Many years ago, the NACFB charged its members according to the size of the company. We did this by counting the number of people actively working for the company, and on top of that, because we had a large number of sole traders, we asked for an indication of the company’s income, and based our fees on a combination of those two elements. It sounds magnificently equitable, given that we have to charge our members something.
Free membership would commit us to surviving on and therefore hiking up Patron fees, and then fielding inevitable accusations of being entirely in the pockets of the big banks, which we are not. Every member of our Board of Directors is an active, practising, committed commercial finance broker.
The trouble was, it was never easy to give a straight answer to the question “What’s the fee?”, so we simplified things. Brokers don’t have to tell us about their income any more. We just want to know how many people work for them – signing deals, advising clients – and we base the fee on that because there is a link between fee income generated and affordability. We also cap it so that we don’t end up quoting telephone-number fees. Now in a sense you might say this is like a tax cut for the rich, but we just don’t feel a broker should be paying the same kind of fees as a lender, so we stop counting employees at fourteen.
There is a hitch here which we have to acknowledge; it would be in the interests of a broker’s bank balance if that broker were to under-report the number of people working for the company, and in a sense we’ve made that easy to do, by treating differently the many types of staff that a broker could employ or work alongside. We use the terms Registered Individuals, Appointed Representatives, and Agents, and as of now, we charge each of them the same sum, in the same way. But as with any newfangled terminology, it’s easy for a broker to say “well, I don’t think of him/her as an Appointed Representative because (insert specific objection here).”
Let me use this space, then, like a little glossary so that we are all literally on the same page.
An employee of a firm who generates income by dealing directly with customers and giving advice will qualify as a Registered Individual. Support staff and deal coordinators will not fall within the definition of a Registered Individual.
A Registered Individual (“RI”) is our own term for an employee of the firm who generates income for the firm by dealing directly with customers and giving advice. Support staff and deal co-ordinators are not RIs.
An Appointed Representative (AR) is different. An AR is an individual (or a firm) who has been appointed by the broker firm to undertake the sale of financial products, or to give advice on financial product to commercial and retail customers. The broker firm will not need to register the AR with the NACFB so long as the AR’s primary activity is neither credit broking nor related to financial services. They must not actively discuss with, nor give advice to, the customer.
An Agent, Franchisee, Associate or Introducer (henceforth brought together under the umbrella term of Agents) is an individual or firm that acts on behalf of the member firm and transacts business through the member firm. They may use the member firm’s trading style or they may instead trade under their own style. Agents will potentially deal directly with the customer, but utilize the funding lines of the member firm. Introducers who fall within the definition above will be treated as agents and need to be registered, but if the Agent is already a member of the NACFB under their own name, they won’t need to be registered again under the member firm. And any party which is not registered with the NACFB must not use the NACFB logo on marketing material.
Anyone who thinks they fall between cracks between any of these definitions should bring it to our attention because the fact that any of these definitions seems to mostly apply to an individual most likely means that we regard it as fair that the member firm in question ought to have this individual reflected in their fee structure.
There is also the small matter of Professional Indemnity Insurance to consider. If a member is telling their insurance provider one thing and us another, that’s not cricket, but the real risk is when someone acts in one role and reports to their insurer that they do something different.
That might undermine their insurance altogether, rendering it invalid. And we think that is too much of a risk for anyone to take.