The United Kingdom is one of the world’s top financial centres, providing banking and credit services to businesses and individuals across the globe. As the nation’s powerhouse, the financial sector bears a great deal of responsibility for the continuing prosperity of the United Kingdom, so ensuring that trading standards are met is hugely important. Business can only grow when it is conducted in an atmosphere of security and stability, and this is why institutions like the National Association of Commercial Finance Brokers (NACFB) exist, to promote the welfare of the industry and the country.
The necessity to manage the standards of trading within the financial sector was recognised by the Bank of England when it formed The Financial Conduct Authority (FCA), The Prudential Regulation Authority (PRA) and The Financial Services Compensation Scheme (FSCS), all of which have been founded to promote consumer confidence in the sector and to maintain the UK as one of the world’s foremost financial centres; the NACFB works in tandem with these institutions, playing a key role in keeping the nation’s financial systems running. Security and stability are not the NACFB’s only priorities, though, and it also works to further the interests of its members as – the Association functions as a central organisational point for commercial brokers, allowing them to leverage their collective experience and expertise for mutual benefit.
Formed in 1992, the NACFB, The National Association of Commercial Finance Brokers, was founded to combat the growing occurences of dishonest trading within the financial industry: within the complex world of commercial finance, there is a lot of scope for misrepresentation and misdirection, which, when coupled with the sums involved, can cause enormous problems for investors. The presence of any dishonest traders within an industry is bad for business, as it makes it difficult for consumers to know who to trust; therefore, it’s in the interest of the commercial brokerage community to ensure that consumers have a way to distinguish honest, accountable brokers, to avoid harming consumer confidence and damaging the industry.
Fraud and malpractice can cause enormous harm to the industry, but Government initiatives to combat these issues can sometimes be heavy-handed and detrimental to business; the NACFB seeks to guard against this by establishing a code of practice which its members abide by, to provide a safe option for borrowers in order to protect their confidence. This ensures that not only is consumer confidence built up, but there is little need for the Government to step in and enact tough regulations without at least consulting the NACFB in advance, and giving them a chance to modify or amend regulations. The NACFB also represents the interests of commercial brokers to the Government, advising the Members of Parliament of potential issues which could arise from the introduction of new laws, and monitoring the progress and content of any bills that are passing through the House of Commons. This allows them to keep Association members updated with ongoing developments and likely outcomes, which helps commercial brokers to plan for future regulations.
In addition to this, the NACFB seeks to build relationships between commercial brokers, creating an environment in which mutual sharing and learning is possible through extensive networking opportunities. This benefits the industry by promoting co-operation between its members, helping to solidify the industry and provide a coherent sense of identity. Finally, by representing the commercial brokerage industry, the NACFB is able to provide promotional material that helps to educate the population as to the services that its members provide; for many, commercial brokerage is an arcane subject, but by raising the issue within the public domain, the NACFB can increase the industry’s profile and create a greater demand for business.
The NACFB aims to improve and maintain the level of service within the private commercial finance industry, and there are two key components to this. Firstly, the NACFB has established a set of best practices, and has ensured that its members are always held to the same standard. This ensures that clients always know what they’re going to get and that they’ll have some source of recourse should the broker fail to adhere to these regulations. In addition to this, though, the NACFB is the sole channel through which many of these brokers can be reached; the NACFB counts 1,620 commercial finance brokers on its membership roll, and the majority of these offer their services exclusively through the Association. This means that the NACFB serves an important role in putting clients and brokers in contact: because each individual broker has different lender contacts, and can provide different options to clients, it’s important that client and broker are properly matched. This benefits both parties by ensuring that clients are receiving the best possible service and that the brokers are acquiring customers who are looking for their specific services.
This ability to put brokers and clients in contact with appropriate partners improves the quality of service that the UK commercial brokerage industry offers: clients find the best deals without having to search through dozens of options, and brokers have access to a steady supply of relevant customers who are looking for the services they supply.
There are five main sections to the NACFB’s policies, which serve the underlying goal of promoting the welfare and growth of the commercial brokerage industry and the UK as a whole:
As mentioned above, the NACFB seeks to preserve consumer confidence in the sector by creating a standard of practise to which its members are held, ensuring that there is a sufficiently powerful framework that members are consistently held to a high standard and that there are meaningful punishments for those who break the rules. To achieve this, the NACFB registered a Code of Practice with the Office of Fair Trading (OFT, superseded by the Financial Conduct Authority in 2014). This Code of Practice lays out the rules by which members must abide once they are accepted into the Association; by publishing these rules, the NACFB demonstrates to consumers that their members are properly regulated, and outlines the standard of service they can expect to receive.
The establishment of a set of rules is only reassuring as long as there is a meaningful way to enforce it: it doesn’t matter how stringent and well-meaning a Code of Practice might be if there is no incentive for members to obey it. Therefore, the NACFB has also put in place a system by which customers can submit complaints against members, and mechanisms by which poorly performing members may be punished. Since the NACFB does not have any legal authority, and must rely on financial oversight institutions such as the FCA and PRA to enact punishment for breaches of the law, the NACFB’s authority relies upon its ability to provide benefit for its members: threatening exclusion from the membership only carries a penalty if the membership is beneficial in the first place, so the NACFB works hard to make sure that its members benefit from accreditation as a sign of trustworthiness. It also maintains a confidential list of brokers who are suspected of fraud, which is used to advise members and clients in their dealings – the threat of being added to this blacklist is an added disincentive for brokers who may be less than honest.
The NACFB does not only serve to keep its members in line and establish a Code of Practice; it is also concerned with the health of the industry as a whole, and the Association regularly makes representations to the House of Commons on issues relevant to the commercial brokerage industry. Government oversight of the financial industry as a whole is vital to maintaining standards, and the ability of the Bank of England to control the financial climate is key to establishing an open and honest trading environment, but it’s important for commercial brokers to make their voice heard to ensure the Government doesn’t introduce laws which restrict their business. Through regular meetings with the FCA (which is responsible for the regulation of the financial industry), the NACFB is able to leverage its large membership to influence policy-making for the benefit (or at least to avoid the detriment) of its members.
As a network of private commercial brokers, the NACFB is of course heavily involved in the consumer credit industry and was instrumental in the UK Government’s Business Finance Partnership scheme, which introduced more than £1 billion of private funding to medium sized businesses. This helped to revitalise the economy in 2013, making up for the shortfall in Government lending caused by the recession, and the NACFB benefited its members by representing their interests at every stage.
To establish the NACFB as a national representative of the commercial brokerage industry, it’s necessary to create an atmosphere of mutual trust and respect between members. By arranging to provide networking opportunities between different groups, the NACFB can act as an intermediary, knitting the commercial brokerage industry closer together to boost efficiency throughout the sector. The NACFB runs regular workshops throughout the year in a variety of locations, and also provides opportunities for members of the industry to come together at their AGM and Gala Dinner events. Not only is this a way for brokers to build their professional network, it also allows members to provide valuable feedback to the NACFB on the matters that concern them the most.
As it creates a central organisation to which commercial brokers are affiliated, the NACFB also provides a powerful means through which to distribute news and communicate ongoing developments in the industry; updates can be relayed from meetings with the FCA in Westminster to the central NACFB organisation, and from there can be distributed amongst members. By providing an effective channel through which to communicate with the commercial brokerage industry as a whole, the NACFB acts as a focal point that increases the efficiency and effectiveness of all of its members and ensures that they are able to react to changing situations quickly and appropriately.
Establishing a common set of core competencies is key within any industry, to ensure that there is a set of transferable skills which are recognised across the entire sector. The NACFB provides access to training in the form of the “Level 3 Business Banking and Conduct” award, from the Institute of Financial Services, an Ofqual-recognised branch of the School of Finance. This is designed as a scheme to promote a thorough basic understanding of financial principles, and the ways to deal with clients in a knowledgeable and professional manner – creating a base level of expertise for employees is an excellent way to enhance customer satisfaction, as it drives a minimum level of quality for every interaction. The “BB&C” qualification acts as a solid foundation for further growth within the industry and is fully recognised by all commercial brokers as a valid and valuable certification.
In addition, the Institute of Financial Services also provides further educational opportunities in the form of a “Level 4 Diploma in Retail Banking Conduct of Business”, an effective way for employees to further enhance their understanding of the financial services industry. These courses are provided using an eLearning program, which allows learners to benefit from the flexibility of studying from home at their own pace and keeps course costs relatively low.
In addition to the responsibilities outlined above, the NACFB also acts to increase awareness of the commercial brokerage sector, communicating their services and goals with the public to enhance their perception of the industry. This is achieved through a variety of methods, by attending relevant summits and networking events to promote the interests of its members and by producing pamphlets, leaflets and other materials to potentially interested parties. The NACFB does this to make the public more aware of commercial brokerage solutions: sometimes, the domain of financial services can seem arcane to the uninitiated, so the Association aims to publicise the role of private finance in the commercial sector, to emphasise the importance of contracting with an accredited NACFB member and to provide a point of contact for small and medium enterprises looking for trustworthy sources of credit.
One of the key aspects of the NACFB’s role is that many of its members only offer their service through private commercial channels, meaning that for a finance agreement to be reached, the client must contact them through the NACFB. To facilitate this, the NACFB provides an “introducer” service, which puts clients and brokers in contact – this allows clients to find accredited brokers which match with their needs, and for brokers to access a steady stream of customers.
The NACFB is run by an elected Board of Directors, with a serving Chairman, and separate board members whose responsibility covers all aspects of the NACFB’s remit, including International Relations, Compliance and various different areas of commercial finance. Together, these men and women represent the interests of the commercial brokerage industry, and the democratic nature of the Board ensures that no power blocs are established; the NACFB’s authority is established through the results it provides, and dissatisfaction can be expressed by its members freely.
Before they can become accredited NACFB members, brokers must prove that they are an established commercial brokerage firm. This prevents frivolous applications being made, as membership cannot be granted without proof of at least three loans being arranged – without this track record, it’s possible that unscrupulous brokers could register as NACFB members to benefit from the increased trustworthiness it denotes and have little to lose by breaking the Association’s rules.
In addition to providing evidence of commercial brokerage, applicants must also submit a registration fee: £500 for the first registration, with another £200 added for each additional named individual. The applicants will also provide extensive identification and background information, and will be subjected to a credit check to determine their financial history. As the trustworthiness of its members is of great concern to the NACFB, potential applicants are rigorously examined for any sign of fraud or malpractice before they are permitted to join the Association.
In the grand scheme of things, the NACFB is a fairly small organisation: the UK financial sector is enormous, and even with over 1,500 members the commercial finance broker’s association is only one element in a huge machine. However, the NACFB has worked for nearly 25 years to help bolster the UK economy, establishing various different measures to promote and protect the welfare of its members, their clients and the financial sector as a whole; although it is far from solely responsible for the healthy state of the private finance industry, it can claim that it’s been highly beneficial and effective within its scope.