The head of Advantedge's broker operations is warning brokers that the compliance burden under the new licensing regime is likely to be even more significant than previously suggested.
Steve Weston, Advantedge's general manager for broker platforms, argued that there are 'significant' risk management and IT compliance requirements that licence holders will need to fulfil, which will add to the ongoing 'implicit' costs of maintaining a licence - particuarly in light of the proposed level of scrutiny from ASIC.
"It is likely that most brokers will find the credit representative model most suitable for them," added Weston, "The costs of the ACL add a compelling economic argument for most brokers to consider becoming a credit representative."
He did acknowledge, however, that there would be situations in which brokers holding their own ACL would be more appropriate, such as if there is a financial planning practice tied to the brokerage, or if the business model is built around using lenders not on Advantedge's platform.
"Even so," he added, "Advantedge's position is that, in the majority of cases, brokers will be better off as credit representatives."
Weston made the comments as he unveiled the details of Advantedge's support services for brokers under the new licensing regimes. Brokers operating under its aggregation groups PLAN Australia, Choice Aggregation Services and FAST will be offered the option to obtain and trade under their own credit licences, or to apply to become a credit representative under Advantedge's ACL. Becoming a credit representative will cost $139 plus GST per month per person.
Weston stressed that Advantedge will still "provide market-leading support irrespective of model", but added that credit representatives will also have access to a dedicated compliance team of credit advice managers. He commented that Advantedge is currently hiring for this team, which he expects to consist of at least ten people by the end of the year. He also revealed that Advantedge is "investing heavily" in changes to its software platform that will help brokers process loans more efficiently.
According to a recent Advantedge survey, up to 50% of brokers affiliated with its companies are considering taking up the credit representative option, with more still undecided. Eventually, Weston expects around 80% of brokers to operate as credit representatives - a similar proportion to brokers in the UK, where brokers already operate under an equivalent licensing regime.
Weston also commented that the new licensing regime is "the best single opportunity to turn the mortgage broking business into one that's more professional", and argued that brokers who embrace the change will build even stronger relationships with their clients.
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