Is inexperience harming the mortgage broking profession?

Like many seasoned mortgage professionals, Kapil Virmani, founder and director of South Australia–based Think Mortgage, has been a saviour for borrowers burned by poor experiences elsewhere.

He’s seen deals collapse and home ownership dreams put on hold thanks to sloppy loan structuring and half-baked advice.

Unfortunately, this is often the result of inexperienced brokers who, through no fault of their own, lack the support and guidance they need around them.

Virmani has seen a surge of newcomers, brimming with enthusiasm, entering the profession in recent years. They are arriving with genuine ambition and a true desire to help clients along their property journey.

“That’s something the industry should welcome,” says Virmani. But the industry must be equipped to properly support them in the early stages of their journey.

Virmani says: “Mortgage broking is a complex profession. It requires not only an understanding of lending products and policy, but also an ability to assess client needs, structure loans appropriately, navigate lender requirements and manage risk. These capabilities are built over time, often with the support of experienced mentors.

“Without that support, new brokers can sometimes struggle to recognise when better outcomes may be available for their clients. In many cases, this is not due to a lack of care or effort, but simply a lack of experience.”

At stake is the wider credibility of the entire mortgage broking sector.

A matter of trust

While the dark post-Royal Commission days, when the finger of blame was aggressively shoved in the direction of brokers, are gone, scrutiny over the industry remains high.

The Finance Brokers Association of Australia (FBAA) recently warned brokers to tighten their standards around advertising and the Best Interests Duty (BID) amid increasingly hawkish regulatory actions.

The profession was in the headlines for the wrong reasons this month, when Commonwealth Bank reported two mortgage brokers to the authorities over suspected fraud.

This came after CBA uncovered $1 billion in potentially fraudulent home loan applications, with the bank citing “fraud being attempted through mortgage broking and referral channels”.

Of course, this amounts to a few potentially bad eggs in the industry, and is not an indication of endemic bad practice. In fact, as broking industry body the Mortgage and Finance Association of Australia (MFAA) has consistently pointed out, brokers account for a rounding error’s worth of financial compensation claims when compared to other industries.

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But without the right guidance, Virmani warns that brokers risk delivering inconsistent service outcomes for borrowers. “While these situations are often unintentional, they can still have broader implications for client trust and the perception of the profession,” he says.

Trust is the bedrock of the mortgage broking profession, adds Virmani. “If clients begin to associate broking with inconsistent service quality, the entire sector risks losing credibility. That could eventually invite tighter regulation and create an opportunity for banks to claw back some of the market share brokers have worked hard to earn.”

He advocates for professional development and mentoring programs, while encouraging brokerages and aggregators to invest in training, supervision and culture.

Thankfully, the industry is starting to wake up to these challenges.

United approach needed

Blake Buchanan, general manager of prominent mortgage aggregator SFG, has raised similar concerns.

Buchanan worries that low entry requirements – the minimum standard for becoming a broker is currently a Certificate IV in Finance and Mortgage Broking – do not sufficiently equip a new-to-industry broker with the knowledge they need to succeed.

“Mortgage broking is a cornerstone of Australia’s financial system. With that role comes responsibility. The current model, with its low entry standards and high failure rates, is not sustainable,” says Buchanan. He advocates for making the Diploma of Finance and Mortgage Broking Management a minimum industry entry requirement.

The MFAA has thrown its support behind improving the standards of education in the broking industry. Last July, it teamed up with Royal Melbourne Institute of Technology Online (RMIT) Online to launch the first-ever university-level broker qualification.

The Mortgage Finance Professional Australia (MFPA) designation has since gained traction, with the first cohort of brokers receiving the designation last September.

Broker-focused lenders like Pepper Money conduct popular educational webinars that draw in thousands of viewers, while broker networks like Mortgage Choice and outsource Financial provide robust mentoring and education programs.

But a united approach may be necessary if trust in the broking profession is to remain.

As Virmani says: “If we want the industry to continue growing and strengthening its reputation, we must work together to ensure every broker – new and experienced – is equipped to deliver the outcomes that clients expect.”

This united approach must be adopted by the mortgage aggregators, argues outsource Finance chief executive Tanya Slale.

“There are aggregators in this industry that put on new entrants for the sake of putting on new entrants, so they can get a nice little cash flow for doing virtually nothing,” Sale said during MPA’s latest aggregator roundtable. “If we’re going to attract new people into our industry, we must pick and choose what that new entrant is going to look like … We want people who are going to be serious. But then, this industry has to be serious about putting them on.”