Improve disclosure to win business and prepare for the future: MFAA

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The Mortgage and Finance Association of Australia (MFAA) today highlighted the need for mortgage brokers to provide disclosure to customers, saying it will not only increase business now, but that it will benefit brokers when new national credit legislation comes into place later this year.

“There are other major advantages to this approach. Our latest Mystery Shopper report carried out towards the end of last year clearly explains that brokers who made disclosures about supervision, complaints, procedure and commission were much more likely to get the sale,” Mr Naylor said.

“The report showed that when brokers clearly disclosed commissions, the shopper’s average likelihood of intention to borrow with and recommend that broker, was 7-7.9 (out of 10). Conversely, those who do not disclose well received ratings from 3.3-4.3.”

The Mystery Shopper report is carried out by enlisting a number of people who are in the market for a home loan; either as first time buyers or investors, refinancers and occasionally next time buyers. Shoppers are instructed to make an appointment with a broker, and execute a relationship, should they choose.

According to the report more than half of the brokers (57.1 per cent) disclosed their commissions or how they were paid, up from 43 per cent in January 2008. [NB: under current broker regulation in WA, NSW and Victoria brokers are only required to make these disclosures once they are acting for the borrower; there are not such requirements in other states].

The report also illustrated a need for brokers to increase loan fee disclosure with customers and to provide better explanations of supervision and complaint channels.

“As in all business, it’s clear that transparency and openness is key to winning customers,” Mr Naylor said.

Other findings from the report include:

  • Brokers were generally regarded as professional, scoring 78.2 per cent, and there was a slight year on year improvement.
  • The majority (84.8 per cent) of shoppers perceived brokers to be honest
  • In 81.6 per cent of mystery shops, the broker was considered to have a comprehensive knowledge of the products offered

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  1. Once again a Phil Naylor comment misses entirely what the industry he is supposed to represent is all about and goes off a tangential swipe at the failure of brokers to disclose commissions and explain complaint procedures. I even re-read the Key Findings of the mystery shopper report as my take on that did not accord with “failure to disclose complaints procedure” as a key finding. Here is my take Phil.
    125 shoppers, 6 went ahead with loans. That’s about 5% which is exactly the percentage of cold enquiries to sales that I have consistently experienced over 10 years as a broker. Nothing to do with disclosure.
    Customers want to buy a house, they come to a broker to assist them in obtaining the finance so they can buy their home. That is our business Phil.
    Our business is NOT telling each and every one of those enquirers how to complain about the service THEY HAVE NOT YET HAD. That is an absurdity. I went back over everything I had bought this week and guess what – NOT ONCE did any of those transactions result in me being told about the complaints process either before during or after the transaction.
    Here’s a sales tip Phil. If I tell a potential client about complaint processes at any time before the consummation of the transaction then they will immediately start to mistrust me. As the waitress puts my food in front of me she doesn’t say ” Oh by the way if you get food poisoning this is the number of a hospital who do good stomach pumps and here’s the number of a good lawyer so you can sue us”. Don’t think I would really enjoy the meal if she did that.
    No-one argues against having a dispute procedure but your proposal of the need to disclose it before you actually have a client – ie. someone with whom you are going to do business – is ridiculous. In the case of the shadow shop, only 6 of the 125 NEEDED to know about it becuase they were the only ones who did busioness with their broker.
    On commission disclosure, I have always disclosed it when I write up a deal – why not, it is going to be in the LOO.In fact I think everyone should have to give full disclosure.
    From now on I expect to see on the top of avay MFAA communication your name with your salary(TEC will do) beside it Phil and the names of everyone else who works for the MFAA and their renumeration.
    As one of the many brokers who contribute to those salaries I have a right to know. Better put the disputes procedure up there as well.
    Here are a few useful things you might do instead of concentrating on crticising your employers.
    1. Ensure that all Lenders that have service level related commission agreements go back to full commission payment while their own service levels are so bad. If you don’t know who they are Phil then ring any broker who will tell you.
    2. Make further efforts to rid of the CRS. It is wrong in every case and should be dumped and ackowledged as the snake oiul it is. Worse it only encourages the crooks you are always rightly trying to get rid of by giving them a tool to exploit.
    3. Set up a dispute service for brokers who have issues with aggregators. Most of the membership are brokers Phil – start representing them in all facets of the industry and not just the ones that the Lenders and Aggregators tell you to.
    Brokers First should be the motto of the MFAA Phil – help us, don’t attack us.

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