Find out what it takes to start your own mortgage brokerage in Australia and navigate the complex landscape of real estate finance.
This comprehensive guide to starting your own mortgage brokerage aims to demystify the process and provide you with industry insights on the steps and key considerations that you need to establish a successful brokerage in Australia.
Whether you’re transitioning from a career as a mortgage broker in another brokerage, or you’re embarking on a new career, understanding the industry’s complex regulatory and compliance framework is crucial.
Table of contents
- Training and accreditation requirements
- Developing a business plan
- Legal requirements and compliance
- Choosing your business structure
- Marketing and client acquisition strategies
- Risk and compliance management strategies
Training and accreditation requirements
The first step towards starting a mortgage brokerage business begins with training and accreditation. Aspiring brokers need to complete relevant educational qualifications including a Certificate IV in Finance and Mortgage Broking and a Diploma of Finance and Mortgage Broking Management through a registered training organisation (RTO).
Mortgage brokerage firms in Australia must adhere to national regulatory compliance commitments including the National Consumer Credit Protection Act (NCCP), Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF), Privacy Act, and annual Continuing Professional Development (CPD) training.
MFAA and FBAA are industry associations that represent, educate and support finance brokers
They monitor legislation and make representation to industry regulators, federal government departments, and state and federal Members of Parliament.
Core functions are to:
- monitor legislation and make representations to ministers and members of parliament both state and federal levels as appropriate.
- engagement with key stakeholders including ASIC, AFCA, ACCC and treasury.
- develop and uphold the code of practice as adopted by industry professionals who offer consumer finance, commercial finance, lease and motor vehicle finance, business and debtor finance, as finance/mortgage brokers.
- provide training programs to the industry via a registered training organisation (RTO) and keep members up-to-date with changes to government legislation and regulations.
- manage complaints and disciplinary procedures which are designed to eliminate unacceptable working practices amongst members, by providing a disciplinary tribunal approved by the ACCC.
Unlike other real estate and finance licences that vary between states and territories, the mortgage brokerage licensing is consistent throughout Australia which ensures a uniform set of regulations that foster trust and transparency in the industry.
Developing a business plan
Developing a business plan for your mortgage brokerage helps to set long-term, result-oriented goals that are essential for navigating the competitive and complex mortgage finance industry in Australia. A business plan with a strength, weaknesses, opportunities, threats (SWOT) analysis helps to define a unique value proposition in the market and understand target demographics and growth plans.
Developing a business plan also helps to ensure that mortgage brokers have a transparent understanding of the costs and risks involved with setting up the brokerage. Business plans are essential for mitigating risk and preemptively planning for any future challenges and costs that arise throughout the process.
Legal requirements and compliance
All brokers are required to be a Credit Representative (ACR) of an Australian Credit Licence (ACL) holder, or hold your own ACL.
To achieve this, you have two options:
- get your own ACL by applying to ASIC
- become a Credit Representative of an existing ACL, such as your aggregator.
It does not matter if you choose to own a brokerage, if you are a sole trader business, or if you work as a PAYG broker. The above rule still applies.
Brokers in Australia must also comply with the National Consumer Credit Protection Act (NCCP) which governs responsible lending practices, disclosure requirements, and providing credit assistance that serves the best interests of the borrower. Brokers must also comply with the Privacy Act 1988 to ensure client confidentiality and the privacy of personal information, as well as adhering to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws.
To protect against legal claims of allegations of negligence or misconduct in professional practices, mortgage brokerage owners must hold professional indemnity insurance.
Just like other professionals in the real estate industry, mortgage brokers must fulfil Continued Professional Development (CPD) training requirements and be prepared for regular compliance audits and regulatory oversight by providing requested documentation and information.
Choosing your business structure
Choosing the right business structure for your mortgage brokerage will be dictated by the size of the business, as well as how you plan to run the business now and in the future. Your business structure will affect your tax liabilities, asset protection, and setup costs for the business. Business structure options for mortgage brokerage firms, include:
- sole trader
- company
- partnership
- trust
Each structure has unique implications for tax, liability, ongoing costs, and accounting. Before you start the business, it is advisable to consult with a tax professional who can guide your decision based on your personal circumstances and business plan.
Marketing and client acquisition strategies
For new mortgage brokerage businesses in Australia, understanding marketing and client acquisition strategies is essential for short-term feasibility and long-term growth. A comprehensive marketing plan for a mortgage brokerage firm in Australia should include multiple digital channels that considers the behavior of your target demographic. Creating quality content across different channels is essential for winning engagement and trust with potential clients.
Risk and compliance management strategies
Risk and compliance management when starting a mortgage brokerage in Australia means laying out a complete framework for responsible lending obligations. The framework should include policies and procedures around compliance, risk management, resource planning, complaint handling, conflicts of interest, and training. These elements are crucial for meeting the general obligations of mortgage brokers in Australia.
In addition to this initial plan, conducting regular compliance and risk assessments and periodic intervals helps to ensure mortgage brokers assess current and future risks as the business scales and evolves over time. Regular audits help to ensure mortgage brokerage owners limit the risks of legal and financial repercussions for non-compliance.
In addition to creating a robust risk and compliance framework, mortgage broker insurance is another essential investment for limiting risk. Regularly reviewing insurance and assessing risks to accommodate changes to the business ensures that the brokerage remains compliant and up-to-date with the latest developments in the mortgage industry-specific landscape and general business landscape in Australia.
