Super-brokers and compliance issues
Adam Tyler says FCA requirements could change the broker market, and those exiting the market would have dropped out anyway
There’s never been a greater appetite for simplicity. New lenders coming to the market are filling niches within niches, making it more plausible that you’ll find exactly the type of funding you need. Small businesses dream of the day when all their financing needs can be arranged in a short phone call or email – the slow process of applying to and being rejected by their bank is off-putting to say the least.
Brokers, too, want to be confident of a consistent response from lenders, and lenders like to know what to expect when they see an approach from a broker, which is why many of them have a restricted panel. Often the way they homogenise the panel of brokers they work with is to insist on NACFB membership. But another way is to bring on what we’re calling the “super broker”.
BMW lost money on the original Mini partly because it cost as much to fit a seat in a Mini as in a Rolls-Royce as far as labour was concerned, and it couldn’t make that back in the marketplace. Similarly, sole traders will be disproportionately hit by the time demands of compliance with the Consumer Credit Act. A super-broker brings economies of scale, and not only that, but lenders can expect applications that precisely meet their criteria, which in turn builds a flow of trust that works both ways.
For borrowers, the “super-broker” won’t feel much different from working with a sole trader – the difference being the sense that there’s extra weight behind the lender approach, which makes things feel a little bit more like dropping in their local high street bank, only with a better chance of getting the funding. This gives borrowers that little extra bit of choice, as no doubt some will prefer the ambience of working with a sole trader.
The NACFB has a broad spread of broker members, and although I’ve heard it suggested that regulation might effectively cull the population, I don’t foresee that being a big problem. Putting it bluntly, the brokers least likely to jump through the FCA’s hoops are those brokers edging towards a comfortable retirement age – those who would drop out of the market anyway over the short to medium term.
At the other end of the scale, the new blood tends to be more amenable to demands such as qualifications and business compliance programmes. We’d be surprised if we lost as much as 10% of our membership over the effect of the consumer credit permissions that are being phased in over the next 12-18 months. Nature and the economy both abhor a vacuum, after all.