5 Common Mistakes Brokers Make (And How to Avoid Them)

The Compliance Blind Spot

Mistake #1: Not Taking Record Keeping Seriously

The introduction of the Best Interests Duty (BID) on 1 January 2021 was a watershed moment for the industry. It fundamentally elevated a broker’s legal obligation from the previous standard of ensuring a loan was “not unsuitable” to a higher, positive duty: to prove that the credit assistance provided is demonstrably in the consumer’s best interests. In this new world, your notes are not just administrative fluff; they are your single most important line of defence.

ASIC’s Regulatory Guide 273 (RG 273) is unequivocal: robust, detailed, and contemporaneous record-keeping is the primary mechanism by which a broker can prove they have complied with their BID obligations. Should a complaint arise, an independent third party—be it ASIC, the Australian Financial Complaints Authority (AFCA), or a court—will review your file notes to understand the story of your process. Having incomplete or non-existent notes leaves your business dangerously exposed. The financial stakes are business-ending, with a breach of BID carrying a maximum civil penalty of $1.57 million for an individual or three times the benefit derived from the contravention. Beyond the regulatory risk, poor record-keeping is simply bad business. It creates massive inefficiencies, leads to inconsistent client service, and fosters a chaotic workflow that makes scaling your operation impossible.

The Solution: Make Your CRM Your Single Source of Truth

The most effective way to mitigate this risk is to transform your Customer Relationship Management (CRM) system from a simple contacts list into a comprehensive compliance engine. This requires a disciplined, process-driven approach to documentation.

First, embrace contemporaneous note-taking. Every single interaction must be documented in your CRM as it happens, not days or weeks later from memory. This includes summaries of phone calls, minutes from meetings, and copies of all relevant correspondence. Your notes must tell a clear, chronological story of the client’s journey, capturing their specific needs, long-term objectives, and financial situation—using their own words wherever possible to add authenticity and clarity.

Second, you must meticulously document the ‘why’. It is not enough to record what you did; you must record why you did it. Your CRM file needs to contain a detailed, evidence-based justification for your recommendations. This includes the scope of lenders and products you considered, the outputs from any product comparison tools you used, and a clear rationale explaining why the final recommended product was in that specific client’s best interests over other viable options.

Finally, you must explicitly address the Conflict Priority Rule. This rule requires you to prioritise the consumer’s interests above your own or those of related parties. If a potential conflict exists—for instance, if one product offers a higher commission—your notes must document this and clearly demonstrate the steps you took to ensure the client’s interests remained paramount. A useful internal question to guide this process is, “What would a broker in my position, but without this conflict, have recommended?”.

The Lead Generation Trap

Mistake #2: Over-Relying on a Single Lead Source

For years, the gold standard for lead generation has been referrals and repeat business. This channel is undeniably powerful, accounting for a combined 72% of all leads for the average broker. However, relying on it exclusively in today’s market is like building a mansion on a single pillar. The industry is more crowded than ever, with broker numbers hitting a record 22,265. This means you are not only competing for clients but also for the finite attention of your referral partners.

Placing your entire business’s growth in the hands of a few key real estate agents or accountants is a high-risk strategy. If a top-referring agent retires, or an accounting firm decides to launch its own finance arm, your lead pipeline can dry up overnight. This is the definition of a fragile business model—one where your success is dependent on factors entirely outside of your control. In a market where brokers are now the primary competitors for other brokers, a passive approach to lead generation is no longer viable.

The Solution: Build a Diversified, Proactive Lead Generation Engine

The key to sustainable growth is to build a diversified, multi-channel lead generation system where you control the inputs and can reliably predict the outputs. This doesn’t mean abandoning your referral network; it means supplementing and strengthening it with proactive strategies.

• Dominate Your Digital Backyard (Local SEO): The home loan journey for over 70% of Australian borrowers now begins with a Google search. If your business doesn’t appear on the first page for local search terms like “mortgage broker Parramatta,” you are effectively invisible. Start by creating and meticulously optimising your Google Business Profile.
• Become a Trusted Authority (Content Marketing): Position yourself as the go-to expert in your market by creating and sharing valuable, educational content. Write blog posts, record short videos, or create downloadable guides that answer the most pressing questions your ideal clients have.
• Nurture Strategic Alliances (Professional Partnerships): Evolve your ad-hoc referrals into structured, mutually beneficial partnerships with Real Estate Agents, Accountants & Financial Planners, and even HR Managers of local businesses.

The Post-Settlement Silence

Mistake #3: Neglecting Post-Settlement Communication

One of the most dangerous assumptions a broker can make is that a client relationship ends at settlement. In the current market, this is an open invitation for competitors to raid your trail book. The market is a perfect storm for client churn. Refinancing is rampant, accounting for a massive 35% of all new lending activity, and a significant cohort of borrowers are rolling off low fixed-rate loans onto much higher variable rates. This means virtually every client you have ever settled is a prime target for a compelling refinancing offer from another broker or a bank’s aggressive retention team.

The Solution: Implement a Proactive “Client for Life” Strategy

To protect your trail book and cultivate a source of repeat and referral business, you must shift your thinking from loan settlement to lifelong client management. This requires a structured, automated, yet deeply personal communication strategy designed to keep you top-of-mind and continuously demonstrate your value.

• Automate Key Touchpoints: Use your CRM to its full potential by setting up automated workflows for key client milestones like loan anniversaries and birthdays.
• Conduct Proactive Repricing and Reviews: Do not wait for your client to call you asking for a better interest rate. Be proactive. Use technology to analyze your loan book and prioritise clients at risk of leaving for a repricing request.
• Provide Ongoing Value Beyond the Loan: Position yourself as a lifelong financial partner. Send out a periodic email newsletter containing valuable market insights, practical tips for home maintenance, or educational content.

The Policy Knowledge Gap

Mistake #4: Not Understanding Credit Policies Deeply

The industry is currently facing a challenging trend: loan application conversion rates have declined for four consecutive periods, falling to a low of 76.1%. This means that nearly one in every four applications submitted by a broker is not proceeding to settlement. A declined application is far more than just a missed commission; it represents a significant breach of trust with your client, a colossal waste of time and resources, and can negatively impact the borrower’s credit score.

The Solution: Commit to Continuous and Deep Professional Development

In this environment, simply meeting the minimum Continuing Professional Development (CPD) hours should be considered the starting line, not the finish line. True professionals differentiate themselves by investing in deep, continuous learning.

• Master Your Lender Panel: Go far beyond reading product fact sheets. Actively participate in every lender and aggregator PD day, webinar, and BDM meeting available to understand the subtleties of how they assess different income types and borrower profiles.
• Pursue Higher Qualifications: The Certificate IV is the entry ticket. The Diploma of Finance and Mortgage Broking Management (FNS50322) is essential for understanding complex scenarios and risk management.
• Differentiate with Advanced Designations: For experienced brokers, new university-level qualifications like the Mortgage Finance Professional Australia (MFPA) designation are powerful differentiators, signaling an elite level of expertise.

The Compliance Grudge

Mistake #5: Treating Compliance as a Tick-Box Exercise

Holding a mindset that views compliance as a bureaucratic, time-wasting burden is one of the most dangerous positions a broker can take. The regulatory landscape has been permanently reshaped, and treating compliance as a simple tick-box exercise is a direct path to failure. ASIC’s enforcement posture has hardened into a clear “Why not litigate?” approach. The risks extend far beyond regulatory fines to catastrophic and irreversible reputational damage.

The Solution: Embrace Compliance as Your Greatest Trust-Building Tool

The only sustainable path forward is to fundamentally shift your mindset. Stop seeing compliance as a cost centre and start seeing it as a core business value and your single greatest competitive advantage.

• Embed BID in Your Culture: The principles of the Best Interests Duty must be woven into the very fabric of your business, informing every client conversation, every process decision, and every piece of advice you give.
• Educate Your Clients on Your Obligations: Be proactive and transparent. Explain the Best Interests Duty to your clients at the beginning of your engagement. Use it as a powerful point of difference.
• Lead with Transparency: Directly address the issue of remuneration. Be upfront with clients about how you are paid by lenders and confidently explain how the BID and Conflict Priority Rule ensure that your recommendations are based solely on their needs.