NACFB CEO’s “baptism of fire”

With a 30-year plus career in the commercial finance industry, including senior positions at lenders including Lombard, Barclays, and GE Capital, and most recently Group CEO at the brokerage STAR Asset Finance, Higginbotham brings experience from both sides of the fence to his new role.

“I see my NACFB move as an exciting opportunity to represent the industry at a different level, one which is not operational but more strategic, and a chance to use the grey matter,” Higginbotham says.

Since there have been plenty of immediate challenges to tackle, with the handing down of the wholly unexpected Court of Appeal judgment on commission disclosure, a critical issue for brokers in all sectors, happening just three weeks after Higginbotham took on the top job. 

The resulting confusion across the whole industry about how and when to disclose commission and evidence customer consent is still playing out, and NACFB is in constant touch with its members, and with lenders and other trade associations to provide guidance and support. NACFB has developed a template designed for brokers to share with their clients with information about the broker, their role in a financial transaction and detail what commissions and fees the broker will receive from the lender.

While this has proved a baptism of fire, Higginbotham is keen to outline his aims for the NACFB longer term, several of which resonant strongly with the current crisis.

Co-operation

“One of the first principles is that we cannot be too myopic – there’s a wider commercial finance ecosystem and we need the different elements to cooperate. That is a real theme – the need to maximise our community, and provide a platform and method of communication so brokers and lenders can share ideas,” Higginbotham explained.

“I want to ensure collaboration with other parties where appropriate, including the British Business Bank and other trade associations, so that collectively we can change and shape the future.”

Secondly Higginbotham identifies the issue of trust as critical, saying: “The trust piece of work is a bedrock. We need to ensure professionalism and oversight, and the more we can evidence transparency and accountability, the more credible we can be as a voice.”

Technology has an obvious role to play in embedding compliance requirements into daily practice and in creating a single view of customers, but Higginbotham is unsure that technological solutions will be a substitute for individual broker interactions.

“In many ways brokers are like old fashioned bank managers. They have the knowledge base to help SMEs navigate the finance providers, and that’s their value-added. IT can automate the route to finance, but IT systems can’t replicate that relationship,” he argued.

Higginbotham points to results from a recent NACFB survey of members, which showed that 32% reported clients selecting a different product types than the one about which they originally enquired. “Tech automates specific actions, and monitors compliance data, but it’s the broker that understands how speed, costs, risk and complexity all relate for that particular customer and that’s something you can’t tickbox,” he says.

Adaptability

October’s shock ruling about changes to requirements for commission disclosure and evidencing customer consent have thrown these issues into the spotlight. While acknowledging the chaos and confusion that originally ensued, Higginbotham is more optimistic about the long-term impact.

“Where there are challenges there are also opportunities. If we can create more transparency that will be better for all parties. The first reaction is inevitably ‘how bad can this be’, but there’s no reason why we can’t navigate the changes in a positive and proactive way, so things are better than before. One of every broker’s greatest skills is adaptability,” he said.

Since the judgment was handed down the NACFB has been working on updating guidance to members. Initially this was tactical advice, providing information on what the association knew of the implications and suggesting pragmatic immediate steps to take. Higginbotham points out that until any appeal has been heard at the Supreme Court, it will be taxing to provide absolute clarity on what the requirements are.

“We’re working to ensure any outcome is relevant, appropriate and proportionate, but it is very much a moving feast and as and when we get new information or data we will add advice,” Higginbotham noted.

Undoubtedly the sudden need to react to the court judgement has created immediate pressures – for example, the requirement to obtain a wet signature, if that turns out to be the case, risks turning what was a two-hour turnaround on an agreement into one taking two days.

“Then there is the question of who obtains overall consent from the customer. Lenders might want to go direct to the end customer, but brokers would probably rather keep that as part of existing processes. What we don’t want is a complex mix of requirements hitting the end customer and which are not co-ordinated,” Higginbotham pointed out.

However, with Consumer Duty obligations another factor to consider, brokers will need to assess whether customers come into the categories of sophisticated, unsophisticated or vulnerable and be prepared to evidence that the pricing on any given finance deal is fair and reflects the value added by the broker’s services. In the longer term, this will call for the development of updated consent and commission disclosure processes across the industry.

“Through all this my aim at the NACFB is to help brokers to develop a consistent and co-ordinated approach to the challenges that impact us all, in tandem with other trade bodies and interested parties. We need to work collectively with a strong and unified voice,” Higginbotham concluded.

Jim Higginbotham, CEO of the NACFB, is joining Stephen Haddrill, director general of the FLA, at Asset Finance Connect’s conference in London on November 26th,  which will bring lenders and brokers together to share their ideas and thoughts on how the industry responds and innovates following the Court of Appeal ruling.

Ticket information for the AFC UK Autumn 2024 Conference can be found on the conference website or directly from Louise Clavey at louiseclavey@assetfinanceconnect.com.