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While licensing will benefit the broker community, the start date couldn't come at a worse time for the industry.
Sam White
Executive chairman
Loan Market
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There has been a lot of talk about the introduction of NCCP changes on January 1. Regulation like this will be good for our industry, as long as regulators don't lose touch with reality.
Unfortunately the start date is right in the middle of the sacred holiday season. This means we can't start educating brokers until the last minute, when everyone is frantic with end of year settlements and when we are competing with family. So much for work/life balance.
I would hope that the regulators make a commercial decision to move this date to March or July to allow for an effective implementation of this important regime.
If not, the first couple of months of next year will see the normal period of confusion and frustration. As long as the new rules are practical, then everything will start to settle down by March. There has been a lot of talk about what effect the NCCP will have on our industry. On the basis of the rules being reasonable and interpreted reasonably, certain things will occur.
Broker numbers will trend down, but not significantly. Also, NCCP will require every broker to have a robust set of business processes.
Good brokers with strong processes will need to make changes to their system to accommodate the specific requirements of the NCCP. They will review their existing business, sales and client processes and look to strengthen them. Those that don't have a structure and process (by definition the lower producers) will now need to put systems in place in order to stay in business.
It's a question of how many think the juice is worth the squeeze. My suspicion is that the majority of those that were going to leave the industry have already done so and that broker numbers will not dramatically drop from here.
But while I don't expect broker numbers to decline rapidly or spike unexpectedly, I do expect to see a drop in liability and potential claims.
There may be an initial spike in claims and complaints in the early months. Over time this will drop significantly below current levels for two key reasons.
Firstly, all aggregator and broker groups are investing in risk and compliance management. It means collectively these groups will increasingly place a premium on the accurate assessment and mitigation of commercial risk. It will operate to make more risks known and therefore managed.
Secondly, brokers will need to improve their documentation of key conversations and interactions with all customers which will reduce the potential for further claims.
Another impact NCCP will have on the industry is that it will cause increased cross sales. Regulation will create more administrative and insurance costs in the industry and therefore add to the drivers for productivity improvements, quality in conversion and alternative revenue streams.
When legislation finally does come into play, I believe brokers' relationships with lenders will become stronger.
The economic viability of the broker channel to the lenders should be increased as compared to their proprietary (branch not broker) network, as deals will be more comprehensively packaged and documented.
Finally, I expect NCCP to change the overall structure of the industry.
The regulation will further widen the division between full service retail brokers (generally adopting a credit representative model) and wholesale aggregators. It will provide the broker with a clearer choice as to what structure is right for them and their business.
Whilst the entry standards for new brokers wanting to enter the industry may be higher than they were before, this also means that there will be more structured programs designed for those people who do want to enter. It will mean both a better calibre of new entrant and one who will need to invest more to succeed.
I think the NCCP will have the effect of accelerating the direction that we have been heading down over the last few years. As long as regulators are reasonable and rational then it will be a good thing for both industry participants and consumers.
