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Should brokers consider themselves salespeople or financial advisers? The Adviser looks at the evolution of the third party distribution channel
SINCE THE inception of third party distribution, the broker proposition has evolved significantly.
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The introduction of the National Consumer Credit Protection Act combined with the various education requirements including the Certificate IV and Diploma have helped push brokers into a new professional environment.
In an interview with The Adviser earlier this year, NAB’s executive general manager of growth partnerships, Antony Cahill, said the new regulatory environment would ultimately help the third party distribution channel increase its market share.
“People are becoming more aware that financial products can be quite complexand they are seeking help, guidance and advice,” Mr Cahill said.
“Brokers are ideally placed to provide that.”
Many brokers now have the necessary skills to offer advice on a range of financial services. This includes complex loan structures such as self-managed super funds and complicated tax structures such as offset accounts.
In addition, they can help borrowers become properly insured – protecting the client against any accidents that may occur in the future.
Yet, despite all of this, many brokers still refuse to embrace diversification.
Why? According to a recent The Adviser straw poll, many brokers avoid diversification because they do not wish to appear “pushy”, but Loan Market Group’s Mark De Martino believes this is “weak”.
“Brokers have to get over themselves,” he said. “When we started as brokers, a lot of us felt like salespeople. Over time, you gain confidence and begin to realise you are not a salesperson, you are an adviser.”
“You are offering value to your clients. If you take that attitude – that it is your job to advise and steer your client in the right direction, then you should be offering them insurance as well as other financial services.”
Vow’s chief executive officer, Tim Brown, agreed and said brokers are not only in the right position, but are also educated and skilled enough to offer more than a humble home loan.
“Borrowers will expect a lot more form their brokers in the future,” he said.
“Brokers need to see themselves for what they really are – advisers. They are no longer simply a mortgage broker, but rather a certified financial adviser that adds value to their clients’ financial futures.”
The reality, however, may not be that easy. New changes to the NCCP will prevent brokers from declaring themselves “independent”, or referring to themselves as a “guidance counsellor”.
From 1 March 2013, brokers will not legally be allowed to refer to themselves as “independent” if they receive commissions that are not 100 per cent rebated to the customer.
In addition, brokers are unable to use words such as “financial counsellor” or “financial counselling” unless they have been given exemption by the regulator.
Gadens partner Jon Denovan said the enhancements are “overkill” and they ultimately stop the natural professional progression of the third party distribution channel.
“We do not believe the original NCCP requirements have been given the necessary time to settle down and be truly embraced before these enhancements have been made.”
The changes will force brokers to re-think their advertising and marketing strategies and the way they communicate their proposition to clients – but will they inhibit the progression of the broker profession from salesperson to financial adviser?
Only time will tell.
