What Finance Brokers Do
Finance Brokers (or brokers) work with clients to determine their borrowing needs and capacity, select a loan that suits the borrower’s aims and objectives and manage the process through to settlement. Finance brokers need strong financial literacy skills, excellent people and customer service skills and the ability to really listen to clients’ needs.
Types of Finance Brokers
Finance brokers can specialise in areas such as:
Many finance brokers are gaining additional skills and qualifications to expand their client services into areas such as general insurance and financial planning.
Obtaining Lender Accreditation
A finance broker or brokerage has to obtain accreditation with lenders in order to sell their product/s. Most finance brokers will become accredited with a number of lenders – called a ‘panel of lenders’. Finance brokers are only able to sell products from lenders on their panel. The requirements for accreditation vary from lender to lender, as too does the size of each finance broker's panel. Some lenders have minimum volume loan requirements in order to achieve and maintain accreditation.
Accreditation Transfer Form
Following discussions with MFAA lender members, the National Brokers Committee recommends downloading and completing this form for aggregators in respect of transfer of brokers. A template letter of release is available here.
Aggregators & Franchise Groups
Many brokers join an aggregator or franchise group to access the group's wide panel of lenders. These groups provide many additional services to brokers such as software and technology, training, general business support and back office administration.
Professional Indemnity Insurance
Like many other businesses, brokers also need to maintain professional indemnity insurance.
It is a requirement of MFAA membership for a member to be covered by, or personally have in place, PI Insurance for no less than $2 million for any one claim and $2 million in the aggregate and minimum Run-Off cover. More...
Membership of the Credit Ombudsman
Many businesses are joining an external dispute resolution (EDR) scheme as part of their consumer complaints handling processes. The industry's EDR is the Credit Ombudsman Service Limited (COSL).
The MFAA requires its members to hold membership of COSL (or another ASIC approved EDR) or be covered by a COSL membership. This is also a requirement for all brokers under the ASIC regime.
Finance brokers are remunerated by the lender and receive an upfront commission and a trailing commission on the loans they settle. It is not standard industry practice for a broker to charge a customer for their service due to this arrangement although, the changes required by the new Credit Legislation may mean some brokers will charge a fee and receive a commission. Consumers should be encouraged to ensure that a broker provides them with this information before they engage his or her services .