The debate around part-time mortgage brokers is heating up, with experts questioning their impact on the industry and raising concerns for client welfare.
While some see flexible work arrangements as a key to success, others argue part-time brokers pose a serious threat to professionalism and service quality.
Terrence Sum (pictured above left), mortgage adviser and director of Grand Ocean Financial Services, noted the growing trend of part-time and casual broking among professionals such as accountants, often attracted by the potential for flexible hours and additional income.
“Due to their casual nature in the broking industry, it is often that they don't prioritise mortgage broking as this is not their bread and butter,” Sum said. “Instead, it’s more like a side gig to make some extra revenue when they come across an opportunity.”
“Or for anyone that is currently working in a completely different industry, they take up mortgage broking as a side hustle and do not intend to invest too much time and effort into building it.”
In the face of skyrocketing costs and an economy in flux, Australians are doubling down on the hustle, taking on second jobs to cling to their accustomed lifestyles.
After a discussion with several brokers at an industry event, Bruce Bello (pictured above right), mortgage adviser and director of Rockbanqe Private Wealth, was “astounded to learn” that many in the mortgage industry deploy the same tactic.
“Running a full-time mortgage business can be challenging in itself, let alone moonlighting as a salaried employee with conflicting schedules and demands,” Bello said.
“Not only can it take a toll on an individual’s mental health, but it can also lead to fatigue and burnout. As they say, being in business is not for the faint hearted.”
Although he has nothing against having an entrepreneurial spirit, Bello said the “part-time mentality simply cannot work in the mortgage broking industry”, and in turn, could result in inactivity for periods of time as the individual plays catch up.
Broker inactivity has risen sharply in recent times, with the MFAA’s Industry Intelligence Service 16th edition Report showing 22% of the industry did not write a loan between October 2022 and March 2023.
This came as the mortgage broker industry increased its numbers by 871 year-on-year, ending March with a population of 19,456.
While some in the mortgage industry attribute this sudden rise in inactivity to other factors, others question the rise of part-time brokers as the primary culprit.
“As living cost goes up, I'm seeing more and more people turn to mortgage broking as a side gig to help with the ever-rising living cost pressure,” Sum said.
“Given the nature of how easy it is for an individual to obtain the education requirements to enter the industry, it is not surprising that we also see a large number of inactive brokers. What's easy come, easy go.”
While more brokers may be looking to go part time, some may say, what’s wrong with that?
It could be a sign of the way the industry is heading to deal with the problems of today.
In July 2023, Australian Broker interviewed Peter Mastroianni, managing director at Loans Only about the benefits of part-time brokers for the industry.
Mastroianni said that the Loans Only group consisted of 40 to 50 brokers from “all walks of life”, with a significant number that worked part-time and had achieved “remarkable success”.
“Just looking at what these individuals are doing, it’s worth challenging the notion that broking has to be done on a full-time basis because it doesn’t,” Mastroianni said.
With industry awards evaluating settled loan amounts as a measure of success and the general culture around hustling, solo brokers starting their business may have a skewed view of what success looks like.
But Mastroianni said that success for a growing number of brokers didn’t necessarily equate to working long hours and settling $100 million worth of loans.
“More and more people are looking for a comfortable life where they settle $20 million to $30 million and work the hours that suit them,” he said.
However, others contend that part-time brokers can lead to lower standards and could harm clients.
Louis Frade, former co-founder of Vault Mortgage Corporation who retired in December, said her experience with the vast majority of part-time and casual brokers was not pleasant.
“Most casual brokers do not succeed and are not only time wasters but a danger to their clients,” Frade said.
“Many don’t keep up to date with products, policies, and procedures. Some don't know how to read payslips, savings statements, and other supporting documents. Others can’t even prepare a servicing calculator, funding report, or compliance documents to name a few.”
Bello agreed, saying that encouraging part time brokers could lead to “irrevocable financial consequences” to the client in missing key deadlines, not to mention the client being subject to a sub-par service offering and a negative perception of the mortgage broker channel.
The reasons for the disparity between part time and full-time brokers, according to Bello, is how and why they operate.
Bello said he had adopted the term mortgage ‘adviser’ in his interactions as there was a “stark difference” between an adviser and a sales-focused broker.
“A trusted adviser acts as fiduciary to clients, investing the time to forge deep relationships and provide bespoke advice around the client’s situation. Regular reviews form part of their operating rhythm,” Bello said.
“A salesperson utilises a general cookie-cutter approach, often pushing products in the first interaction, monitors the clock, and acts in their own monetary interests.”
A mortgage facility in the modern world is a multifaceted financial instrument.
There are several nuances that underpin everything from pricing and structure, right through to the sequence of documentation required to drive an application from inception through to settlement.
Given it is so time-consuming, Bello said it was no wonder that Australians placed their trust in a mortgage adviser, with most of these relationships being formed through word of mouth or trusted referral sources.
“An advocate typically endorses the trusted advisor as being the ‘subject matter expert’ who is known for putting the client’s best interests at heart,” Bello said.
“In saying that, what happens when there is an ominous silence when a client or potential client attempts to connect with the so-called expert? Is this individual ill, on vacation, or simply just inactive?”
While others certainly disagree, Sum, Frade, and Bello all agree that the prevalence of part-time brokers needs to be addressed.
Sum said raising the bar for new entrants would help increase standards and help with the number of inactive brokers in the industry.
“Look at financial planning, it used to be fairly easy to work as a financial adviser in the past, but once the government tighten up the qualification requirements, only the committed advisers remain in the industry,” Sum said.
Frade agreed, saying that mentors, licensees, and aggregators were “not proactive enough” in assessing the competency of new brokers.
“Broker CPD points are also often not verified, which needs to be addressed.”
For brokers partly invested in the industry, Bello urged them to consider their true intentions and the clients who needs their time.
“If you aren’t completely invested, then fundamentally your part time operation will simply will not succeed once you factor the ongoing compliance demands, and sheer overhead expenses as part of the ongoing regime,” Bello said.
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