Aggregators are also grappling with added complexity around commission payments and heightened lender scrutiny
In Clive Kirkpatrick’s 34 years in financial services, this is the first time he’s ever been concerned about brokers’ mental health.
“This is the most ambiguous, difficult 12 months I’ve ever experienced; that includes the ‘87 crash, the GFC, and the recession of the late 90s,” Vow Financial’s general manager told MPA.
“[Brokers are] now getting asked really senseless questions by assessors. For people who have been in the industry a long time and know what they’re doing and have very good credit skills, they feel [like] they’re being attacked as liars,” he said.
The heightened scrutiny has also affected aggregators.
Since the commencement of the royal commission, customer complaints have increased by between 250-300% and lender requests to investigate irregularities in loan applications have increased by over 300%, Kirkpatrick said.
That means aggregators are spending more time investigating these matters. “This has resulted in a significantly increased commitment of time and money by the aggregator to manage these requirements,” he said.
“Add this to the fact that the aggregator is now responsible for the supervision and monitoring of both ACRs and ACLs. In Vow’s case, this is an increase of 180% of representatives that need to be included in our supervision and monitoring program. It [used to be] 500 ACRs and now it’s 1,400 ACRs and ACLs.”
Now with the major banks moving forward with the CIF-recommended adjustment to commission calculated on the facility drawn down, net of offset, aggregators are also grappling with the nuances among their various structures.
“The bank pays the aggregator, so we have to figure it out and then pay the broker. It puts an inordinate amount of complexity into our commission payments. We’ve got to track it, determine whether there are errors. It builds a fair bit of cost into our processing,” Kirkpatrick said.
While he fully backs it and believes it is the right thing to do, he estimates that with this new commission calculation, brokers could see a five to 10% pay cut.
“You’re getting a triple whammy: A declining housing market, a cut on your income and increased costs. What we’re saying to our brokers is … perhaps you’ve missed opportunities around insurances, motor vehicle finances, wealth and super; perhaps there’s stuff you should go back to to make sure you’re meeting a broader set of your customers’ needs.”
While there won’t be any reprieve for brokers next year with the royal commission’s recommendations due and a federal election looming, Kirkpatrick said there are still plenty of opportunities for brokers who can remain positive and resilient.
“There’s still the same demand for housing. Small businesses still require finance to grow their businesses. Developers are trying to get finance to build more properties to meet the demand for housing,” he said.
But he warned brokers not to lose sight of their own wellbeing: “Ensure that you look after your physical and mental health because I think next year could be as hard as this year.”