Are reforms needed in the Canadian Broker industry?

After 45 brokers were terminated following fraud charges earlier, many consumers and experts are wondering what this means for the Canadian broker industry’s future. Some fear this “purge” firing is a first step before heavier regulations, which could cripple an already struggling industry and hurt consumers looking for alternatives to the big banks.

The challenge in regulating the Canadian broker industry is keeping the public safe while giving brokers room to provide competitive services, and many argue the strict regulations already in place are sufficient enough. The real solution may not be more regulation, but in helping brokers start out with sufficient resources and allowing them to expand when they feel the need.

Many experts agree the low standards for becoming a broker need to be addressed to stop people from bending rules to stay viable. The salary of your average independent Canadian broker is commission-based, which means there may be slow periods that can leave some hurting financially.

Tony Piattelli, a broker with Quantus Mortgage Solutions in Calgary, believes entrance requirements should be tightened to help minimize the desperation that can lead to fraud. Piattelli told CTV News that employers and regulators should ensure that newcomers have “a war chest,” a minimum amount of funds they can access that can keep them afloat during slower months. Hamilton-based broker Blair Anderson agrees, believing such an initial investment could help people stay on the right side of the law. "When you make it tougher to make a living,” he says, “those that are so inclined will start to work around the rules.”

Canadian brokers also need to expand past their usual residential mortgages. Art Appelberg, president of Northwood Mortgage in Toronto, told Mortgage Broker News that banks have “mastered customer retention,” which has caused problems for the industry. Easing certain regulations that limit a Canadian broker’s job description won't allow them to take advantage of perfectly ethical opportunities as they come up, and those chances often end up in the hands of their biggest competitors: banks. If brokers could access manufacturing ownership opportunities, like the current deal between CFF Bank and Home Trust, they could create more opportunities.

By diversifying and raising entrance standards, the Canadian broker industry could potentially thrive while providing essential, ethical services to clients. Equipping brokers with the tools they need could create an industry that regulates itself while staying competitive and viable.

Photos by: Sneg Mortgage Team, Chiceu Home & Garden Advisor