The learning curve

Brokers fumed, railed and ranted that degrees didn’t magically make any industry more ethical, professional or trustworthy. That said, there were a few dissenting voices that agreed a better educational standing – whatever that may be – had merit.

All this hullaballoo came from a submission to the current Financial System Inquiry – or Murray Inquiry, as it’s better known – by the Consumer Credit Legal Service WA who moaned that broker ethics could only be improved by university degrees.

The group’s submission said that “the current qualifications required of [mortgage] brokers are manifestly inadequate”, and mentioned that it “regularly” receives calls from consumers who are in financial difficulty due to acting on bad advice from a broker.

“We believe rendering it compulsory for [brokers] to attain relevant university qualifications and training in ethics will increase the general standard of skill in the industry, and reduce the risk that [brokers] act in self-interest only, rather than in the best interests of the consumer.”

Be it degrees, diplomas or whatever, it does raise the question of educational standards in the industry or the lack thereof. And, in reality, with an industry that wants to be seen as offering a professional, ethical, diversified offering, maybe degree-qualified brokers could be just the tonic the industry needs.

Is ‘adequate’ enough?

Outsource Financial CEO Tanya Sale believes it’s wrong to describe the broking qualifications as inadequate.

“I don’t know who these people are recommending a university degree for broking, but that’s just going way overboard,” she argues.

“At the moment, Cert IV is the minimum requirement for ASIC, which is fine. The components for the Cert IV are much more in-depth and educational than when it was first introduced.”

Michael Russell, chief executive of Mortgage Choice, does not believe that mandating university degrees will be a magic bullet to delivering mortgage holders with a better customer experience.

“Our peak industry body – the MFAA – has already raised the minimum educational requirement to a diploma level, notwithstanding the fact that the current legislation only requires a Cert IV, and I believe this is more than adequate for the foreseeable future,” he says.

“From my experience, I have never seen any correlation between poor customer experience, advice and the education level of the mortgage broker – it’s almost always the result of operational tardiness or failure to follow proper processes.”

However, there are a few ‘dissenters in the ranks’ that say a good, hard look at educational standards is long overdue. One such flag bearer is Bruce Mawson, former MFAA director and principal of Mawson Professional Lending in Brisbane. Mr Mawson agrees the current requirement as adequate but urges there’s real merit in a degree option too.

“I’d love to see a degree course available, which would allow practitioners to elevate themselves to a higher standard,” Mr Mawson says.

“I’d love to be the broker out there with a degree to compete against any other broker, and I think it would give me a far greater opportunity to write higher volumes,” he says before adding that any sort of tertiary study should be optional rather than the industry standard.

Justin Doobov, managing director of Intelligent Finance and The Adviser’s top-ranked Elite Business Writer for 2014, says he would welcome an increase to education levels.

“A degree education would cut out some of the cowboys that want to dip their feet in the water, try the market and end up making a bad name for the industry,” he says.

“The issue with our industry is that some consumers see brokers as salespeople rather than professional advisers. Maybe having a degree as a requirement would effectively change that perception.”

Mr Doobov adds that while it might be good to introduce a tertiary degree as a minimum requirement, the industry has to be careful not to overburden brokers with paperwork and compliance.

“We’re arranging loans for people – we’re not investing their money,” he explains.

Ethics and professionalism

The industry has already made a big leap in improving the professionalism and ethics of brokers with the introduction of the NCCP legislation in 2010. Would a compulsory university degree enhance the industry’s reputation?

“No. Ethics are an individual attribute and cannot be garnished through further education,” says Mr Russell.

“I believe mortgage holders have every reason to trust the industry’s present education and ongoing professional development requirements.”

Ray Hair, Homeloans general manager of sales, agrees that making it mandatory for brokers to complete a university degree will not make the industry more ethical or professional, and says the MFAA’s current requirement of a diploma adequately reflects the technical aspects of being a mortgage broker.

“If we want mortgage brokers to be seen as professionals, we need customer and regulatory advocacy and promotion, coupled with consistent enforceable disciplinary provisions,” he says.

However, Mr Mawson is adamant that a tertiary degree would improve the industry’s image, “primarily because of the commitment it takes to get there”.

“There needs to be a facet somewhere that enables people to get a qualification that says ‘You know the industry’,” he explains.

“For people who complete a Bachelor of Commerce, I’m confident that they know about accounting and tax. For those who do a law degree – bang – they know what they’re doing. We don’t have that for broking.”

Changing perceptions

Some people have the mentality that anyone can become a mortgage broker, and think that there may be brokers out there giving financial advice who aren’t properly qualified.

Ms Sale says this perception has got to be changed because the industry “has gone way ahead of it”.

“That’s the old broker mentality,” she says. “Gone are the days where if you had a pulse you could become an accredited broker.”

“This old broker mentality has to be stomped out of our industry, and it’s up to us to change it. It needs to be a joint effort by brokers, aggregators, lenders and the associations to drive this change – it can’t be just one group pushing the wheelbarrow while the others just sit back and watch.”

So how can this perception be changed?

Mr Hair feels there should be better consumer education of what advice a mortgage broker can provide and should be providing.

“Good brokers are trusted by their clients and will therefore often be asked for advice beyond their credit licence or representative role,” he explains.

“It is imperative brokers understand and communicate these boundaries or obtain the additional qualifications necessary to provide these additional services.”

Mr Doobov suggests a system could be introduced where new industry entrants are sponsored by an employer and the employer is required to give them a report card, which could be uploaded onto a website database and shown on the broker’s profile.

“This could create more transparency by giving customers access to the facts, figures and history of each broker,” he says.

What about fee-for-service?

Another important thing to consider when looking at broker education standards is fee-for-service. Would more educated brokers be able and more likely to charge for their services?

“Definitely. And they certainly should do,” says Mr Mawson.

“One part of the industry that really confuses me is why brokers seem to accept that banks decide how much they get paid. It’s just strange.”

“I’m a big fan of fee-for-service,” adds Mr Mawson. “I have no desire for banks to not pay me commission, but I certainly don’t think that I deserve to be paid the same as a broker with a Cert IV who started writing loans yesterday if I had a higher qualification,” he says.

However, Mr Hair says a customer’s willingness to pay their broker a fee for service is not determined by the broker’s qualifications.

“It reflects the customer’s understanding and acknowledgement that their broker has provided a service beyond simply applying for a loan, for which the lender pays them,” he explains.

Mr Hair says that only being paid on settlement of a loan means there are circumstances where a broker may provide services that do not directly result in a loan application being submitted, and these services would not otherwise be remunerated.

Comparing industries

The broking industry is not alone when it comes to being subject to a parliamentary inquiry into education standards.

The financial planning industry has witnessed submissions to the Parliamentary Joint Committee on Corporations & Financial Services from various firms and lobby groups stating their views on education requirements and how they should be implemented.

According to The Adviser’s sister publication, ifa, boutique advice firm Axiom Wealth used its inquiry submission in September to argue that advisers should be focusing more on developing practical skills to “drive quality outcomes” than on tertiary education.

“We do not support any move to retrospectively mandate tertiary qualifications for financial advisers,” Axiom’s submission stated.

“Theoretical studies are often a poor substitute for practical experience.”

However, the Financial Planning Association of Australia (FPA) thinks otherwise, after making it compulsory for new members to have an approved tertiary degree qualification in July last year.

FPA chief executive Mark Rantall says that education plays a vital role in lifting the standards of advice given to consumers.

“We’ve continually lifted the education standards over the years, and we think it’s important to obtain certification after you’ve obtained a degree,” he says.

Mr Rantall says that as a requirement, FPA members also have to take on ongoing professional development to ensure their competency is kept up to date, along with adhering to a professional code of conduct and standards.

“There’s not just a one-off qualification – it’s an ongoing journey and commitment to higher standards of professional education and practice,” he explains.

“If financial planning is to be regarded as a respected profession, there are to be no shortcuts to becoming a financial planner,” he says.

Learning outside the box

Many industry figures also share the view that brokers should be looking to increase their knowledge and skill set by completing courses in other areas such as customer service, business management, sales, technology and social media.

Mr Doobov thinks that brokers would definitely benefit from “not only being book smart, but also street smart”.

“It would never hurt any broker to do courses in customer service and time management, as this is what our industry revolves around,” he says.

“Brokers should be doing courses and workshops that expose them to things and situations that they will experience in their day-to-day environment,” says Ms Sale. “That’s what is going to take them forward.”

Mr Russell also believes that brokers should complete as many courses as they can.

“Professional and personal development is generally what distinguishes the good from the great,” he says.

Training transformed my business

Loan Market's Marios Rokka was the biggest improver in last month's Elite Business Writers rankings, jumping 23 spots to number 26 – something he attributes to training and education...

Having started as a broker in 1999, Marios Rokka experienced phenomenal growth with his business in the first four years, but eventually hit a point where he had applied everything he had learnt and had built his business to capacity.

“I sat at that capacity for a number of years and eventually realised that I wasn’t growing anymore,” he says.

Mr Rokka admits that he felt like his business was starting to go backwards three years ago, so he started working with a business coach who helped him view his business differently.

He also invested a lot of time with business expert and mentor Matt Church, who also helped him gain some unique perspectives on different aspects of his business.

“I also focused on getting around the country to talk to successful brokers,” he says. “I didn’t want to keep on learning from mistakes – I just really wanted to learn from success.”

According to Mr Rokka, he then went back to his business and implemented the new strategies with his staff.

“My whole team’s attitude changed,” he explains. “We were no longer providing loans, interest rates and reduced fees – we were providing solutions for clients and helping them achieve outcomes rather than being a conduit for a loan.”

Mr Rokka says he is now more in touch with why he does what he does and misconceptions have been stripped away.

“I thought I was broking because I love to help people, but that wasn’t always enough for me because then I’d always revert to selling products and rates,” he says.

Mr Rokka says there is no one way to produce successful brokers.

“I think degrees and diplomas help you understand the mechanics of broking, and give you more credibility,” he says. “And the only way you can fully understand how everything runs is through experience.”

“Once you have some experience, you need to sit down and work out why you are doing what you’re doing.”

Maintaining the professionalism

The Adviser asks industry trainer Kaplan Professional CEO Brian Knight about his views on having a better educated industry, and what his organisation is doing to improve the standards.

Are you seeing a lot of interest from brokers to enrol in your courses and CPD product?

Very much so. This year, the number of brokers doing entry level courses, such as a Certificate IV in Finance and Mortgage Broking and a Diploma of Finance and Broking Management, is up significantly from the previous year. It’s probably been one of the biggest increases we’ve seen in any of the sectors including real estate and financial planning.

We run structured CPD, which involves articles of academic merit put together where people are assessed on it. What we’re seeing is a lot of broker groups, aggregators and individuals are wanting that rather than doing CPD in an unstructured way.

Our CPD product has grown significantly this year, and I think there has been increased recognition of the importance of CPD. Some brokers are also looking to do additional courses that cover areas such as credit and financial planning.

Would a better educated industry be more ethical and professional?

In terms of ethics and professionalism, we can teach that in our courses, and we get a lot of requests for courses that cover those areas. However, ethical and professional behaviour is often driven by the industry itself. It’s got to be more than just education that drives it.

Some people out there have a mentality that anyone can become a mortgage broker, and that there are a lot of brokers out there giving financial advice who aren’t very educated or skilled. Do you agree?

We’re seeing most broker groups embracing further education, and this is the same across other sectors such as financial planning. Everyone is conscious of improving the education standards of their particular sector. The effort that some broker groups make in focusing on education is unbelievable.

Broker revolt

Brokers reacted angrily when the Consumer Credit Legal Service WA told the Financial System Inquiry that brokers need university degrees because current education standards are “manifestly inadequate”:

Aydn O’Neill, AAA+ Financial Solutions, Qld

“This reeks of a beat up by someone that probably has no idea regarding the mortgage broking industry and is trying to justify their own existence. It would be handy to know who presented this to the parliamentary committee so we could see this person or group’s credentials, especially regarding our industry. I have had approximately 20 years in the banking and finance industry, and I can assure those who spoke of this nonsense that it would trump any university degree you can think up. The current level of education is ample, but if the job requires more in the future, then can I suggest we consider the next step in education requirements.”

Alex Filipovic, Axel Finance, SA

“It is becoming quite obvious there are a bunch of so-called professionals who are ignorant, ill-informed and probably inept in their own field as they have nothing better to do than constantly attack brokers. Perhaps they should get off their backsides and review the process required in submitting an application. Then they may like to answer the critical question: who approves the loan? It’s time someone had a one-on-one with these donkeys.”

Mark Ruiz, Loan Market, Qld

“I have a Certificate of Management from a university. I have a Bachelor of Business from a university. I have a Certificate IV in broking, and now a Diploma in broking. Oh, and by the way, I have also been in banking and finance for 35 years. Which one do you think makes me a better broker?”

Catherine Salat, Just Imagine Finance, NSW

“Sounds great! We can all go to uni, party hard, fluff our way through the exams, get our degree and then charge clients astronomical fees for just seeing us. And if their loan isn’t the best, we can point to our disclaimer that we have no responsibility – just like solicitors and accountants. Where do I sign up?”