108: Better Defence - Prepare with FSRA

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EPISODE DESCRIPTION

In this episode, Tom & Brandon share one of their trainings with Tango, where Brandon shares what he took away from FSRA at the CMBA conference, and how increasing audits are reshaping the brokerage industry and why documentation is your best defence.

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Episode Transcript

(00:00):
Welcome back to another trainingsession episode where we pull back

(00:03):
the curtain, give you behind thescenes access to the strategies,
insights and conversations we haveat our brokerage, Tango Financial.
This is real training, realtakeaways to help drive results in
your business.
So enjoy.
So I was at the Canva event thisweek and Fizra had the opportunity
to come to the stage and sharesome of it, some about what
they're seeing and what they'regoing to be looking for.

(00:24):
And when it comes to FISRA, I knowwe all have mixed feelings about
them.
On one hand, they do protect
consumers.
They do remove some of the bad
energy and bad forces out of theindustries, those people
committing fraud and doing thingsof that nature.
On the other hand, they are verystringent with us, very strict.
They have a lot of duplication inprocess when it comes to things

(00:48):
like FinTrack for bank files, whenthe banks themselves are doing
that and have whole systems andtons of money invested in it.
So there's a lot of waste andthings that I think waste
individual brokerages and brokers'resources on having to duplicate.
I totally agree that on theprivate alternative side that that
FinTrack should be done becausethere's not a banking body
necessarily reviewing that clientand that file.
So there's huge opportunities forfraud.

(01:09):
That's besides the point.
Really what we want to prepare for
as brokers and agents is in theevent that FISRA does audit our
brokerage or us as individuals, isour file going to pass or are we
going to face some penalties?So I've always struggled with
this.
We have a lot of documents and as

(01:29):
the principal broker for TangoOntario, it's something that
weighs heavily on me knowing thatour clients... are in a good
position, but also that ourbrokers, brokers, excuse me, are
doing a good job.
So we have very defined compliance
processes.
We have Carrie as our national
compliance manager, who's gonethrough everything, kind of done
an internal audit on us there andsaid, okay, shore up here or

(01:53):
improve this.
And so we feel like we have a very
good base of documentation there.
But then when I was listening to
FISRA yesterday, I realizedthere's stuff that we can do.
that is so simple just to add tothe file.
And it doesn't have to be a verystrict document process that
everyone follows.
It's just little things that we
can do that would improve it comethe event of an audit.

(02:17):
So, okay, Fizra said base kind oflevel audit.
They're going to come in.
They're going to look that your
disclosures are accurate.
They're going to look for that
Vintrac and PEP.
They're going to look for all the
basic things that you know youhave to put into your compliance
package.
But then they're going to go one
step beyond this, and they'regoing to apply what they call a
reproduction test.

(02:37):
And basically what this is, is
given the parameters of the file,can they determine why you made
these decisions for the client?So why did you put the client in
the variable mortgage?Why did they take a fixed 10 -year
mortgage?Why are they going private?
Could they have gone alt?Did you explore that?
Try to exhaust all possibleoptions before you put them in

(02:59):
this higher rate, higher riskproduct.
And that's what they're going todo.
So based on what you submit,that's what they're going to use
to determine if that was done.
So this got me thinking, you know,
we've added quite a bit to ourpackage, like a disclosure to the
client that goes above and beyondit, outlining the risks of... all
mortgages, and then we highlightthe ones that are relevant to the

(03:23):
one they're taking.
But it got me thinking that we
should even add little likesummary stories.
It doesn't have to be much, butexplaining sort of where the
client came, what was the journeylike for them?
Why was this done?Did we try to go to a few other
lenders first?Was it declined for LTV?
Was it declined for this?Because when the files looked at,
that will add that clarity for thereproduction test.

(03:43):
So these are just little thingsthat I think all of us would
benefit.
And I know there's some brokers
out there doing an incredible job.
We have a team coming over and
they showed me what they do fortheir compliance.
And I was blown away by the levelof detail they have.
So there's really high standardsof people who are just excelling
at this incredibly.
And then there's people who are
just doing the bare minimum.

(04:04):
And the vibe I got from Fizra...
was that the bare minimum is nolonger going to be good enough.
They were very clear that theytargeted large brokerages first,
and now they're moving on to thesmall and medium -sized brokerage.
So obviously, they've been able tobuild out a team of staff around
all these changes and regulations,and now they will look to levy the

(04:26):
fines to pay for those staff.
So on your side of things, whether
your brokerage has strictguidelines in place already, or if
they're a little loosey -goosey,you can start to do this yourself,
just to ensure that you as anindividual are protected from any
kinds of fines or negativeoutcome.
So obviously, your basic stuff,complete packages, having some
sort of know your client form inthere, having that additional

(04:48):
disclosure, and then adding justsome additional notes about why
the decision making why thedecisions made were made.
And doing this is beneficial foryou if like five years, fast
forward five years, they'relooking at a file from today.
Are you going to remember that onetext message you got from the

(05:08):
client saying, hey, I really wantto go variable because rates are
coming way down?Probably not.
But if you have it documentedincluded in your notes, it's there
in case you need it.
So protect yourself from future
risk and start implementing someof these processes.
If you are on a team that's notdoing this, reach out to us.

(05:30):
We have a national compliancedepartment and we are very
cautious about compliance becauseit's make or break for the
industry.
And especially as more AI and
automation start coming in there,it's going to be very cut and dry
about how they're going to look atfiles, but also at the speed at
which they can start reviewing andauditing files.
So I think you'll start to see waymore audits.
Another piece here is if you'refeeling overwhelmed as a team lead

(05:53):
or as a brokerage owner, you canjoin the Tango Ontario family.
And we have all of this complianceand systems in place built out for
you.
So it takes that weight and that
cost off your plate.
But on an individual level, just
start adding a little bit moremeat to your compliance packages.
It will protect you in the longterm and it will be worth it.

(06:13):
Take care.