While brokers here may be feeling squeezed by government regulation, this is not a unique trend to Australia but one being experienced by small business owners worldwide, a leading governance and compliance expert has said.
Adrian Pay, business development officer and EMEA director of regtech firm Dynamic-GRC, spoke to
Australian Broker about the global push by governments and regulators against informal and smaller business setups.
“It’s a shame. I’m not exactly sure why this is happening but it seems like down in Australia as well, they’re getting into this global trend.”
To adapt and affect this movement towards greater regulation in Australia, the broking industry has a good case to work together, Pay said. Industry associations have a huge role to play in helping brokers save time they may otherwise spend keeping up with rapid change on their own, he added.
“If they can centralise this through the broker associations, then that would be a better way of doing this. You could have a team of five or ten people centrally whose job it is to read through all the rules, deflect a lot of the silly stuff, communicate with brokers, and keep them informed.”
Pay said the idea of collectivising administrative overhead had been used to great effect in Ireland. There, the national credit union association has established the Credit Union Compliance Centre which fields questions from its members for a single annual fee.
“If the industry can pull together on that and the individual broker or broker firm pays a few thousand dollars a year, they could have access to that centralised resource which keeps their records and keeps them up-to-date.”
Ruling the bad apples
The industry has reached this influx of heavier regulation because brokers have not been effective in lobbying government against these changes, Pay said.
“I get the feeling reading through the ACL requirements that the industry didn’t get its views across right at the very beginning and that’s a shame. If you can organise your industry and lobby, then you can actually influence the rules that are imposed on you. Otherwise, you’re just waiting to get hit with more rules.”
While the ACL requirements were reasonable for brokerages with 100 people in the firm, Pay said they didn’t work for very small brokerages or individual brokers.
“The regulators shouldn’t be taking a one-size-fits all approach. I know they take into account what’s appropriate but that’s their judgement. What they think is appropriate might be more than what a one-man band thinks is appropriate.
“That’s why it’s important to get your views across right at the very beginning. Once rules have been published, it’s quite hard to then go back and argue about them.”
Although some degree of regulation is necessary, Pay said the entire industry seemed to carry the cost for a few rotten apples.
“Regulators seem to think that more rules make the rotten apples good apples and it doesn’t work that way. For people who are going to be dishonest, you can put in all the rules that you like – you can almost train them to be cleverer about their dishonesty – but it doesn’t make them good people.”
Regtech broker hacks
Fintech can also play a part in helping brokers stay on top of these changes, especially for those still relying on spreadsheets, word documents and emails for items such as breach, training and complaints registers, he said.
“At the moment, the individual broker may hack something on Excel. That means they have to go and set it up, they have to store it, and there are minimum time requirements for how long you’ve got to keep that data.”
A purpose-built technology platform will make it easier for brokers to enter in information and then access it through the cloud without physically installing software or setting up a server in the office.
Practical fintech solutions that can be used on-the-go are especially useful for brokers covering wider regional areas which may have been overlooked.
“I think the regulators don’t get outside of Melbourne and Sydney very much,” Pay said. “They don’t really understand. You go to these small places and this is their real lives. Brokers might need to drive out to a farmstead in the middle of nowhere and actually deal face-to-face with people.”
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