TMM - The NZ Mortgage Mag Issue 5 2015

Issue

05

2015

Speeding up turnaround times

What needs to change?

MARKETING PLANS AT YOUR FINGERTIPS

THE SECRETS OF SIMON MAULE

PUTTING YOUR CLIENTS IN COURSE

CONTENTS

16

UPFRONT One of the biggest issues for mortgage advisers at the moment is getting deals approved by banks.

Susan Edmunds looks at the problem and provides some tips to help you speed things up.

04 EDITORIAL

We may have won the Rugby World Cup but there are some things we can learn from across the ditch when it comes to the mortgage business.

06 NEWS

BNZ’s return to mortgage advising pays off; App fee hasn’t put off brokers; FSC cracks $1 billion milestone; Franchise model for Loan Market and more...

12 PEOPLE ON THE MOVE The latest appointments and people news.

26 Simon Maule

FEATURES

COLUMNS

14 HOUSING COMMENTARY

22 PAA NEWS

16 THE DEAL TURNAROUND

24 SALES AND MARKETING

Auckland’s housing market may be slowing, but what does that mean?

CONUNDRUM

Why brokers are struggling to get deals approved by banks and tips to help speed the process.

20 FAA REVIEW

What changes might lie ahead for mortgage advisers as a result of the Financial Advisers Act review?

26 MY BUSINESS: Simon Maule

Australian-mortgage broker Josh Barlett has some great ways to work with real estate agents.

Tomorrow’s talent - what is crucial in attracting new advisers.

A guide to start your marketing plan.

28 INTEREST RATES

BNZ outlines its views on inflation and interests rates.

30 LEGAL

TMM’s resident legal expert Jonathan Flaws explains why it’s important to educate borrowers.

32 INSURANCE

Steve Wright explores disability cover for stay-at-home parents and children.

34 INTELLIGENCE

EDITOR’S LETTER

Fielding benefits for advisers

A

s is often the case when we put together an issue of a magazine, various themes start to emerge, and that has been the case with this issue.

We have smashed the Australians in the Rugby World Cup but there are certainly some things we can learn from across the ditch when it comes to the mortgage business.

One of the catalysts for these thoughts come from a paper EY wrote for the Mortgage Finance Association of Australia – which is the equivalent of the Professional Advisers Association in New Zealand.

The paper, Observations on the value of mortgage broking, talks how the relationship between lenders and mortgage advisers has changed.

One of the observations EY made was that in the past lenders looked at brokers as a way to grow their loan book and to incentivise clients to switch lenders. Now they view the channel as an effective way of servicing clients “Lenders noted that they are moving to a partnership model with brokers whereby they work together to provide customers with the most appropriate proposition and focus on retention.”

It seems New Zealand is a little behind in this area and the idea of a partnership between

04

banks and third-party distribution is still in its infancy. The biggest change in recent times has been how Westpac has tried to reengineer its business to treat its three channels in an agnostic way.

With all the recent changes here it will be interesting to see how that model plays out.

BNZ also appears to be taking a similar approach to Westpac. Our interview with BNZ chief executive Anthony Healy (page 6) gives a useful insight into how the bank is finding the adviser market after a 12-year absence.

The EY report also had data which showed that consumers were interested in arranging other products through the adviser channel.

Again this is something NZFSG chairman Sam White talks about (page 8).

New Zealand mortgage advisers have been much better than their Australian counterparts in providing insurance advice to customers, and it is an area which still has significant growth potential.

At TMM we have expressed the view for a while now that mortgage advisers need to be up to speed with other credit products as it is a way of ring-fencing and securing your client base. Of course there is the option of working with other advisers on a referral basis.

Currently it feels like the New Zealand mortgage advisory industry is on a roll and than should only keep getting bigger and stronger. Advisers can benefit from this in the short-term but should also have one eye on the future and to think about how they can grow and solidify their business operations.

PUBLISHER: Philip Macalister SENIOR WRITERS: Susan Edmunds, Miriam Bell, Dana Kinita SUB EDITOR: Phil Campbell CONTRIBUTORS: Paul Watkins Steve Wright Jonathan Flaws Kymberly Martin GRAPHIC DESIGN: Jonathan Harding ADVERTISING SALES: Freephone: 0800 345 675 sales@tarawera.co.nz SUBSCRIPTIONS: Dianne Gordon Phone 0800 345 675 HEAD OFFICE: 1448A Hinemoa St, Rotorua PO Box 2011, Rotorua Phone: 07-349 1920 Fax: 07-349 1926 tmm_editor@tarawera.co.nz

The NZ Mortgage Mag is published

by Tarawera Publishing Ltd (TPL) in conjunction with the Professional Advisers Association. TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and ASSET magazine. All contents of The NZ Mortgage Mag are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.

The NZ Mortgage Mag welcomes opinions from all readers on its editorial. If you would like to comment on articles, columns, or regularly appearing pieces in The NZ Mortgage Mag, or on other issues, please send your comments to: tmm_editor@tarawera.co.nz

Philip Macalister Publisher

GIVE YOUR CUSTOMERS PEACE OF MIND WITH AIA REAL HEALTH The cost of surgical and medical treatments available privately in New Zealand are rising, and new cancer treatment medicines are being developed.

Future proof your clients health challenges by ensuring they have access to the next generation of immunotherapy cancer drugs.

$500,000 Limit

Surgical. Medical. Cancer.

REAL Products. REAL Benefits.

Grow your business today with AIA REAL Health. For more information contact your BDM or phone 0800 800 242.

Terms, conditions and usual, customary and reasonable rules apply. Please refer to the policy wordings for full details.

aia.co.nz

NEWS

Market adviser return pays off for BNZ there is no pressure on BNZ for a fast approval.

“We are tailoring turnaround times to [individual] brokers,” Duarte says.

In addition to embracing third-party distribution, BNZ has put on 30 new mobile mortgage managers, mainly in Auckland where the bank has the smallest physical network of all the big banks.

First billion-dollar profit

Anthony Healy

B

NZ says its re-entry to the mortgage adviser market after a 12-year absence has gone better than expected with some unexpected benefits.

While the bank has not disclosed how much business it has written in the first four months of using brokers it is around the $180 million to $200 million mark.

The bank has disclosed about 0.4% of its home loans has come through thirdparty distribution.

BNZ chief executive Anthony Healy confirmed TMM’s figures were about right.

“Yes, that’s a pretty good estimate,” Healy said.

The bank has an exclusive agreement with the NZ Financial Services Group, which includes Loan Market. Eighty of the original 107 advisers who were accredited in the first intake have been writing business for BNZ. In the past couple of weeks a further 90 advisers have been accredited. The roll-out plan is to have 350 by February next year.

All accredited advisers are in either Auckland or Wellington.

Healy said one of the unexpected, or unanticipated, benefits had been the “insights

06

“We’ve made bold strategic decisions and investments which will set us up for success in future years..”

– Anthony Healy

you get on the home loan market because brokers give you direct real-time feedback.

They don’t hold back.”

He says the decision to get back into the market “is the right move and I know it is going to pay off for us”.

BNZ chief financial officer Adrienne Duarte said applications were running at five times more than expected and 70% of the customers were new to bank.

She said the bank aims to turn around applications in two days, but some advisers don’t want instant decisions. While some do, others want approvals from other banks and in these cases it can take up to two weeks so

BNZ has, for the first time, reported an annual profit of more than $1 billion. It says statutory net profit was $1.04 billion for the 12 months to September 30.

Healy said this was made in a “testing and competitive environment” and was underpinned by strong performances in its three core businesses; SME, housing and markets.

He says the year has been one of “building foundations – we’ve made bold strategic decisions and investments which will set us up for success in future years. Returning to the broker market was one of these decisions.”

Others were the launch of the BNZ Advantage card and rewards programme, investments in core technology and digital.

He says BNZ has the biggest digital team of all the banks and one of the biggest in New Zealand.

Healy says it is “inevitable” that banking will face digital disruption challenges to their businesses and he wanted BNZ to be capable of dealing with the changes.

During the year net interest income increased 7.5%, driven by growth in business and housing volumes, and an increase in net interest margin (NIM). NIM increased five basis points to 2.39% for the year, driven by lower funding costs.

Healy said that was partially offset by shifts in the bank’s portfolio mix from floating to fixed rate loans.

The proportion of variable rate loans has fallen from 25.5% in the March quarter to 23.1% in September, while fixed rate lending has risen 2.7% to account for 73.5% of loans at September 30.

BNZ has pledged $1 billion of lending to support housing growth in Auckland, including a range of initiatives targeted at the delivery of affordable housing solutions. ✚

App fee hasn’t put off brokers

– Adrienne Church

S

pecialist lender RESIMAC says its decision to charge mortgage advisers a fee for lodging an application has been well-received by the market.

RESIMAC started charging a $475 fee to lodge an application. That, however, can be avoided if the deal is lodged online and will be waived for its platinum brokers. This group of people have conversion rates of more than 50% and also get other benefits from RESIMAC. General manager Adrienne Church says if a loan is settled then the fee will be refunded at settlement.

“We are here to be a niche lender, not to do the cheapest rates which we just can’t compete in,” Church says.

While she was worried about how the fee would be received by the market, she said there has been very little backlash.

The fee was RESIMAC’s response to the issue of slow application turnaround times. Brokers had been submitting deals to RESIMAC as an

“We are here to be a niche lender, not to do the cheapest rates which we just can’t compete in.”

alternative to banks.

Church says RESIMAC is now getting the deals it should get, rather than bank deals.

Further, the company hadn’t seen any fall off in business.

“They have gone up,” she says.

Also there has been a big shift from applications coming in over the fax to applications now being lodged electronically. Before the change 80%-85% of applications came via fax, now 80-85% are submitted electronically.

Church says the increase in settlements has been huge. RESIMAC’s conversion rates in New Zealand were around 15%-20% while in Australia they run at 60%. Now the New Zealand rate is much closer to what the company experiences in Australia.

RESIMAC’s current niches are: ➤ Prime Products: 90% LVR Prime Standard (for the Platinum Advisers), 80% Investment loans or 70% Prime Low Doc. ➤ Specialist Products: 80% LVR Specialist Standard and Specialist Low Doc. This fee will not be applicable if the deal is submitted through RESIMAC’s online channels Quick Quote or RESiQ and it will be refundable on settlement. ✚

07

NEWS

Brokers on $1b loans roll

Briefs Headline: ASB awards Ajay Ajay Kumar’s mortgage broking firm Global Financial Services (GFS) has been recognised for writing the most business for ASB in the past year.

GFS has been ASB’s biggest writer for two consecutive years now.

Kumar said GFS had experienced 65% lending growth last year and 80% this year and it would write about $800 million in loans this year.

Kumar said his firm's successes were especially notable as GFS only had one office. "Other advisers with multiple offices have more capacity to do more,” Kumar says. “We are one building, one branch."

Bolton squirrels into new market John Bolton’s Squirrel Money is the second peer-to-peer lender to open for business in New Zealand.

Currently the FMA has issued four P2P licences but LendMe and the Lending Crowd are yet to open for business.

Squirrel is focussing on the personal lending market and rates are determined by a contestable bidding system where the company matches up investors and borrowers.

The site is offering indicative rates for investors of two years at 7%, three years at 7.5% and five at 8%.

CGT officially off the table The Labour Party has officially let go of its controversial capital gains tax, which it campaigned on in the last two elections.

Delegates at the Labour Party’s annual conference, earlier this month, approved the elimination of the proposed tax from the Party’s policy platform.

Labour Party leader Andrew Little said the party would not campaign on a capital gains tax in the 2017 election.

Nor would a Labour government introduce a capital gains tax in its first term, should it win in 2017.

Little did not rule out a return to the policy in future.

08

I

n the three years since the New Zealand Financial Services Group was established it has grown its membership by 41% and doubled the volume of home loans it has written.

It has just clocked up its fourth consecutive month of settling more than $1 billion of loans.

Chairman Sam White says not a lot of time has been spent on celebrating cracking the billion-dollar milestone. While it is a good achievement it has been achieved by hard work.

“If we ever do start patting ourselves on the back I getting a bit nervous,” White says.

White says the success of the group has been brought about because it has a “very clear view the broker is the customer”.

That has been supported by the tools and software it offers including its CRM which is something “we want to keep investing harder in”.

While the group has shown considerable growth there are still more opportunities in the market, White says, especially around insurance and other products.

The group has seen its annual premium

Insurance API Members Loans written

income rise from $5.4 million three years ago to $12 million. White would like, however, to see insurance making up about 35-40% of the group’s business.

He believes insurance will be a big driver of the industry in the future.

“We still need to get better at making sure that customers are protected when they take out debt. We have got to be better at that as a group and industry.”

The other trend he predicts is that mortgage advisers may start offering such other products as car finance, asset lends and commercial lending.

While mortgage adviser market share in New Zealand sits around the 30%-35% mark it will grow to more than 50% in the decade, “if not sooner,” he predicts.

That is driven by many factors including the increased complexity of lending rules such as LVR restrictions.

“It’s inevitable brokers will go to above 50% in next decade, maybe much faster especially with regulation and LVR restrictions.”

White says: “All of us need to keep evolving to meet the needs of customers...if we don’t meet them others will.” ✚

2013

2014

2015

$5.4m

$7.75m

$12m

553

646

782

$4.25b

$5.5b

$8.75b

Top gong to Otago

M

ortgage Link handed out awards at its 21st annual conference in Queenstown earlier this month.

The top Mortgage Link Office award, based on volume of business, went to the Manawatu team based in Palmerston North.

The top individual adviser award, (volume

of business) was awarded to Michael Walters from the Mortgage Link Otago Office.

The Mortgage Link Top individual adviser of the year award (based on various criteria across an Adviser business) was awarded to Judy Steiner from the Mortgage Link Hawkes Bay office. She received multiple awards for outstanding production in both individual and regional office categories. ✚

Loan Market moves to franchise model

N

ZFSG is currently moving to a franchise model for all its Loan Market advisers. Currently they are licence-holders and moving them to a franchise model has a number of benefits, Sam White says.

It brings the group into line with how it runs its Australian Loan Market business but it also makes it “easier to define who we are”.

When the change was made in Australia, all but a Sam White handful of advisers

made the switch.

White says it makes it easier for advisers if they want to sell their business for whatever reason.

Loan Market doesn’t have restraint of trade clauses in its agreement and will only withhold trial commission in cases of fraud.

White does not believe in restraint of trade clauses: “I don’t believe in them. I think it’s a form of slavery which is not right.

He says these sorts of clauses may have made sense in the past but his view is that he has to build a business with a strong customer value proposition.

“If people don’t choose to join me then I don’t have a business,” he says.

“I want to run a business with volunteers not conscripts.” ✚

Devine in Queensland state

F

ormer Lifetime Financial Services group business manager Vicky Devine has left New Zealand to take up a role with the Mortgage and Finance Association of Australia (MFAA).

She is the association’s new Queensland​ Business Development Manager, based in Brisbane.

She says a key difference between the broker markets in both countries is that in Australia advisers have to belong to an accredited association and most in the mortgage space belong to the MFAA. This give the association much stronger engagement with its members than is the case with associations in New Zealand.

In New Zealand mortgage advisers have been much better at protecting their clients and selling life insurance.

She says the MFAA’s priority is to futureproof the industry for the benefit of all members. "This can only be achieved following a detailed understanding of our industry, stakeholders, markets and technology disruptors. Suffice to say, the MFAA is ‘driving conversations that bring the industry together’."

One of her initiatives is to put on a

conference next year which looks at business opportunities in the Asia Pacific region.

"In a mature market, top-line growth for finance broker businesses becomes more Vicky Devine challenging and aside from maximising opportunities within our own market it is important to look to other markets for continued growth. The Asia-Pacific region provides just that.

"The MFAA is currently collaborating with Singapore and New Zealand finance broker associations to deliver an industry leading event in June 2016.

"It will be of interest to those currently working in the Asia-Pacific region, as well as those who have an interest to expand their business into new markets including lenders, finance brokers and service providers." ✚

09

NEWS

Brokers write more ANZ business

M

ortgage advisers are accounting for a greater proportion ANZ’s home loans sold in the past year.

The bank says mortgage advisers accounted for 41% of home loans in the 12 months to September 30 compared to 35% in the previous year.

The growth has come mainly at the expense of the bank’s branch network where flows fell from 53% to 48%. Mobile mortgage managers accounted for 11% of loans, down 1% on 2014.

During the past year ANZ has been particularly aggressive in the mortgage adviser space offering bonus upfront commission as an alternative to Westpac’s recently re-introduced trail commission model.

The bank’s figures also show ANZ’s overall market share grew slightly from 31% to 31.6%.

It has also cemented the top spot for share of new home loans in New Zealand’s two biggest cities, Auckland and Christchurch.

In Auckland its share of new home loans has grown from 30% up 2013 to 33%, while its “leading peer bank” (presumably ASB) has fallen from 27% to 24% in that period.

There is a similar story in Christchurch where its share of new home loans has risen from 27% to 29% the two-year period and its leading peer bank has remained static on 19%.

010

“The average loan size at origination showed a marked increase rising nearly 18% from $260,000 t0 $306,000, but the average LVR was 64%.”

ANZ has increased the amount of investor loans it has done in the past year with the number rising from 24% to 26% and owneroccupied loans fell 2% to 74%.

A recent survey of property investors showed that limits on high loan-to-value lending haven’t had any impact on their investment strategy over the past 12 months.

Those who have changed their strategy as a result of the limits on high LVR lending are more likely to have held off doing things, rather than done things.

It also showed most investors say that if the high loan-to-value limits were reduced or removed it would not affect their strategy in the six months immediately following the

change, or thereafter.

However, when compared to the previous year’s survey, a higher proportion of investors said they would be more likely to buy an investment property, particularly after the initial six months following the change.

Overall, the average loan size at origination showed a marked increase rising nearly 18% from $260,000 t0 $306,000, but the average LVR was 64%.

The bank’s annual profit rose 3.5% to a new record high during the year. It reported net profit after tax was up $60 million to $1.771 billion for the year to September 30 However, hedging and insurance policy asset valuation gains helped drive the increase.

For the financial year ANZ NZ's cash profit was up just $5 million, to $1.687 billion.

Hedging gains and insurance policy asset valuation gains helped boost net profit after tax, with the two up a combined $55 million.

Operating income increased 3% to $3.88 billion and operating expenses rose 1% to $1.47 billion. The bank's credit impairment charge rose to $76 million from a write-back of $9 million in the September 2014 year.

Net loans and advances increased $8.89 billion, or 8.4%, to almost $114.4 billion, and customer deposits rose $8.5 billion, or 11.2%, to nearly $84.9 billion. ✚

Mobile mortgage planning tool

K

epa has just released its new mortgage planner tool to help its members better run their businesses.

Kepa’s head of adviser IT and technology Kerry Ballantyne said it was a state of the art software tool, which is designed to make mortgage sourcing and processing easy in today’s competitive marketplace.

It uses the IRESS platform and is cloudbased and device agnostic so it can be used on any device, anywhere, at any time, he said.

“For mortgage advisers, particularly those who operate in a highly mobile way, it means that everything you need is in one place.

“This helps to support a paperless, compliance driven process.”

The Mortgage Planner is a product search and comparison tool and features a quick loan qualifier and amortisation calculators.

Ballantyne said it allows for scenario-based modelling, which enables tailored advice

across multiple lenders and products.

While the tool was developed in the UK, it was done so specifically for the New Zealand market and is a New Zealand first.

The Mortgage Planner is an offering for Kepa members, Ballantyne said.

It was launched at the Kepa conference earlier this month. ✚

011

PEOPLE

PEOPLE ON THE MOVE

Got a new appointment you would like to tell advisers about? Email details and a pic to tmm_editor@tarawera.co.nz

knowledge and understanding of the New Zealand property market. Awarded the Top Lender during his time at BNZ, Miao prides himself on being approachable and easy to work with.

Based in Auckland, William provides advice on home loan lending, business lending, commercial lending, property finance, and construction lending. William is fluent in Mandarin and English.

MortgageLink adds people

Glenn Stevenson

Sarah Berry

Changes at ANZ

ANZ Bank has appointed Glenn Stevenson as the new head of mortgages, moving from his previous role with the bank as head of deposits and bonus bonds.

He stepped into the role in early October when the former head of mortgages of nearly four years, Sarah Berry, became head of products.

He brings more than 20 years of experience in banking and financial services to the role, particularly in funds management and core banking.

New faces at Mortgage Express

Joining the company is Cherie Campbell as a mortgage and insurance adviser based in Christchurch.

She has a strong financial background, with more than 12 years' lending experience

012

Cherie Campbell

Over the past few months a number of new advisers have joined Mortgage Link.

Mortgage Link welcomes Heather Samu, Clive Brumby, Kathy Guo, Andy Kim, Alicia Li, Feng Wei, Stanley Zhou, Jack Liu, Jenny Liu, April Li, Phil Daniels, Colin Deng and Vinnie Maniktala who are all based in Auckland and surrounds.

Rob Jefferies and Fiona Crampton joined the group and are based in Dunedin and Soon Kim and Rebecca Taiaroa are in Christchurch/Rangiora.

William Miao and eight years in financial roles in both the private and state sector. More recently, she spent two years as a home loan specialist for a major bank.

Sarah Johnston, general manager of Mortgage Express said she was well known for exceeding client’s expectations. “[She has] the ability to make them feel at ease as she takes the stress out of the whole home buying process.”

Along with running a family business, Campbell has experience in managing a number of her own investment properties.

Also joining the team of advisers is William Miao.

He has had nearly 10 years’ experience in the banking industry, including six years at ASB as an authorised financial adviser (AFA) specialising in wealth management, and a further three years at BNZ as a mobile mortgage manager.

Miao is highly regarded for his thorough

Huia Manuel

RESIMAC’s new BDMs

RESIMAC Home Loans has two new business development managers. The first is Huia Manuel.

She relocated back to New Zealand from Adelaide, where she was a business development manager for BankSA which is a division of Westpac.

She has more than 10 years’ experience in bank starting as a branch manager, mobile manager and then a residential lending manager. Before starting in banking Manuel was self-employed, she owned and operated

administration.

On her return to New Zealand she took up a position with Bluestone Mortgages.

After Bluestone, she had a stint with Toyota Financial Service.

RESIMAC also has a new underwriter who a lot of the advisers may already know, Angela Ferguson joined the firm from Kiwibank, and a new loan-coordinator Michelle Watson who joins RESIMAC from ASB Bank.

Heath wants it made clear that he did not set up the new business James Heath Mortgages Ltd. That was done by his de-facto partner Gina Smith. Smith was the sole shareholder and director.

“I have not tried to set up a new business whether this be a limited liability company, sole trader or partnership. I was aware of my obligations under the franchise agreement.” ✚

Coup for Ray White

Tracey Warner a café in the Adelaide Hills.

Manual’s passion and strengths are in her customer service focus, helping people and helping brokers to grow their business, general manager Adrienne Church says. “She will focus on encouraging use of technology for straight through processing and better outcomes for broker and customer.”

Tracey Warner, is the other new business development manager. She has been with RESIMAC for more than 12 months, mainly in the operations/sales support team.

Warner started out in mortgages with a broker specialising in investment properties in the Gold Coast back in 2001, then moved on to Liberty in 2002 as a Loan Coordinator.

After a few years with Liberty, she took the leap as all young New Zealanders do and moved to London. Whilst in London, she had a range of roles from working in share trading, to commercial insurance and systems

Leaving NZ Financial Services Group (NZFSG) is Cameron Marcroft to become an adviser working in the Ray White Remeura office in partnership with the principal Megan Jaffe.

"It a real shame to lose Cam as he has assisted a great deal in the growth of NZFSG in the past two years," NZFSG director Bruce Patten said.

"He will be a hard person to replace, however we expect he will be one of our leading advisers in the next few years given his experience. It’s great to see that people in our business see the opportunities open to them and it is a real endorsement of the strength of the branded side of our business."

MPM case due for court in Feb

The group of former Mike Pero Mortgage advisers who are seeking to overturn the restraint of trade clauses are due to have their case heard from February 29 next year.

In the previous issue of TMM we reported on a separate, but related case between MPM and Christchurch broker .

In that case Justice Moore granted an injunction against Heath preventing him from starting, or continuing, any business in competition with MPM until the restraint of trade case was heard.

While the court granted the injunction

NEW

APPOINTMENT? Got a new appointment you would like to tell advisers about? Email details and a pic to tmm_editor@ tarawera.co.nz

013

HOUSING COMMENTARY

By Miriam Bell

On a knife’s

edge

Evidence is growing that Auckland’s housing market might be slowing.

But opinion is divided over what that might mean, reports Miriam Bell.

Auckland has turned Speaking at the NZ Property Investor Federation conference in mid-October, Core Logic director of research Jonno Ingerson said Auckland had turned. His call was based on bank valuation activity and property listings.

Sales activity tends to follow bank valuation activity almost perfectly, he said. Bank valuations have decreased in Auckland – to the point that it is slower than elsewhere in the country.

At the same time, the number of property listings has slowed when they should be picking up on a seasonal basis. “Listings should be screaming up at this time of the year as we come into Christmas,” Ingerson said. “The number of new listings is starting to back off and that’s anti-seasonal.”

Ingerson said the turnaround in the Auckland market was probably driven by China’s slowdown along with the Government’s tax changes and the imminent LVR changes.

However, the city’s supply shortage means there is no quick fix to the price pressures in the market.

This means that Aucklanders will continue to buy in such areas as Hamilton and Tauranga and sales activity in the regions will continue to strengthen. Despite this, he doesn’t think Auckland’s values are likely to show strong increases for some time.

Rising values

A

nticipation has been stalking the Auckland market in recent weeks. An expert’s bold call that the market has finally turned has left observers eagerly awaiting the latest round of data, keen to see whether it backed up the call.

While each twist and turn of the market was already being followed with fascination,

014

speculation is now on a knife’s edge.

Dinner party conversations and media reports alike revolve around the question of what exactly is going on with Auckland’s house prices.

Now, the data is starting to flow. Early indications are that the Super City’s skyrocketing price growth has started to slow, yet the jury remains unable to reach a verdict.

First out of the blocks was the Quotable Values (QV) data which ran counter to Ingerson’s call. It showed that Auckland’s values have continued on their upward march in October.

The average residential property value in the Auckland region is now $918,153 - up from $896,676 in September. SuperCity values have increased 24.4% year on year, 7.3% over the past three months and they are now 68.0% higher than the 2007 market peak.

QV national spokeswoman Andrea Rush said high net migration and record low interest rates were fuelling the ongoing rises.

“Anecdotal evidence suggests the market may have cooled somewhat in anticipation of regulatory measures being introduced by the Government and the Reserve Bank,” Rush says.

“But there is still no sign that this is having any impact on rising values in the region.”

Changing trends However, the latest Barfoot & Thompson data told a different – and more confused – story.

It showed that Auckland’s average sale price increased by 0.5% to $840,402 in October, from $836,275 in September. At the same

time, Auckland’s median price declined by 1.3% to $780,000 in October, from $790,000 in September.

Barfoot & Thompson managing director Peter Thompson said these figures made for mixed messages in terms of price movements. “What is clear is that the rate of price rise that occurred in September at the start of the spring season has not been sustained,” Thompson said.

While market trends have changed, in his view, it is too soon to tell whether the latest Reserve Bank LVR and Government tax initiatives have permanently halted the rise in Auckland house prices.

Sales, new listings and auction clearance rates were all down, while the stock on market at month’s end was up. October’s sales numbers were solid, but they were down by 21.4% on those for September and were the lowest in any month this year since February.

“At present, the market is balanced and sales numbers and prices between now and Christmas will determine where prices go in the new year,” Thompson said.

Regulatory impact Westpac senior economist Michael Gordon thinks the Barfoot & Thompson data backs up anecdotes that Auckland’s market has slowed since the Government’s new tax measures came into force. “This slowdown is not unexpected, and reinforces the sense that some of the heat in the Auckland market in recent months is due to buyers getting in ahead of the new regulations,” Gordon says.

He noted that sales were down to around the levels seen before the regulations were announced in May, while the fall in new listings suggested property buyers recognised the new regulations provided a window of opportunity which has now closed.

But there was no clear impact on the trend in house prices, with the average sale price rising and the median price dipping.

Gordon said this wasn’t surprising as house prices tend to follow the sales trend with a lag of around three months. “One major reason for this is that we don't observe the prices of houses that don't sell – in a slowing market, it can take a while for sellers to scale back their expectations and accept a lower offer.”

In his view, house sales were likely to remain subdued over the next few months, with prices likely to cool by early next year. “At this stage, it's difficult to tell whether the new regulations will have a lasting impact on the Auckland market, or to what degree they have simply brought demand forward.”

Temporary slowdown Several other industry commentators agree the Auckland market has slowed – but don’t believe the slower pace will last.

City Sales managing director Martin Dunne said the market has turned and there is now

some breathing space. “I don’t think prices will drop dramatically,” Dunne says. “But their growth will flatten out for a short period. And then they will start creeping up again.”

Kris Pedersen, from Kris Pedersen Mortgages, said though the pace of Auckland’s market is off the boil, he too doesn’t think the slowdown will last.

“The combination of low interest rates, high demand due to population growth and migration, and the ongoing supply shortage is just too strong a market driver. Auckland’s market might be a bit sluggish till the end of the year and then it will probably pick up again in the first quarter of next year.”

The latest realestate.co.nz data also adds weight to the theory that Auckland’s market has turned. It showed that the city’s average asking price dropped back to $832,713, from September’s record high of $851,531.

REINZ SALES: UP

Sales volumes were up nationwide in September..

INTEREST RATES: DOWN Interest rates remain at record lows.

OCR: DOWN

The Reserve Bank kept the OCR at 2.75% in October.

Out of Auckland Meanwhile, the QV data showed that nationwide residential property values were also up in October.

The average value nationwide is now $552,345 – up from $542,277 in September. This is an increase of 14.0% over the past year and is the fastest rate of increase since March 2006.

Values rose 4.7% over the past three months, which leaves them 33.3% above the 2007 peak.

Rush said that many upper North island centres including Auckland, Tauranga, Hamilton, the Waikato and Hauraki Districts, Whangarei and Rotorua were continuing to show significant increases in values.

For example, in Hamilton, the average value is now $429,829. This is an increase of 10.2% over the past three months and 18.2% year on year, which leaves values 18.9% higher than in 2007.

The Wellington and Dunedin markets were also now starting to show a definite upward tick, while the Christchurch market is relatively flat in comparison, Rush said. “There continues to be a shortage of listings in some areas while sales activity and demand has picked up in many parts of the country which is usual for the spring season.”

Regional growth The double-digit house price inflation in Hamilton, Waikato and Tauranga was likely to continue as investors look out of Auckland, Infometrics economist Mieke Welvaert said.

“With prohibitively high house prices in Auckland, more people have sought housing in areas nearby, while the introduction of investortargeted regulations in Auckland is likely to push investors to buy up in areas neighbouring Auckland,” Welvaert says.

She said that, as Auckland accounts for almost 40% of national sales, the new LVR regulations should dampen house price growth in coming months. “But accelerating growth in regions nearby will limit this effect.” ✚

IMMIGRATION: UP

Migration hit another record high in October, according to Statistics NZ’s latest data. .

BUILDING CONSENTS: UP

Building consents issued have fallen recently. Statistics NZ says, however, the nationwide trend is still on the rise, particularly in Auckland.

MORTGAGE APPROVALS: UP

Bank lending data remains strong.

RENTS: NEUTRAL

Rents remain flat around the country – even in Auckland where rents have now held steady for over a month.

015

016

The deal turnaround conundrum

One of the biggest issues for mortgage advisers at the moment is getting deals approved by banks. Susan Edmunds looks at the problem and provides some tips to help you speed things up.

B

rokers are struggling to get deals done as banks drag their feet on issuing home loan approvals.

Across the country, advisers are complaining that turnaround times for applications have blown out and in some cases deals are going right down to the wire, leaving clients with only hours to spare before the first bids are called at an auction.

Broker John Bolton, of Squirrel, Auckland’s largest mortgage brokerage by volume, said Reserve Bank changes and other law changes, such as the introduction of the Responsible Lending Code, were significantly increasing paperwork at the same time as the Auckland property market was much busier.

“It’s clogging us up and the banks and completely messing up processing times.

What used to take two or three days is now taking well over a week and sometimes two weeks. Auctions don’t help and everything is in a rush,” he said.

David Windler, director of The Mortgage Supply Co, agreed turnaround times were a significant problem. “All the lenders are providing service delivery that they would be keen to improve upon but quite simply they do not seem to have the resources to make a difference.”

017

He said the banks seemed overwhelmed by the volume of applications they were receiving.

What might have taken three days previously now could take up to three weeks to process.

But he said the banks had had a chance to improve their resource and staff levels to prepare for the increase in activity and it should not have come as a surprise. “This has been looming for close to 12 months now. It is a daily worry that things won’t get back in time. A daily concern is can we beat the clock?”

Bolton said he had dealt with cases where the approval had come in hours before an auction.

The increase in the number of properties being sold under the hammer is partly to blame.

Many banks are asking brokers to advise them of each property a buyer plans to bid on at auction, so that they can confirm that the property is acceptable.

That means that the bank’s assessment team has to take the time to look at a property, approve it, then run the risk of the buyer missing out and having to start the process all over again for the next property they want to bid on.

A component of the problem is the looming Reserve Bank changes to loan-to-value restrictions. From November 1, landlords in Auckland will need 30% equity to get a loan.

East Auckland broker Karen Tatterson, of Loan Market, said there had been a rush of people trying to enter the market before that date. “There are a lot of investors trying to get pre-approvals and the banks are not managing the process.”

She said brokers were not entirely blameless, themselves. “Some people put ‘urgent’ on deals that are not necessarily urgent and a lot of brokers do multibank their deals, sending applications to three or four banks at the same time and that loads up the processing.”

So what can brokers do to help get deals approved faster?

Windler said getting a quicker result required mortgage brokers to develop a solid working relationship with the staff within a bank.

“We select lenders very carefully and go to places where we have developed a personal relationship and are trusted a lot more and can ask for a favour,” he said.

Windler said the pressure on approval times made it even more important for advisers to make sure every application was perfectly put together.

He said: “They can’t afford to miss any information out or it will go to the bottom of the queue. The pressure on high-volume advisers is massive because of this at the moment. I’m running two PAs now and our volumes are at record levels as it is. It used to be the case that you could sit on something a bit too long and pick up the phone and persuade the lender to do you a favour and make up for it but you can’t do that anymore.”

Brokers had to carefully choose where to send their deals, he said, and should prioritise the lenders they knew they could hear back from quickly. “Turnaround is now the number one criteria outside ‘will they approve it?’”

Another possible solution to the problem

018

❝ Some people

put ‘urgent’ on deals that are not necessarily urgent and a lot of brokers do multibank their deals, sending applications to three or four banks at the same time and that loads up the processing.❞ -John Bolton

is the development of digital lodgement solutions, such as Westpac’s, which speed up the approval process.

Windler said he would recommend it to all advisers and any other bank that followed suit would be making a smart move.

Westpac spokeswoman Hilary Marett said: “With record low interest rates creating a highly competitive market there have been high application volumes across all channels including brokers. Working with them to understand their application priorities combined with regular reviews of our resourcing has led to improved turnaround times which are currently the best they have been for several months.”

The bank’s former director of third-party banking Kylie Kneale issued told advisers that while turnaround times were not what the bank would like, the delay was volume driven.

She said manual applications had been taking 10 days to assess while digital applications had a delay of three to four days.

Kneale said advisers could speed up the process by sending all the relevant information with the application, sending one email with all conditions, using Westpac’s mortgage adviser portal to check on the status of an application rather than getting in touch with bank staff directly, ensuring all forms were fully completed, and asking for pre-pricing when they knew clients were price-sensitive.

She said it would help if brokers provided clear customer expectations in regards to price and loan term when possible.

She said the bank’s lending guide should be used to answer policy questions and the “Chatter” function in Westpac’s Mortgage Adviser Portal could be used to ask questions of an adviser’s business development manager.

Adrienne Church, of RESIMAC, said good use of technology would make a big difference.

In Australia, 90% of RESIMAC’s applications are submitted online but in New Zealand some brokers still fax their deals through.

She said using the tools available would help brokers have more confidence in the success of their deals too because they would know the servicing calculations were right and that the deal would meet criteria.

Kneale urged brokers not to send deals out to multiple lenders at once: “Please don’t farm your deals to multiple banks!”

Church said that was a key problem. She said outside RESIMAC’s 30 “platinum” brokers, just 20% of broker applications would convert into actual loans, compared to 70% in Australia.

She said she had been told banks’ conversion rates were about 35% to 40%. “That means only one deal out of every three or four received is being converted compared to 60% or 70% in Australia.”

She said it was not uncommon for RESIMAC receive a deal that had also been offered to all the major banks at the same time.

Church said it was hard for her to compete on rates.

“If deals come in and I can see on Veda they’ve been sent to multiple providers I will ring and say I’m not doing it…They’re shopping around partly because they don’t have visibility as to what they are actually going to get [from the banks] but with me they do because the carded rate is the rate they get. But with a bank they might get 20bps off.”

She said it was brokers’ job to get the best rate they could for their clients but they needed to be aware of the consequences of that.

ASB admitted there were delays.

General manager business banking and retail specialist services Ian Boyce said there were a number of reasons.

“The first is the greater volume of business from this segment. We have also noted a substantial increase of re-work where customers are unable to secure a property at auction,

❝ The first is the

greater volume of business from this segment. We have also noted a substantial increase of re-work where customers are unable to secure a property at auction.❞

meet the demand for our competitive offerings.”

ANZ said high-volume periods could push out processing times and when an urgent decision was required brokers were advised to get in touch with their local business development manager or the ANZ assessment team to make them aware of the situation. “Where possible these applications can be prioritised to meet specific deadlines.”

But the brokers said direct channels seemed to receive approvals faster than applications submitted via advisers.

Windler said: “In many cases direct channels would be beating advisers and third-party channels hands down every time. But I don’t think it’s deliberate.”

Tatterson said she had one client who had a preapproval, purchased through a private treaty arrangement and sent the sale and purchase agreement into the bank on the Monday.

The approval was still not back by Friday, so the client went into the branch to talk to staff directly. The approval was signed off by the following Monday.

“It’s not a bank thing, it’s an adviser unit thing,” she said. “Clients are going to a bank and getting an approval in 24 hours and we can’t do that. It makes us look like a bunch of Charlie horses.”

Windler said the banks genuinely seemed to be working to deal with the backlog. “The constant feedback we get is that they are doing the best they can, they are working overtime and we’re getting approvals through as the weekend. We have a team meeting every Monday and I keep stressing, control what you can control. Put in high quality, fullydocumented applications and pick the right lender to send it to. But ultimately you can’t control the turnaround, which is frustrating.”

Tatterson said she too had been told they

TIPS TO SPEED UP APPROVALS ➤ Ensure customer needs are clearly identified through the fact find. ➤ Review customer account opening, AML and borrowing entity through the fact find, so there are no delays with settlement dates. ➤ Submit applications that best suit the purpose and the customer need, as opposed to multiple submissions to a number of different lender at the same time ➤ Ensure information is provided in full, with clear explanation for any exceptions, to avoid delays in the approval process while waiting for additional information. ➤ Ensure price expectations are clearly understood at the start so the broker is able to discuss this with the lender up front, as opposed to a generic “best price” request. ➤ Conversion ratios are an integral part of the broker business ➤ Utilise the support of the head / aggregation group to provide guidance and clarity when a broker has a situation that is unknown.

were working to improve turnaround times. “I don’t think they have to manpower to cope with the influx. It’s really difficult when clients are trying to get out there and purchase properties as soon as they can.” ✚

-Adrienne Church

which means that they need to have their application re-worked to pre-qualify for their position for subsequent auctions” He said many brokers provided wellpresented applications that enabled their turnaround to be prioritised.

“Meanwhile, we keep an eye on aspects to the application process that can be improved at our end and continue to carefully review the staff numbers through our broker centres.”

BNZ national manager of sales development Matt Nauer said: “We are in month four of being back in the broker market, so it's early days. The broker unit is more successful than forecast, so the unexpected yet welcome demand has resulted in some delays on our initially proposed turnaround times. We have worked hard on improving response times by implementing process improvements and hiring more staff to

019

FAA Review LEGAL

By Susan Edmunds

The days of being an RFA look numbered An options paper on the review of the Financial Advisers Act is due out soon. To get a feel for what changes people and organisations are seeking TMM has pooled together top comments could impact mortgage advisers.

Q

UESTION: Are the current adviser designations working, what about the delineation between category one and two products?

ANSWERS:

Massey University: The term “registered financial adviser” is misleading for consumers.

We have doubts about the need for a separate QFE regulation arrangement. All QFE staff giving advice should meet normal AFA regulations. Non-AFAs within QFEs should not give advice. RFA advisers could then be renamed as “brokers” or “product salespeople”. Given that RFAs currently only have to register and have no inherent education, there is no real need for a regulated term, as they are similar to used car salespeople. RFAs could be regulated as strict product sellers under the FSA Act. Kepa: Many of the products currently in category two are actually quite complex. At the very least, products such as life insurance, mortgage broking and fire and general broking should be considered as complex as existing category one products.

020

Westpac: The general public believes the term RFA means the holder has completed education or gained experience in order to hold the title. However, this term simply means the holder has passed a credit check, is a member of an approved disputes resolution scheme and is registered on the Financial Services Providers Register. Westpac does not have a view on alternative terms but some possibilities are mortgage adviser and insurance adviser.

Financial Services Council: The term “registered financial adviser” does not give the consumer an accurate understanding of what these advisers are allowed to provide them advice about and the level of competence they have to do so.

PAA: While it is appropriate to tailor the conduct requirements to different advice needs, we recommend this distinction should be made at a conduct standards level within the Code of Conduct, not as a basis for categorising advisers into different types.

ANZ: Customers are frustrated at not being able to access product-related advice, which they often perceive as financial advice.

AMP: The different categorisations and adviser obligations undermine the FMA’s aim of ensuring that sales processes and advisory services reflect the consumer’s best interest, by driving differing standards of advice, disclosure, conflict management. This makes it difficult for consumers to assess the quality and suitability of advisers and their advice. It also creates the situation where consumers need more than one adviser in order to meet their financial needs.

BNZ: Educating the public on this to a point where there is sound understanding [of the different categories] is likely to be a challenge.

BNZ submits a preferable solution may be to bring the requirements on RFAs to be more aligned with those of other advisers, who are subject to a code of professional conduct. The QFE model already places significant compliance requirements on their adviser services.

Ron Flood: I believe there should be one designation with designations such as investment adviser, insurance adviser, mortgage adviser ,with a person able to have one or more depending on their qualification and experience.

Q

UESTION: What should nonauthorised financial advisers have to disclose?

ANSWERS:

Kepa: RFAs should have their disclosure requirements brought into alignment with AFA requirements.

Westpac: The information disclosed by RFAs should be the same as for AFAs. This would mean the addition of information on remuneration qualifications and areas of expertise.

Securities Industry Association: The disclosure obligations for RFAs should be the same as for AFAs. The purpose of disclosure is to provide clients with detailed information relating to any conflicts of interests, including fee/remuneration in order for their clients to make an informed decision as to whether to procure the services. Such disclosure information is necessary to meet the objectives of the Act. Massey University: RFAs need to disclose the range of products that they are able to assist with. If their product range is restricted, for example to less than half the market, an RFA should be unable to recommend a product as being the “best” for the client.

RFAs should also be required to disclose how they are remunerated, including the receipt of commissions and/or other incentives.

Insurance and Financial Services Ombudsman: RFAs should be obliged to disclose fees and commission to consumers.

Financial Services Council: A simpler, more consumer-friendly information source would be more helpful including clearly telling the customer if they are in the sales or financial advice process. Few clients read disclosure statements in detail and most just glance at them.

AMP: We believe that the same disclosure requirements should apply to all advisers, and needs to be appropriate for the type of

There are concerns that some RFAs may be holding out their registration as some form of qualification to consumers – BNZ

service being provided by the adviser. All advice disclosure needs to be simplified and meaningful to the consumer. The disclosure documents today are too lengthy and contain too much boiler plate information.

We would support mandating maximum document length.

ASB: Simplification of the disclosure requirements, particularly by category two QFE advisers, could be done in conjunction with increasing consumer financial capability.

Q

UESTION: What qualifications should advisers be required to have?

ANSWERS:

BNZ: BNZ understands there are concerns that some RFAs may be holding out their registration as some form of qualification to consumers. If an RFA is providing specialised advice, such as insurance or mortgage broking, the FAA review should consider whether they ought to be suitably qualified, with a reasonable level of ongoing CPD. PAA: We recommend that all advisers should meet minimum qualification levels. We suggest that for advisers not yet qualified at

the level five standard, a three to five-year transition to that qualification be allowed. All advisers would then be required to maintain a professional development plan, available to the FMA for review. We support different combinations of the level five coursework requirements being specified by the Code Committee for different types of advice situation, which in effect would allow for standards appropriate for insurance and mortgage advice.

Massey University: One of the major issues with the current AFA education requirements is that it is tending to lead to a vastly lower levels skill in the industry than was the case pre-regulation. Prior to the Code, financial advisers seeking to follow global trends as well further distinguish themselves as professionals were aiming to obtain a level seven qualification via a Graduate Diploma and CFP/CLU. The need to obtain level five before obtaining the AFA designation discourages new entrants from continuing on to the Level seven qualification. A level five qualification, however, is only acceptable as an interim measure or for lower level category two specialities. The reason for this is that a level five qualification has a very low theoretical content and is more suited to staff involved in routine back-office procedures than expert advisers. Even if content headings indicate some complexity, the very limited classroom hours ensure that AFA is very limited.

ASB: There is no evidence that the current formal education standards are inadequate or resulting in consumer harm. We believe that raising them would not in itself result in better consumer outcomes. It should be recognised that formal education is only one aspect of competency and that there are other equally important aspects to competency, for example, continued professional training, on the job learning, mentoring and supervision. ✚

021

PAA LEGAL

By Rod Severn

Tomorrow’s talent Professional Advisers Association (PAA) chief executive Rod Severn talks about one of the biggest challenges for the industry – tomorrow’s talent.

T

here are many reasons to join the advice industry, but if you had to pick one quality that sets it apart from others, what would it be?

When I joined the PAA 18 months ago, I was completely new to financial advice; I arrived from the IT sector with no preconceptions and fresh eyes. Looking back over that time, if I had to pick one thing that I believe sets the advice industry apart, it would definitely be passion.

The passion I have seen and the genuine desire of advisers to improve the industry is truly impressive. The willingness of people in the industry to help one another and to keep improving how advice can serve the interests of consumers is essential to the industry moving forward. From what I have experienced, this kind of approach and attitude is very much business as usual amongst quality advisers. It is a real strength and exemplifies the qualities we need to continue to attract in new talent for the financial advice industry.

Why is attracting new advisers to the industry one of your top issues of concern?

The average age of PAA members is 54 years old, so it is reasonable to expect that a large number of advisers will be retiring over the next 10 to 20 years. At current levels, new-entrant numbers won’t keep pace with the number of advisers leaving the industry. This is a big concern first and foremost for consumers, as well as for the industry, and so there is an urgent need to look for new pathways for people to join the industry.

What is crucial in attracting new advisers?

As we all know, it’s not as simple as running an advert on Seek. There are many parts of this issue, but as a starting point, two of note are visibility and qualifications - as well as the relationship between the two.

On the whole new advisers tend to join the industry from the banking and insurance

022

PAA chief executive Rod Severn sector, which of course makes sense and is well supported. However, to attract quality new talent in larger numbers, we need to broaden the talent pool. We need to look at new avenues – such as universities and tertiary institutions – and establish pathways for people who would otherwise not have had the opportunity to consider financial advice as their industry of choice.

To achieve this, we need to improve the perceived professional standing of the industry, and one way to do that is though qualifications.

By raising the bar for those entering the industry, we will increase the professional standing of advice and in turn increase the visibility of being a professional financial adviser. Take a university student considering their career and business

opportunities as an example - professions such as accounting and law enjoy much higher visibility for a number of reasons, one being the level of qualifications required to enter the profession. Requiring a minimum standard or qualification turns a service into a profession.

There is no overnight solution. But increasing the professional standing and visibility of advice are two of the key elements that will play a role in how successful we are at attracting quality talent. The role and value of this industry deserves a high level of interest from quality recruits. We need to make sure they see it. ✚ Rod Severn, CEO, Professional Advisers Association

Be Part of the Bigger Picture. Join the PAA. Support the New Zealand advice industry, your profession and your business by getting involved. The benefits are many – for your business today and for the future of advice.

Events and Networking

Join the PAA and over 600 delegates at the 2016 National Adviser Conference, July 28 & 29; catch up with colleagues and attend L&D sessions relevant to your advice specialty at one of the 30+ Road Shows and Regional Meetings held across the country each year.

The PAA Calendar is packed with opportunities to develop your business, share experiences, and learn from other advisers.

Regulation and the Future of Advice

With the FAA Review underway, regulation and the importance of advocating for adviser interests is a top PAA priority, as it is for the profession as a whole. The PAA is a dedicated advocate of the advice profession, and maintains an ongoing dialogue with the regulator. Add your voice to the mix and get closer to the conversation through the PAA.

PAA Member Benefits

Learning and Development

Keep up with your CPD requirements; get one-on-one guidance on the practical application of existing and new regulation; hone your business and advice skills; update your qualifications and much more.

In workshops, online and one-on-one, the PAA Learning and Development team is expert at helping advisers with their development needs – both advice competence and business skills.

Business Savings and Benefits

Cut business costs with your PAA membership. Using the PAA Member Benefits Programme, get discounts on a wide range of business and personal expenses at Noel Leemings, Beaurepairs, Office Max and at more than 25 other providers; benefit from highly competitive premiums on Group Life and Professional Liability Insurance, and more. PAA member benefits are designed for adviser needs.

Better Advisers, Better Advice For over 60 years, the Professional Advisers Association (PAA) has supported advisers in providing high quality services to New Zealanders. Independent and run by advisers for advisers, the PAA represents professionals across investment, mortgage and insurance.

The four strategic pillars of the PAA are: Community Awareness of Advice: Promoting fair and accessible advice from advisers for all New Zealanders Adviser Champion: Advocating the adviser role to the government, industry and consumers

Join the PAA today.

Adviser Competence: Providing quality continuing education and mentoring Adviser Collegiality: Building professional relationships and benefits that matter

Call Cheryl Cassidy on 09 500 5172, email cheryl.cassidy@paa.co.nz, or visit www.paa.co.nz for more information.

SALES & MARKETING LEGAL

By Paul Watkins

Half you marketing plan is already at your fingertips There’s no single magic marketing bullet, but if you follow these plans you will grow your business. By Paul Watkins

W

ith so many new online marketing options and traditional media failing, it’s hard to know where to place your promotional dollars.

But there is a great way to start your marketing planning that is literally at your fingertips. This will give you a good guide as to where your funds and time should be spent.

Follow this through, it’s worth getting right.

Start by putting all your clients from the last two years into a spreadsheet. You can go back three years if you wish, but so much has changed in marketing over the last three years, going back

024

further than that may not be of too much value.

The columns of your spreadsheet should read: Name; age; type (first home, subsequent home, business loan or investment); how you got them (press advertising, more from an existing client, referral from client, website search, Facebook campaign, expo or home show etc) and the last column would be a value call on how hard they were to get a loan for – rate out of 5.

First thing to do is sort and categorise them into the types – first home, investment and so on. Then treat each of these lists as separate.

The reason here is that the way you got clients for investment finance may have been quite

different to how you got first home buyers.

The next step is best explained by way of example. Group them according to how you got them: press, radio, web site and so on. It will nearly always be the case that one of these stands out ahead of the others and some hardly feature. For this example, let’s say that 30% are from client referrals, 40% are from existing clients re-financing, 10% from referrals from others such as real estate agents, 10% from Facebook and 10% from google searches and a variety of other sources.

The trick now is to look closely at each of these in turn. Start with the largest, in this case

refinancing or changing loans for existing clients. What are you doing to foster more? Do you keep in touch with them regularly? Do you send newsletters? Do you hold client functions? If you do very little but get the work anyway, imagine what you might get if you made up a calendar of activities specifically around existing clients.

Before we carry on to the next category of referrals, this is how you write your marketing plan. The best plans are ones that build on existing successes. Don’t try to look for that flash new way to market your services. Clearly something is already going right for you, so make those things that work for you even better.

So on to the next one – referrals from existing clients. This example is not unusual at all, where over half of all new work should be coming from existing clients and referrals from existing clients. How do you ask for referrals now? Whatever you do, add to it. Once again a monthly newsletter can help, client functions where they “bring a friend” can help. Suggestive articles that might spark ideas of how you could be of value to friends or family can help. Case studies work particularly well in this respect, as do provocative headlines like, “How can your kids possibly get their first home before they reach 30?”

These are only a few of the many ways referrals can be gained. Spend time in your office brainstorming on ideas aimed at gaining referrals and getting more business out of existing clients. It is well worth it.

Now move on to the 10% in this example that come from referrals from others. These could be real estate agents, insurance advisers or accountants for example. So ask the same questions. What do you do now to foster these? If you only have one lead source, can you add another? That would in effect double your business from this category.

Can you perhaps form a small network of mutual referrers?

Ten per cent could be from Facebook advertising. Facebook have a habit of changing the rules regularly, so this may take a bit of learning to get the best out of it. Facebook marketing, search engine optimisation (SEO) and your web site are important parts of your marketing mix now, but do require expertise that can be bought relatively inexpensively.

If you want to improve in these areas, look for suitably experienced contractors to do this for you. There are a good number of them out there.

How do you choose one? This is an interesting question as it is a direct reflection of how your clients choose you. The first step is to ask friends or business associates, just like many of your clients do.

You will have gathered from the above that the idea is to closely examine what is working for you already. If you go back through two years of clients as suggested, then you will graphically see what your most successful activities have been. Now work out a plan for each to improve them. Some may not be worth any effort at all. Then and only then, move onto new stuff.

Now go back to your spreadsheet of two years of clients. You know what works and have drawn up a list of activities to improve each of these. Now it’s time to look at the message. Does your promotional message or website headline meet the motivations of the prospects?

This is a topic for a separate article, but to put it in simple terms, why would the prospect bother to call you? What is in your message that appeals to their motivation to seek either a new mortgage or to refinance their existing one? There is no one answer here, just that challenging question. Get it right and the phone will ring.

I get calls from brokers who are not growing their businesses and ask if perhaps their website is the issue. Others ask if they should take a stand at a local home or community show and still others if advertising in a real estate supplement might work. It’s impossible to answer these questions without knowing where their business has been coming from to date. If a large number of their transactions are from existing clients, then a concerted effort towards them might raise that by say 20%. That’s substantial. Looking for new untried ideas could take a lot of time and money and come to nothing.

Remember that there is no single magic bullet. Your business will grow from a series of well-coordinated activities, building on what works now. So create that spreadsheet and start your initial analysis. ✚ Paul Watkins writes blog content and newsletters for financial advisers.

025

MY BUSINESS

By Dana Kinita

IN A LEAGUE

OF HIS OWN Simon Maule left a solid career of banking behind to become a mortgage adviser and within two years is receiving accolades for his work. He talks to Dana Kinita on how he has no regrets making the move.

I

t may not be the rugby league career he was wanting growing up but Simon Hause says he loves the job he’s in.

The Loan Market New Zealand mortgage adviser in Christchurch had spent 20 years in the banking sector before making the switch 18 months ago.

“I was a branch manager at SBS bank for three years and starting making noises through contacts that I was looking for a change,” Maule says.

He was previously the general manager of Credit Express Limited, leading a team of 12 staff.

Through talking to Loan Market chief executive Brian Greer who was looking to expand the company and its co-owner and principal of Ray White Metro, Tony McPherson, the transition was seamless, he says.

“I think [wanting to leave banking] developed over time. I was more and more leaving work not happy with what I was doing and was looking for a change. I was not influencing outcomes as much as I wanted and was not engaged with the process.

“I wanted to be my own boss without having to report to lines of management which you often have in big institutes.”

Growing up, the born-and-bred Cantabrian had aspirations outside the finance market.

“I was hoping to be pro league player and fell a few rungs short,” he said.

“That was one of the reasons why I went to university but I wasn’t to sure of what I wanted to do,” While he gained an arts degree from Canterbury University, he landed a graduate

026

“I was taken aback but on reflection, I have worked really hard. It’s the no pain, no gain philosophy - you do get the success and rewards if you work hard. But it’s great to be able to have recognition by someone in the industry” position with his first employer, Trust Bank.

“I didn’t study finance. I just followed my nose and fell into it and I’ve been working ever since,” he say “I haven’t really had a bad business move, this is the first venture into my own initiative. One thing I learnt at the time was not to listen to anyone else’s opinion and believe in yourself.

There was concern [from others] that I was

leaving a stable bank manager's job but I had really good support from my wife, Michelle and I knew I would work hard - you have to work hard to achieve success.

“But I believe the experience I gained before mortgage advising has been really good. It’s helped me have maturity in the business and I don’t think I would have changed a lot I think.”

An average week would see Maule in the office by 8am.

“From Monday through to Wednesday, it’s a 12-hour day most of the time. I’d arrive in the office, clear emails and talk to my PA on the setup for the day. After that I would be in interviews and meeting deadlines. I try not to have appointments on the weekends,” he says.

“The biggest satisfaction that I get is helping clients that have struggled and are really needing assistance, they may not have been given the right advice in the past from their bank, or even other brokers.

“For transactional clients who could get a loan from anyone, it’s about being able to supply a really superior service to them.”

There were challenges, such as moving clients away from being solely price-focused which was achievable by teaching about right loan structures, he says.

Maule worked out of the Ray White Metro office in his first year.

“I didn’t know working at Loan Market was going to provide such a big relationship with Ray White, the business is half-owned by the principal and there is a really strong relationship with working with each other, they’ve been nothing but supportive.”

His success had been helped through the

repeat and referral business from clients, his first home buyers' seminars and referrals from lawyers and accountants.

In June, he was named the PAA New Mortgage Adviser of the Year.

“I was taken aback but on reflection, I have worked really hard. It’s the no pain, no gain philosophy - you do get the success and rewards if you work hard. But it’s great to be able to have recognition by someone in the industry,” Maule says.

“It’s a little hard to tell what tangible impact it has had but it is in my email signature so it gives awareness that there is a point of difference.”

Despite not having a business mentor, advice and support have been given to him by Greer and Patten.

“I’ve had a wee bit to do with Bruce, I’ve stayed with him at his house at one time but both of them have been really good and available, always willing to take a phone call.

“In a small way too other brokers call me for advice and assistance and from what I have experienced, it’s great to have someone to call so I’m certainly willing to help out.”

When not in the office, Maule enjoys coaching his 11-year-old son, Ruben’s, rugby team, boxing fitness training and playing touch rugby. An avid rugby league fan, he supports the New Zealand Warriors.

“I don’t really read business books, I read more autobiographical, sports books. There’s some really good messages that can be transferred into business. One of my favourites is Brisbane Bronco coach Wayne Bennett’s Don’t die with

the music in you. It has great little chapters and inspirational quotes that mentally toughen you.”

Maule says he has been following updates from PAA and the Loan Market on the upcoming regulations of financials advisors.

“I have developed processes with my PA on this but can see increase in paperwork, increase bureaucracy and the [impact] on time and ability to be responsive to your clients.

“Additional documentation is the biggest concern but we will watch and wait for more solid information.”

While he may be a relatively new broker, Maule has a clear sight on what he wants in the future.

“I want to build a team. The Loan Market branch in Christchurch is starting to gain really good brand awareness and we’re based in one of largest Ray White office’s in the South Island.

So ideally we would like another broker in the short term but I want to build a team of advisers over the next two or three years.” ✚

Simon Maule

027

INTEREST RATES Kymberly Martin

RBNZ EYES FURTHER OCR EASING Though the global market has eased recently, uncertainties remain. The Reserve Bank expects inflation to rebound, which may be good news for borrowers.

T

he Reserve Bank, in its most recent review, left the official cash rate at 2.75%, stating it believes it is appropriate to now “watch and wait” after three consecutive rate cuts. However, its statement maintained that “some further easing in the OCR seems likely”, depending on emerging data.

The RBNZ will also be watching the currency.

It noted the rebound in the New Zealand dollar since September. If sustained, the bank said it could dampen tradables sector activity and medium-term inflation. Therefore, all else equal, a higher currency could require a lower path for the OCR. Excluding the currency risk, the bank remains confident inflation, which is currently very low, will rebound into its 1%-3% target range. This will be helped when the sharp fall in global oil prices drops out of CPI calculations as we move into 2016.

The bank sees global market volatility as having eased in recent weeks but myriad uncertainties remain. It mentions the recent

028

rebound in global dairy prices but says it is too early to assess if improvements will be sustained.

Finally, housing gets a substantial mention.

In particular, the bank sees house price inflation in Auckland as strong, “posing a financial stability risk”.

Floating rate outlook Our central case remains a further 0.25% cut from the RBNZ, taking the OCR to a cyclical trough of 2.50% by year-end. Risks around this view appear fairly equally balanced. If dairy prices and business confidence continue to rebound into year-end while the NZD resumes its path of depreciation, there may be little urgency for the Bank to cut again.

Conversely, if improvement in dairy prices proves transitory, and if El Nino weather conditions also threaten the agricultural sector more broadly, the RBNZ may feel compelled to move more aggressively. This is particularly true if such conditions were accompanied by a stronger NZD (especially if reflecting the

US Federal Reserve backing away from a rate hike).

We continue to see the RBNZ as a "reluctant cutter" given its ongoing (and well-founded, in our view) concern about the Auckland housing market. But we see it as likely the bank keeps the OCR at its 2.50% low for a prolonged period. We see it as unlikely the RBNZ will raise the OCR again before 2017. By this time, both we and the RBNZ see CPI inflation having picked up to well within the bank’s target range. Borrowers can expect to enjoy historically low floating rates for some time yet.

Short-dated wholesale fixed rates Short-dated wholesale fixed rates have traded a fairly tight range in recent weeks. They price a further 0.25% OCR cut by March next year and that the cash rate will be virtually unchanged through 2016. This is fair in our opinion.

We see short-end rates continuing to trade tight ranges at low levels into the next RBNZ meeting. If the bank was to cut in December, the response of short-end fixed rates will be

determined by the bank’s accompanying statement. If it maintains an easing bias, short-end fixed rates could trade a little lower. However, if the Bank moves to a neutral stance, the market may start to ponder when the RBNZ will ultimately begin its next rate hiking cycle. This could see the likes of NZ two- to three-year wholesale fixed rates push higher.

Overall, we still see no great urgency to fix short-end rates. However, we also see only limited probability of rates moving much below current levels.

Market Pricing for the Cash Rate is ‘Fair’

Longer-dated wholesale fixed rates This week the US Federal Reserve (Fed) has also been in the spotlight. It made clear that December is still very much a live meeting for a potential first rate hike in nine years. The US FOMC statement pointed to indicators it would assess; "In determining whether it will be appropriate to raise the target range at its next meeting". That is the most direct indication of a specific time for a move that we have had. Consequently the market has moved up its pricing of a hike by year-end to almost 50%.

We expect US rates may continue to rebound from range-lows if a December hike remains a possibility. This will depend on US data remaining solid in coming weeks and financial markets relatively stable.

In particular, the market will be watching out for the November 7 US labour market report. A strong report could encourage the market in expecting a hike. This could see US 10-year bond rates pushing up from the lower-end end of the 2.00-2.50% range they have maintained since May this year.

This would have implications for NZ wholesale fixed rates with maturities of five years-plus. These remain highly influenced by moves in US long rates. We would expect to see upward pressure on NZ five to 10year wholesale fixed rates, which are currently flirting with historic lows.

Currently, NZ five-year wholesale fixed rates remain less than 0.25% above floating rates. These may be considered attractive by those who recognise the risk that rates will move higher in coming months if the US Federal Reserve raises rates. They will also appeal to borrowers who value having certainty in their interest rate exposure, at only limited upfront cost.

Short-End Rates To Stay Low Near-Term

Summary The RBNZ left its cash rate at 2.75%. Our central case remains a cut to 2.50% by year-end. Risks around this view are fairly balanced. We see the OCR remaining at this level throughout 2016, suggesting borrowers will enjoy historically low floating rates for a prolonged period.

However, short-end fixed rates are unlikely to move much lower as they already reflect the expectation of a further 0.25% OCR cut by early 2016.

Longer-dated wholesale fixed rates are susceptible to moves in US long rates. In turn, these will be influenced by the market’s expectations for the Fed funds rate. This week the US Fed has indicated a December hike is still a possibility. This may see US yields extending their rebound from range lows. NZ longer-dated (five-years+) fixed rates would likely be dragged higher.

Five-year fixed rates currently sit less than 0.25% above floating rates. These may be attractive to borrowers who value certainty and recognise the risk presented by the prospect of higher US rates in the months ahead. ✚

Market Sees Greater Probability of Fed Hike By Year-End

029

LEGAL

By Jonathan Flaws

Charting the right direction for your clients It is often said that a little knowledge can be dangerous.

This is because it gives you false confidence that the action you take based on that knowledge will be right.

030

I

t’s like sailing at night without a GPS and knowing roughly where you are, but not exactly, and knowing that the harbour you are heading into has rocks at the entrance, but not knowing exactly where you are in relation to them.

Your knowledge Some time ago a friend of mine told me he was thinking about becoming a mortgage broker.

He was someone I had dealt with over the years in his capacity as a credit officer in a large bank. His experience was dealing with default and loan recovery for his employer. It was after a period of recession and most of the bad loans had been worked through - it was tough finding a job in credit.

I didn't want to stop him from moving forward so I agreed with him that it would be a good thing for him to do. Afterwards I felt guilty because my impression of the mortgage industry was that it was all about selling and the best brokers were always going to be the best salesmen. Credit officers and salesman are words that are not often used in the same sentence when describing a person’s attributes.

He went forward with his decision and I have to admit that in his case I was completely wrong. He went on to become a very good broker and topped his group for several years.

What I had overlooked was that because of his years in credit recovery he understood intrinsically what distinguished good from bad credit. Borrowers who didn't fit the standard lending criteria are not necessarily bad credit if they know and understand what they are getting into, why they are getting into it and how they can manage their financial affairs so the debt is repaid.

He was able to spot the financially literate borrower and put and back up a case to the lender to explain why the deal should be done despite its non conforming nature. He had a lot of the right sort of knowledge and knew how to apply it Most likely, this story is not a surprise to you.

If you have been in business as a mortgage broker or financial adviser for a while and are successful, you will have learned the same skills and have applied them. You have the Knowledge appropriate for your profession.

But you are not the borrower. Your having the knowledge may help you help them obtain a home loan but if they don’t have similar knowledge or only have a little of the knowledge, it’s as if you are putting them on a yacht at night without a GPS and a decent chart and sending them off to find a safe harbour behind a rocky entrance.

Financially literate borrowers Indeed, if all that you do is apply your knowledge to helping your client find a loan then you have not discharged your duty to apply the responsible lending principles.

Put another way, you haven’t delivered the standard of skill and expertise now required of a prudent and professional broker or adviser.

It is certainly the lender’s role and responsibility to adhere to and apply these principles but if the lender has delegated

❝ And let’s face it, your role

is not to be a university professor giving tutorials and lectures on financial literacy - your role is to assist the borrower to make an informed decision. ❞ to you the role of applying some then you are responsible to the lender - as well as the borrower - for ensuring these are met.

Assisting a borrower to make an informed decision is one of the key roles.

Obtaining information to ascertain their objectives and requirements and being reasonably satisfied that the loan meets these and they can repay without substantial hardship are also principles that need to be applied. But you now need to move across to the borrower and be satisfied that you have done all you can to assist them to make an informed decision.

Disclosure of the loan and information about it doesn't get you there on its own. It is important - but it is becoming trite now to say that disclosure is not comprehension. It never has been and never will be. Disclosure is just - well it’s just disclosure. Its one half of the knowledge process. Its taking the horse to the water. But it’s not helping it to drink.

Getting the knowledge London taxi drivers are renowned for possessing “the knowledge”. They can’t get a licence to drive a big black cab around the streets of London without it.

I recently found a convenient reason to be in London over the last weekend in October and saw the benefit of the knowledge first hand.

We arrived at 4.30 on a Friday afternoon. If you complain about the the traffic in Auckland at this time of the day then you have nothing to complain about.

Our London cab driver didn’t get blocked in traffic but was able to duck and dive through many small lanes and side streets to avoid the heavily congested areas and get us to our hotel without any undue delay. We seemed to always be moving.

On another occasion, at around the same time on another Friday, a hotel concierge thought he was doing me a favour by arranging an Uber ride for us at a fixed price.

The driver had a GPS and on one occasion called up a mate who he knew was likely to be ahead to get traffic conditions. The ride took a lot longer, took the main congested routes and only at the end did he forget the GPS and drive what he thought was likely to be a better route but then overshot our destination and had to double back.

He didn't have the knowledge. But he got us there, safely and eventually and the outcome was the same as the black London taxi - in fact his fixed price was several dollars more expensive than the cab’s metered fare for much the same route at much the same time.

As I was leaving London, an article in the Times suggested that the GPS and Uber had made “the Knowledge “ redundant and suggested that London cabs were likely to become a well revered but ancient institution.

Technology can help I’m not sure this is correct. Technology can certainly help and in the area of financial literacy it is going to become more and more important.

By technology I mean structured, well thought through learning and guidance that can be provided over the internet in the form of animated videos. The best of these processes will also enable the comprehension of the reader to be confirmed by answering a few questions to confirm that, unlike written disclosure, the information was not just presented but also absorbed.

In the same way that Uber is using technology to transform the transport system, technologies such as CreditEd will transform this part of the mortgage industry.

The Australian regulators and US regulators are looking closely at these technologies as a means of improving borrower understanding.

I suspect it is only a matter of time before our regulators do the same.

Like Uber it’s not going to be perfect - but it will get the borrower to the lake of financial literacy and will help them drink - or at least tell you they have drunken from the lake. Like Uber it’s not providing the driver with “the Knowledge” in the same way that a London Cabbie has “the knowledge” - this can only really be provided if you have a committed borrower who is motivated to undertake a more formal educative process on their own.

And let’s face it, your role is not to be a University professor giving tutorials and lectures on financial literacy - your role is to assist the borrower to make an informed decision. If you offered your clients a University course they would probably politely decline and find a broker or adviser who got them to their goal without requiring them to get a degree.

Providing your clients with access to a simple and easily accessible animated video tutorial that confirms their comprehension is helping them get enough of the knowledge to understand what they are doing and discharge the responsible lending principle of assisting the borrower to make an informed decision. ✚ Jonathan Flaws is a partner at legal firm Sanderson Weir.

031

INSURANCE

By Steve Wright

Disability Insurance

– HOW MUCH IS ENOUGH? Part two – stay-at-home parents and children

Steve Wright says advisers are duty-bound to give their clients the scary truth about the costs to a family if someone is disabled.

I

n the previous edition of TMM we discussed the potentially massive additional costs (ignoring lost income) someone seriously disabled may incur and the huge financial impact this would have on the family.

We also discussed how replacing income alone is not enough and why government support may not be sufficient or even received at all.

Without access to very large sums of money – very serious disability of one of its members could render the whole family financially disabled, potentially forever leaving the family in financial strife, unable to have the lifestyle they were hoping for.

In these circumstances there is every chance the family will disintegrate. Is this what clients want? Is this what their families deserve?

Insurance to cover the additional costs disability can bring will be required on stayat-home mums and dads too, not just those working “bread winners”.

032

Fortunately a couple of recently introduced insurance products work very well for stay-athome parents and children, allowing advisers to construct effective and efficient insurance plans to cover them with significant amounts.

Highlighting and protecting against, the costs of serious disability of stay-at-home parents and children, not just the “bread winners”, is where you become very important.

Clients will not immediately recognise the need for disability cover on stay-at-home mums and dads or children – they rely on your guidance and advice to educate them on the dangers.

In the previous edition of TMM, I mentioned work that had been done by the Disability Resource Centre Auckland, which calculated the likely additional costs someone who is severely disabled may face, simply to live an “ordinary” (not luxurious) lifestyle.

Those seriously disabled, with high level needs, could need to find upwards of $2,000 per week and possibly for many years, even decades

– the numbers are very big.

From my reading of the report this is the cost regardless of whether the person had previously been earning an income, so it applies equally to stay-at-home mums and dads.

The report also did not cover costs of looking after small children. This is what stay-at-home mums and dads do.

If they cannot do it, who will? How much will it cost?

Much of the cost identified in the report related to the time cost of assisted living – peoples’ time (but again not to look after children).

Some of this assistance may be able to be provided by a family member but what if that family member is still expected to pitch up for work?

Where will clients get the money to pay for these extra costs if the unthinkable happens?

Now what about children?

No one likes to think about bad things happening to children, but they do. The

financial costs of a child severely and permanently disabled are massive.

How much money does a family with a severely disabled child really need?

Severe physical or intellectual disability is particularly expensive. Such a child will need high levels of personal care for the reminder of what might be a long life.

How much money would you want in a trust fund to look after a severely disabled child who may grow into an adult unable to live a normal life or earn an income and requiring many decades of high dependency care?

Government assistance may help but it won’t make life easy and things will probably still be a financial struggle.

Using insurance to provide funds and protect families against the financial consequences of severely disabled children still seems to me to be relatively uncommon and life insurance companies have been slow to develop suitable products.

Because children don’t work, typical

disability products are generally not available or appropriate for them. Fortunately, more and more insurance companies are recognising the need and allowing clients to cover their children with trauma insurance, with one allowing up to $500,000 in total.

Fortunately the incidence of very severe disability in children is relatively low, but it is not as low as we like to think.

The fact that incidence rates are low or that discussing the disability of children is difficult, even unpalatable, does not mean we can ignore it though because the potential cost to the family is catastrophic.

Proper risk management requires protection against severe risks even if they are relatively unlikely to eventuate or are difficult to contemplate.

Cost is always an issue for clients and probably one of the biggest causes of inadequate or no insurance. However, concern about the client’s ability to pay for it should not drive your recommendation.

I think advisers are duty bound to give their client the full scary truth and recommend cover levels accordingly.

Unless you do this clients do not have sufficient information to make an informed decision.

Fortunately the low incidence rate is reflected in relatively low insurance premiums for children, allowing clients to afford some cover on top of everything else.

So, are you actively talking to your clients about insurance protection on stay-at-home parents and their children?

If not, why not? You may be missing an opportunity (which someone else might take!) or worse, your advice may not be compliant.

If the client baulks at the premium then strategies to reduce premium with the minimum loss of cover will be needed but the client should be under no illusion that they will likely be underinsured and exposed to all the financial risk themselves. ✚ Steve Wright is general manager product at Partners Life.

033

Intelligence Learning from Australia

Brokers more than just mortgages

The Mortgage and Finance Association of Australia (MFAA) recently published a report by EY on the state of the mortgage adviser market and future trends. The report, Observations on the value of mortgage broking, suggests that advisers should offer more products to their customers than just mortgages.

Two of the most likely products are insurance and credit cards.

A pdf of the report can be downloaded at www.mortgagerates.co.nz/files/EYreport.pdf