have grown at that rate,” he says.

Mr White takes a slightly different view. He believes some members of the public do have an unfairly negative view of brokers. He attributes this to the damage caused by rogue operators in the industry’s early days and the fact the occasional piece of bad news about today’s brokers will always travel faster than reports about all the good they do.

However, Mr White says things have been improving since the NCCP was introduced five years ago, and the industry’s reputation will keep growing as brokers service an increasing number of customers.

“The perception of brokers today is significantly better than it’s ever been. The professionalism of our industry is far better than it’s ever been,” he says.

“Brokers have been delivering a very beneficial service to people for decades now, but unless there are proper standards and regulatory structures, it’s like anything – somebody is going to do something to upset the apple cart.”

PR expert speaks out

Kristin Westlake from The Continuum Partners reveals how she would improve the image of mortgage brokers if she was running the peak industry body.

Mortgage brokers aren’t alone in suffering image problems; they have good company. Others, such as hedge funds and high-frequency trading firms, have been in the limelight in recent years for all the wrong reasons. Yet it’s generally true that a vast majority of participants are good corporate citizens providing a genuine service to the financial community.

It’s often the actions of a few ruining it for the rest. It can also be that another competing sector is well served by the proliferation of misconceptions and is working to promote these. Or perhaps the industry just hasn’t done a very good job of promoting its benefits. Usually it’s a combination of all of these.

Addressing ingrained misperceptions is a medium- to long-term game requiring sustained effort. Key things to consider include:

• Who are the sheep, and who are the goats? If there is clear separation between the ‘good guys’ and the ‘rogue states’ then the lines of division should be identified and the differences clearly articulated. All industries have their problem children, and efforts must be made to distance those who cause problems from the good operators
• Who will be the face? Every campaign needs a figurehead, someone who has solid credentials and a great track record. The spokesperson needs to have a strong appetite for PR, and the time to dedicate to it. Best laid plans can fall down at the starting line unless adequate resources and time are devoted to them
• Who’s on your team (and who’s not)? Identifying your allies and detractors is important. Change is achieved by turning those in the middle around to see the light. Those very vocal detractors (who may be those who are well served by your continued image problem) are unlikely to change, so don’t waste efforts on them. Find and harness those who can influence the middle and you can start to move the needle

Finally, in PR, as in life, honesty is the best policy. Don’t try to spin – audiences are smarter than we think and see right through it. Take politicians as an example; this is a lesson they have largely still to learn. There is nothing wrong with admitting the industry has had problems, but that today is a new day and the good operators in the industry are determined to prove to the public that they’re here for the right reasons, and for the long term.