TMM - The NZ Mortgage Mag Issue 1 2018

Issue

01

2018 Working together to create tomorrow's advisers today

THE YEAR AHEAD

BRIGHT OUTLOOK but challenges too YOUR GUIDE TO SECOND MORTGAGES

CLIENT FIRST: WHAT DOES IT MEAN?

HOW TO

IMPROVE YOUR MARKETING

Don’t let a setback get in the way.

Struggling to find a finance solution for your clients who don’t fit banks’ policies?

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CONTENTS

22

YOUR YEAR AHEAD What you need to know. Miriam Bell talks to advisers and other key players to identify the major issues for the year ahead.

UP FRONT /// 04 EDITORIAL

It’s been a positive start to the year, Philip Macalister reports.

FEATURES /// 08 SPECIALIST LENDING How to crack this market.

16 PROPERTY NEWS

A round up of key property investment news stories.

18 HOUSING COMMENTARY Has the property market turned the corner? Miriam Bell investigates.

06 NEWS In the latest news BNZ changes commission, mortgage adviser adds an AI Bot, a guilty plea, former NZMBA CEO returns and General Finance gets new owners.

12 PEOPLE Changes are afoot at ASB, RESIMAC, Mike Pero and Mortgage Express.

20 REGULATION UPDATE

Putting clients’ interests first. What it means for you.

26 SECOND MORTGAGES

COLUMNS /// 28 SALES AND MARKETING It’s time to look at new ways of marketing.

30 INSURANCE

Income cover and what they pay.

32 MY BUSINESS

Adviser and TV presenter Tahei Simpson.

34 INTELLIGENCE What’s happening with rates.

28 03

EDITOR’S LETTER

Positive start to the year

T

he first issue of TMM each year looks at what lies ahead in the next 12-months.

When we started this piece people we spoke to were unclear on the prospects for 2018.

However, some of those concerns may have been put to rest after January. Many firms are reporting that they have had really strong January sales.

Take NZ Financial Services Group as an example. Its January volumes this year were more than 30% above what it recorded last year.

With credit growth slowing and house sales still down (but not out) it’s a good portent to the important role mortgage advisers are playing in the market.

The other interesting anecdote we are hearing in the market is that there continues to be a steady flow of enquiries from people wanting to become mortgage advisers. Many of these, we hear, are people with banking backgrounds, All these have to be healthy signs for mortgage broking.

On the lending side we are seeing changes too. James Lockie and William Cairns have sold General Finance, and the new owners, as we report in the news section, are looking to grow the business.

Also, we welcome back Australian lender Bluestone. Pre the Global Financial Crisis Bluestone were a significant player in the nonbank space.

Across at the big banks we have a number of

04 WWW.TMMONLINE.NZ

new chief executives taking over at ASB, BNZ and a number of the smaller banks. How they view third party distribution will be something to watch.

One thing I have observed over the years is no new CEO at a bank just carries on the strategy left by their predecessor. Every new one wants to stamp their market and will make changes.

Added to changes at the banking end of town is, of course, the question: “What is the future for Sovereign Home Loans now that the life insurance business has been sold to AIA?” Sovereign Home Loans is essentially part of ASB and ASB has a new CEO. Looking at the year ahead you don’t have to be a genius to work out that regulation is going to be a talking point for the year. Maybe it will be the number one talking point?

There has been an impression that mortgage advisers were not particularly engaged in the impending changes which will be delivered once the Financial Services Legislation Amendment Bill is passed into law.

What’s pleasing to hear is that the groups are getting more engaged in what’s happening and a number are already adding compliance people to their teams.

Your final chance to have a say on the proposed changes is February 22. That is the day submissions to the Select Committee considering the Bill close.

I have a firm view that you can’t sit and complain about the changes if you haven’t taken the opportunity to make submissions during its development.

And finally I’d like to announce that the second annual TMM Mortgage Advice conference will be held in Auckland in October. For more details see page 9.

Philip Macalister Publisher

PUBLISHER: Philip Macalister SENIOR WRITERS: Miriam Bell Susan Edmunds CONTRIBUTORS: Paul Watkins Steve Wright GRAPHIC DESIGN: Debbie Morgan ADVERTISING SALES: Freephone: 0800 345 675 Kelly Thorpe kelly@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).

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

Join NZ’s most dynamic mortgage brand Mike Pero is expanding and we’re looking for exceptional people to grow with us.

If you’re in the industry and ready to take your career to new heights as a business owner, join the team and brand that can help you succeed.

We can support you with integrated marketing, ongoing sales leads and a leading CRM system.

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Visit us at mikepero.co.nz/about-us

TMMONLINE.NZ /NEWS

BNZ CHANGES COMMISSION STRUCTURE

B

NZ, a relevant newcomer to the mortgage adviser market, has made changes to the way it remunerates advisers.

It has increased its upfront commission from 45 basis points to 55 basis points. At the same time, it is cutting trail commission from 20 basis points a year to 15 basis points.

However, payment of trail commission will now commence one month after drawdown on a loan introduced or restructured by an adviser.

It is also reducing its clawback tiers from four tiers to two tiers. If a loan is repaid within 0-14 months from drawdown there will be 100% clawback and if the loan is repaid within 15-28 months there will be 50% clawback.

BNZ head of third party Adam Ward says the aim of the changes is to simplify the commission structure and processes for their adviser partners.

"It is all about delivering better outcomes, simplifying things for our brokers and streamlining the process for our staff as the business continues to grow and expand.”

Ward says that before making the changes they looked at the domestic and Australian markets and consulted with a number of individual brokers.

No further changes are planned, he says.

While the increase in upfront commission has been well received by the industry, it is the changes to trail commission which have really pleased some advisers.

SuperCity Mortgages managing director

Joel Oliver says it’s a fantastic change because it means there is no need to forecast a year ahead and then follow it all up 13 months later.

“There’s quite a high percentage of remuneration in that first year going from the first month. Essentially, BNZ is remunerating for ongoing service to your client and one of our main drivers is mortgage servicing.

“It’s great to see BNZ acknowledging the third party contribution with the increase in upfront commission and it backs up what they have said about being happy to be in the market.”

He believes the changes will make it easier for BNZ to maintain clients as it incentivises advisers and this could have an impact on the cashback culture that currently exists in New Zealand.

“It puts a bit of pressure on other banks to do the same, so it will be interesting to see if other banks eventually follow. But many of the Australian banks have had this type of trail model in place for some time.”

Loan Market’s Bruce Patten agrees, saying the changes will be very beneficial for managing trail commission.

“The 13 month model is good in theory but in practice it is a logistical nightmare and is quite onerous. It’s much better to track trail every month. This makes it much easier.

“The trail commission might be a bit less but it builds up if you are going to be managing that client for some time. So it rewards advisers for good management of their clients."

❝ It is all about

delivering better outcomes, simplifying things for our brokers and streamlining the process for our staff as the business continues to grow and expand. ❞ - Adam Ward

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SQUIRREL GET ARTIFICIAL INTELLIGENCE

A

rtificial intelligence (AI) has hit New Zealand’s mortgage sector with the launch of a chat bot aimed at first home buyers.

John Bolton’s Squirrel Mortgages has launched a mortgage bot, which is a New Zealand first. It provides answers to the questions would-be buyers have previously tackled via a mortgage calculator.

Robo advice is set to be part of the country’s financial services future and Squirrel’s mortgage bot (Alan) is a forerunner of things to come.

But Bolton says the bot isn’t a robo advice, rather it is a fun mortgage calculator with personality.

“The difference with Alan is he’s a bit smarter and more interactive than plugging numbers into a one-dimensional calculator.”

For first home buyers, getting a mortgage is often stressful and confusing, with most of those who are getting started just wanting to know how much money they can borrow from the bank,

Bolton says.

“Mortgage calculators are heavily searched early in the house buying process. We wanted something fun and with more depth and able to answer a lot of the questions first home buyers have.”

The bot breaks calculations down into questions, before providing users with a comprehensive answer and then moving into the mortgage application process.

Bolton says that Alan is a first foray into AI and, given it is early days yet, may not be 100% right but comprehensive testing and client feedback have been very positive.

“We’re committed to remaining at the forefront of technology and adapting our systems with the end user in mind.”

John Bolton

NEW GUILTY PLEA FROM MORTGAGE FRAUDSTER

O

ne of the accused in a $50 million mortgage fraud case has admitted to multiple charges under the Crimes Act. The Serious Fraud Office (SFO) has confirmed that Auckland property developer Kang Huang plead guilty to 10 charges in the Auckland High Court on December 20.

The charges included eight for obtaining by deception, one for dishonest use of a document and one for corruptly giving consideration to an agent.

Huang was one of four people whom the SFO alleged used false information to fraudulently obtain mortgages from either BNZ or ANZ to purchase 76 properties in Auckland and Hamilton between 2011 and 2015.

His co-accused are all pleading not guilty and are set to go to trial on February 26.

They include Huang's wife, Yan Zhang, and lawyer, Gang Chen, who have been charged with obtaining by deception.

The third defendant is a former BNZ employee, Zongliang Jiang, who is facing a Secret Commissions Act charge of accepting gifts as well as charges for obtaining by deception.

Huang will be sentenced on February 9 and could end up in prison as some of the charges carry prison terms.

In the past, Huang was also involved with Green Gardens Finance Trust, which no longer exists.

Green Gardens Finance Trust earned the dubious honour of being the company the Financial Markets Authority made its first ever Stop Order against – for offering investments illegally – back in 2015.

07

TMMONLINE.NZ/NEWS

By Miriam Bell

A GUIDE TO DIFFICULT DEALS Mortgage advisers are leaving deals on the table by not considering specialist lenders. Miriam Bell provides a guide to help advisers get deals across the line.

A

Huia Manuel

dvisers are being urged to avoid the tick-box mentality when it comes to identifying clients who might qualify for a specialist loan.

The tighter bank lending environment means that there are now more mortgage seeking clients out there who can’t get finance from a bank.

While the non-bank sector provides a viable alternative for many such clients, many advisers remain unsure about it.

RESIMAC sales leader Huia Manuel says "Just because the deal doesn’t tick the boxes with a bank, it doesn’t mean it can’t be placed somewhere else – ie as a specialist loan with a non-bank lender.”

Identifying clients who might benefit from a specialist loan comes down to assessing each client on an individual level and getting to know their circumstances.

Manuel says where the client has a deposit or equity plus income or exit strategy then think about what the situation is that means they don’t tick the boxes for a bank loan.

Clients who have had credit issues in the past but are now back on track and clients who are self-employed but can’t show financials for two years are prime candidates for specialist loans.

“If they have said yes to those first questions, the adviser needs to think about whether there is a non-bank lender who might be able to help the client given their situation, as well as what the best solution is for the client.”

In order to be

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❝ Just because the

deal doesn’t tick the boxes with a bank, it doesn’t mean it can’t be placed somewhere else. ❞ - Huia Manuel able to provide the client with the best information on the possible solutions, advisers need to have both confidence in and knowledge of the non-bank sector.

Manuel says an adviser might know there is a deal there for the client, but not know where to go or what is out there besides the banks.

To this end, it pays for advisers to remember there are different levels of specialisation in the sector.

“The rates might seem high to the customer but where an adviser can talk through the clients whole financial position and put together a plan for the future, such a loan could help a client move into a better situation,” she says.

“A non-bank solution is often a temporary solution. We are all about helping clients to get back on track now and then, eventually, back in with the mainstream banking system.”

However, arranging such loans can be difficult for advisers who don’t know the sector and what is out there.

For advisers keen to find out, Manuel recommends attending training days which feature non-bank lenders to learn what is out there and also engaging with the non-bank lender BDMs. “The BDMs want to support advisers and their clients. Contact them – they really want to talk through deals to help with the loan process to see if they can help. Or they can recommend ways in which a client could be helped.”

Ultimately, it’s about being open and thinking outside of the box, she says.

“Advisers should follow their gut. If a loan doesn’t tick the bank boxes but the client has core things like deposit, income, and good character in place then it is more than likely a non-bank lender can help that client.”

MARK YOUR DIARY The 2nd Annual TMM Better Business Conference is being held on October 30.

2018 Registrations are open now - for more info go to www.tmmonline.nz 09

TMMONLINE.NZ/NEWS

NEW OWNERS TAKE OVER GENERAL FINANCE

J

ames Lockie and William Cairns have sold General Finance to a group of investors lead by Brent King.

King is the former boss of finance company Dorchester Pacific which was a casualty of the post GFC finance company meltdown.

General Finance started life in 2001 initially focused on writing loans for an Australian wholesaler and from General Finance's own funds.

Later on it changed its model and now funds the majority of its loans with money raised through its finance company arm. Wholesale funding is also used.

Its lending covers no-financials, non-conforming loans, bridging finance and some second mortgages.

King says there is significant market demand for mortgages and they are seeking to meet that demand with competitive products.

“We plan to bring another lending party to the market, one that takes a sensible, balanced approach to good borrowers.

“That’s because we can offer the opportunity for people to place loans with us that they are struggling to place elsewhere – usually due to the banks’ numbers, not the borrowers.”

The new owners are planning to further develop and build up General Finance.

That could include getting a credit rating, which would require liabilities of over $20 million and, potentially, listing the company.

When it comes to funding development, King says they see an opportunity to attract investors by catering to the demand for shorter duration investments with competitive returns.

“Investors often cannot think through where they will be in seven years but they can understand where they will be in two years."

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Megan Salt

A TOUCH OF SALT ADDED

T

he chief executive of the NZ Mortgage Brokers Association, Megan Salt, is returning to the industry.

Salt is going to Q Advisor Group on a part-time basis to help with compliance.

Q is run by Geoff Bawden who was the president of the association when Salt was CEO. Salt says she is looking forward to working in the mortgage advice space again. “It is an area I have some understanding and experience,” she says.

With the impending changes to adviser regulation things are “getting a little bit more complicated” for mortgage advisers, she says.

Her goal is to make sure compliance “isn’t a nightmare for advisers” and she will help “take their pain away”.

She says her goal is ensure compliance can create value for Q Group members, rather than being just an added cost.

The NZMBA was subsumed into the Professional Advisers Association.

TMMONLINE.NZ/NEWS

MORTGAGE ADVISERS IMPORTANT: ASB’S NEW BOSS

A

SB’s new chief executive Vittoria Shortt’s first comments on mortgage advice should be reassuring for the market.

She told TMM that advisers “are an important part of the mix” for the bank. This is especially as they offer customers choice when it comes to getting a home loan.

The future distribution of home loans is a “really interesting space to watch”, she said.

“For decades people have said home lending will go online. I don’t see evidence of that.”

While the bank does need to offer more

“digital capability, people are an important part of the home loan experience.”

She says ASB will be “investing significantly in the home loan experience.”

“Rather than just the home loan element we need to think of experiences more broadly.

Late last year ASB’s parent company, Commonwealth Bank of Australia made changes to its broker accreditation and remuneration model.

When asked if ASB would follow suit she said “ASB really needs to take into account its own market.”

“I wouldn’t read through CBA into ASB at all,” she said

Shortt says she will continue ASB’s lending strategy of being in or out of the market depending on how it is developing.

She calls this a “dynamic management model.”

“At the moment we are broadly comfortable in all the areas we are in,” she said.

The major factors driving the property market was supply and demand, especially in Auckland and Wellington.

BLUESTONE IN NEW ZEALAND “SOFT-LAUNCH”

A

ustralian specialist takes first steps back in New Zealand, lending to credit impaired and self-employed borrowers Australian non-bank lender Bluestone has re-entered the New Zealand market, targeting self-employed people as well as credit-impaired borrowers with a range of new lending products.

Bluestone, started lending in New Zealand 15 years ago but pulled out 10 years ago when the Global Financial Crisis began.

During that time it lent around $1 billion, chief operating office Peter Wood says.

Wood says Bluestone has a facility of $150 million from an, unnamed, major Australian institution.

The lender has begun a “soft launch” with a small group of advisers across the country.

It has an office in Auckland with eight staff.

According to documents seen by TMM, Bluestone is targeting self-employed and credit-impaired customers, and those seeking to consolidate credit card debt. It also intends to lend to recent divorcees, property investors, and startups. The firm is accepting applications direct or via aggregator software.

Wood says self-employed people are a key market and with credit impaired borrowers the company is prepared to “go quite a long way down the credit curve”.

Bluestone is offering four products tailored to the credit profile of potential customers, from Crystal Blue, a proposition for clear credit applicants, and Clean Slate, an offering for PAYE self-employed companies and trusts.

The company will also lend to property investors up to 80% LVR. Wood says there are real opportunities in the specialist lending market. “It’s a real opportunity for advisers,” he says.

“Don’t miss the chance. If you don’t write it someone else will,” he told advisers at the recent NZFSG roadshow.

He also said banks are pulling back their lending and will be tied up in regulation for years. This presents opportunities for nonbank lenders.

Bluestone Mortgages is part of the Bluestone Group, which was established in 2000. The lender is a multinational financial services operation with offices in the UK, Ireland, the Philippines and Australasia.

The Aussie lender announced its plans to return to New Zealand last October.

Bluestone joins the likes of Blackwell Global in the non-bank lending market.

Blackwell, formed last year by the reverse takeover of NZF, recently raised a new funding line for

Kiwi customers. Blackwell said its move was spurred by the reduced level of risk appetite from New Zealand banks. Other lenders, including RESIMAC Home Loans, have called for brokers to embrace niche customers who may struggle to access credit.

Peter Wood 012 WWW.TMMONLINE.NZ

OLD HANDS VIE FOR NEW ROLE

N

ewly-formed association Financial Advice New Zealand is looking for its inaugural chief executive, but two old hands have been raised for the job.

The new association is being created by the Professional Advisers Association, the Institute of Financial Adviser and NZ Financial Advisers Association.

Current PAA chief executive Rod Severn said he would be applying for the role. "Of course I am!"

His counterpart at the IFA, Fred Dodds, agreed. “We’ve been on the journey so long,” he said. “If you’ve spent all this time building a car why wouldn’t you want to go for a drive in it?”

He said he did not know yet where the new association would be based. The advertisement for the role says it can be based in either Auckland or Wellington.

Severn is Auckland-based while Dodds is in Wellington.

Dodds said it was possible that the association could have a presence in both cities for a while.

The ad for the role says the new association will have 'a combined membership of 1800' and 'will build and promote the benefits of sound, strong professional financial advice'.

“As inaugural chief executive, you will build a credible strategy and vision supportive of Financial Advice NZ evolving into a leading professional body. You will establish, develop and manage relationships across a broad range of stakeholders against a background of complexity, risk and opportunity, driven by regulatory and technological advances, and membership needs.

A true leader, you will be comfortable working across a broad spectrum from policy development to strategic and operational execution. You will be practised in dealing with ambiguity and a capable and effective communicator and spokesperson, comfortable in leading debate, resilient and attuned to the nuanced expectations of your stakeholders including the public.”

Applications close March 11 and an announcement is due on May 15.

Rod Severn

Fred Dodds 013

PEOPLE

THE LATEST NEW APPOINTMENTS

TMM keeps you up to date with all the new appointments in the mortgage advice profession.

RESIMAC APPOINTS NEW LENDING MANAGER

portfolio is maintained.

“I took this role because RESIMAC pays attention to the changing market and knows how to say "yes" to a growing segment of good borrowers that traditional lenders largely continue to ignore. I don’t ascribe to ‘tick-the-box’ or automated lending. It’s our job to listen and wherever possible find a sound solution for clients. That’s what advisers can expect from the RESIMAC Lending team,” van der Kraaij said.

MORTGAGE EXPRESS’ LATEST APPOINTMENT Vincent van der Kraaij RESIMAC Home Loans has appointed Vincent van der Kraaij as its Lending Manager. van der Kraaij joined RESIMAC Home Loans at the start of the year and has 18 years experience in the finance industry including lending, assurance and asset management roles at UDC; and private bank, risk and retail roles at ANZ. He will be responsible for the management of the RESIMAC Lending Team; the development of the New Zealand lending policies and for reporting on all lending components to ensure a sound mortgage

Mortgage Express has taken on Tina Tsui as a mortgage adviser based in Auckland.

She has more than 13 years in the banking industry, working across the areas of Business Banking, Commercial Banking, Major Corporate and Private Banking, as well as time spent as a practicing financial adviser.

“I’m excited about joining a trusted and well-established brand supported by a network of advisers at Mortgage Express,” she says.

“Tina is passionate about seeing her clients reach their financial goals. She is an experienced financial adviser with many years in the industry and knowledge of commercial and residential lending,” Mortgage Express chief executive Sarah Johnston says.

FROM MACHINES TO MONEY

Tina Tsui

Anoop Karan is becoming a mortgage adviser with Loan Market after 19 years working as a fitter and turner.

He is joining Gopal Sreenivasan’s office which is based in West Auckland.

Loan Market chief executive Brian Greer welcomes him aboard and says “no doubt Gopal will be spending a lot of time mentoring him in helping him to grow his business.”

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NEW CEO AT ASB

Simpson has been in the finance industry since 2007 and have been helping people manage their risk strategies by making sure that they have the right protection in place should they need it. Previously she was a salary based adviser. “I am not chasing the commission dollar so people can trust that the recommendations that I give them are genuine,” she says on her LinkedIn profile.

She became an Authorised Financial Adviser in 2014.

In an earlier role she was practice manager at financial advice firm DecisionMakers Manawatu.

Supporting Mortgage Advisers Since 1991

Vittoria Shortt

Thinking Mortgages? Think Link

ASB’s new chief executive, Vittoria Shortt, takes over the reins of the bank this month.

She replaces Barbara Chapman, who retired in October.

New Zealand-born Shortt has worked for ASB’s parent company, Commonwealth Bank of Australia, since 2002.

In that time she has filled the roles of chief marketing officer, chief executive retail for BankWest, and executive general manager direct channels and operations retail.

A graduate of Waikato University, Shortt began her career in New Zealand, working in roles for Deloitte and Carter Holt Harvey.

“Vittoria is an accomplished, valuesdriven leader with an outstanding record of profitably growing businesses, delivering innovative solutions and managing complex business units,” ASB chairman Gavin Walker says.

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MPM NETWORK GROWS

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Judith Colville At the other end of the North Island Judith Colville has purchased a Mike Pero Mortgages franchise in Northland.

She has more than 30 years experience in finance and legal work and will be relocating to Northland.

MPM has also added three advisers.

Yuko Oshiro, originally from Japan, has lived in New Zealand for the past 15 years.

She has worked in the banking industry as a home loan specialist previously. She is now with MPM in the Wellington region.

Nicola Clark was born and bred in Christchurch and lives in North Canterbury.

“She’s really passionate about helping people get onto the property ladder and will support her clients through getting a mortgage, using KiwiSaver or applying for a HomeStart grant and sorting their insurance cover,” MPM chief executive Mark Collins says.

Sam McEwan is based in the Wairarapa and has more than 10 years experience in the banking industry.

Paula Simpson and Jody Moore Paula Simpson has recently opened a new Mike Pero Mortgages store and franchise in the Manawatu. Since opening, Simpson and her mortgage adviser Jody Moore, have already helped plenty of residents find mortgage, personal loans and insurance products to suit their needs.

Got a new person in your team? Let us know by sending an email to editor@tmmonline.nz with details.

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PROPERTY NEWS

By Miriam Bell

Reform time

The spirit of housing reform has taken hold of the country and it seems it is turning in favour of tenants. Here’s our run-down of what has been happening for investors.

T

he new government is rushing into its housing policy agenda at full throttle with several notable announcements and policy moves coming in the lead up to

Christmas.

For property owners, one major announcement was the make-up of its Tax Working Group, which will be chaired by Sir Michael Cullen. The group of 11 includes tax experts, academics, private sector representatives, a union representative and a Maori community expert.

It will be considering changes to the tax law including around property and fears of a capital gains tax or land tax are running high.

The group’s first meeting is scheduled for early 2018 and its final recommendations to ministers are due by February 2019.

Meanwhile, legislation to ban foreign buyers from buying existing residential policies was introduced into Parliament and passed its first reading.

Housing and Urban Development Minister Phil Twyford says purchases of existing

Bindi Norwell homes by offshore speculators push first home-buyers and families out of the housing market. “This government prioritises home ownership and housing affordability for all New Zealanders and this Bill will ensure that house prices are set by New Zealand-based buyers, not international buyers.”

The new legislation brings residential land within the category of sensitive land in the

Overseas Investment Act. It means foreign buyers – which doesn’t include New Zealand and Australian citizens – won’t be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use.

However, research by the Real Estate Institute of New Zealand (REINZ) indicates that the ban will have a minimal impact on sales.

A survey of its members reveals that only a minority of buyers are from overseas (3.8%).

REINZ chief executive Bindi Norwell says the survey shows the clear majority of sales are made to locals (63.9%) and those from other towns or cities from within New Zealand (29.8%).

“Given foreign buyers are such a small part of the market we are interested to understand what impact the government believes the foreign buyer ban will actually have. We know when looking at Australia that a similar policy there has had little impact with Australia still remaining the third most unaffordable country in the world.”

Flavour of the month

H

ealthy homes have long been one of the government’s flagship housing policies. But the spirit of its newly-passed Healthy Homes Guarantee Act seems to be spreading.

While minimum standards for rental properties will be in force within the next 18 months, the introduction of a compulsory WoF is a more vexed proposal. But a Christchurch company has now launched a Home Warrant of Fitness (HWOF) property inspection service HWOF manager Charles Arthur says that with the new government in power, they believe that rental WoFs will become compulsory across New Zealand at some point. “Right now, opinion is largely mixed when it comes to property owners, but we believe that as the benefits become clearer, they will understand just how much value a

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WoF can offer them financially.”

Growing numbers of tenants are giving preferential treatment to landlords and property managers who show they take their responsibility to provide good quality housing seriously, he says.

HWOF’s offering is similar to the Wellington City Council’s voluntary rental property WoF scheme. However, to date, the Wellington scheme has not gone to plan. Just two landlords have applied for a WoF assessment of their rental property and only one of those properties passed.

Wellington Property Investors Association president Richard Bacon says it is not that landlords are not interested in providing warm, dry good quality properties to their tenants - most want to. “There are dodgy landlords out there who just want to make a quick buck, but all our members take the provision of rental property seriously and are

keen to take care of their tenants.“ In January, an Auckland Property Investors Association survey provided further evidence of this. It reveals that landlords are not as threatened by the advent of the Healthy Homes Guarantee Act as has been suggested – even though details of the minimum standards are yet to be decided.

APIA president Andrew Bruce says members' response to the healthy homes legislation is encouraging and shows they are acutely aware that it goes hand in hand with security of tenure. “As landlords, we understand that it is in everyone's interest to provide a healthy and safe home for our tenants.

"But we want to ensure the Act strikes the right balance between maximising tenants' health without placing landlords under an undue burden that could ultimately distort the rental market with lesser rental stocks and increased rents."

Anti-landlord insurance saga

T

enant liability for rental property damage has been a hot topic since the Court of Appeal’s controversial ruling on the Osaki case. Now there’s been another insurance ruling which goes against landlords and confirms that tenants will only be held liable for insured damage if it can be proved the damage was intentional.

Christchurch landlord Susan Linklater rented a property to some youths but the tenancy ended early because of damage done to the house, including extensive cigarette burns to the carpet. Linklater made insurance claims for some damage and also went to the Tenancy Tribunal, where she was awarded some costs for damages.

She then appealed to the District Court as she felt the tenants should pay her the insurance excess she had paid and to replace two carpets which were insured, but where the excess meant it was not economic to claim.

The District Court dismissed her appeal so Linklater went to the High Court, arguing the District Court was wrong to apply the Osaki decision as the damage was not accidental, but caused by the recklessness of the tenants.

She also argued that some damage was caused by intentional breaches of the tenancy agreement, namely smoking inside the house which was prohibited.

However, Justice Gerald Nation overturned Linklater’s appeal in favour of the tenants, saying the District Court had not erred in its interpretation.

Linklater says she is disappointed by the High Court decision as it essentially means there are no consequences for tenants even if they breach clauses in tenancy agreements and cause damage.

“I wanted clarification on the law and what constituted intentional vs careless damage and if there was a continuum which included reckless damage. But it seems there isn’t. The damage is either careless (and no fault) or intentional. There is no leeway in the definition.”

Crombie Lockwood head of insurer relationships Myles Nobles says while the decision won’t be pleasing to landlords it is largely consistent with the Osaki decision. “The only hope that landlords have is for a change in the legislation, or to pass on the costs of insurance (including factoring in their excess) to their tenants as many will already be doing via rent increases.”

What lies ahead

R

ent rises and a surge of interest in new builds are likely to be on the cards in 2018, industry commentators are predicting.

NZ Property Investors Federation executive officer Andrew King says the costs of maintaining a rental property are likely to go up so market rents are set to follow. That’s because landlords are now seeing diminishing capital gains and will be turning their attention back to yields.

King says tenants don’t like to have big increases in rent, so landlords need to plan for it and put it up in increments over the appropriate time period rather than all at once. “It is worth noting changes to the investor environment mean there could be a lot fewer new investors coming on to the market.”

Prominent Auckland property investor David Whitburn thinks there will be a massive swing towards new builds as a strategy for investors.

“New builds require a much lower deposit from everyone, including investors and that means investors don’t need to use as much equity. This helps with buying capacity. On top of this, buying a new build makes it much easier to meet the looming minimum standards.”

While investors haven’t yet flooded to new builds, despite the lower deposit requirements, the Healthy Homes legislation should be the kicker, he says. ✚

HOUSING COMMENTARY

By Miriam Bell

Making sense of housing numbers The first statistics of the year suggest that the housing market may have turned the corner after a flat 2017. But there’s a lot of conflicting information in the market. Miriam Bell investigates what’s happening.

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t the end of last year there were clear signs that – after the long, cold freeze of winter – the housing market had picked up a bit. More activity was reported and prices rose in many markets around the country.

But a look behind the headlines reveals a more complex picture. There is a growing amount of stock on market, sales have declined significantly, and house price growth remains soft.

Yet demand remains high and, with the easing of the LVRs and interest rates still low, that’s unlikely to change. Add to the mix government policy changes likely to impact on investors. And you get contradicting messages.

It is this which could well turn out to be the theme of the year for the market; disparate data results which overlay a flatter but more settled market.

THERE’S MORE HOUSES TO BUY

Lack of housing supply has long been one of the drivers of markets around New Zealand, particularly Auckland. The new government plans to fast track its KiwiBuild programme in a bid to boost available supply but it seems that, currently, the number of houses for sale is growing.

According to Realestate.co.nz’s latest data, the total amount of housing stock on the market is on the rise. It was up by 9.3% in December, as compared to December 2016.

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Further, big year-on-year stock increases were recorded in all the major centres in December. Auckland’s housing stock was up by 26.1% on December 2016 to 8,497, while Wellington’s stock was up by 21% to 971 and Canterbury’s stock was up by 18.6% to 3,642.

However, the data also shows that new listings have slumped. They were down by 6.2% to a record low of 7133 in December 2017, as compared to 7606 in December 2016.

This is the lowest level on record. The drop in new listings was widespread, with 13 of the country’s 19 regions experiencing a drop.

Auckland was a significant contributor to this, with only 1,908 new houses listed which was down by 7.8% on December 2016’s 2070 new listings. But the biggest fall was in the Wairarapa, which was down by 32.9% to 98 year-on-year.

For the Auckland market, Barfoot & Thompson’s December data provided further evidence of this trend. The agency saw just 571 new listings in December, which it acknowledged as low.

BUT SALES LAST YEAR SLUMPED

At the same time, data across the board shows that sales activity plummeted throughout 2017 – although there was a slight lift at the end of the year.

QV’s December data has national sales volumes down on 2016 for every month during the year and between February and October they were in excess of 20% below 2016 levels. While sales picked up

in November in a post-election late spring surge, they still finished the year 10% lower than the year before.

In Auckland, sales volumes continue to decline with another drop in December, according to Barfoot & Thompson’s data. The agency sold 674 properties in December, as compared to 757 in November and 721 in December 2016.

Barfoot & Thompson managing director Peter Thompson says one of the significant market changes in 2017 was the number of homes sold. They fell by more than a quarter on the numbers sold in each of the previous three years.

Meanwhile, the December data from REINZ shows that, once seasonally adjusted, there was a 0.3% increase in sales nationally from November to December. This follows a 4.5% increase in November.

But year-on-year, once seasonally adjusted, sales remain down by 6.1% nationally and by 2.8% in Auckland. Sales volumes in 15 out of the 16 regions were down year-on-year, with only Nelson seeing a slight increase.

REINZ chief executive Norwell says that December was a continuation of the theme seen throughout 2017, whereby the number of properties sold across New Zealand decreased every month when compared with the same month in 2016.

“But it’s a tough comparison, because 2015 and 2016 were very strong years for the industry, and set quite a high bar, so any comparison was always going to be more moderate beside these outlier years.”

WHAT’S DRIVING HOUSE PRICES

REINZ SALES: UP

HOUSE PRICES ARE RISING, BUT SLOWLY

Stock on market might be growing while sales activity remains at reduced levels, but prices continue to creep up – albeit at a crawl rather than a sprint.

QV’s latest House Price Index records that the nationwide average value rose by 6.6% year-on-year to $669,565 in December 2017.

In the final three months of 2017 the average national value increased by 3.6%. But this means that by October nationwide annual value growth had slowed to 3.9%, which was the lowest rate of growth seen in five years.

In the Auckland region annual value growth slowed to -0.6%, which was the slowest annual rate of growth seen since March 2011. It saw value growth of just 0.4% over the 2017 year and of 1.2% over the last three months, which left the region’s average value at $1,051,762 in December.

Looking around the country, there was a mixed bag of results. Many areas, including Christchurch (down 0.1%), experienced property value decreases over the year. But the Wellington region saw value growth of 9.4% over the year and 3.6% over the last three months, leaving its average value at $628,450 in December.

In contrast, the latest Trade Me Property Price Index has 13 of New Zealand’s 15 regions hitting record average asking prices in December.

Wellington led the way with a 12.8% yearon-year increase to reach a record $568,100 in December. Otago followed close behind with 13.3% year-on-year growth which left the region’s average asking price at $525,300.

Many regions may have seen strong price growth in December, but the rate of growth was decidedly slower than that seen in 2015 and 2016. The national average asking price was up by just 0.2% on November and by 3.4% year-on-year to $640,450. Auckland’s average asking price rose by 3.6% to reach $941,850 in December.

Realestate.co.nz and Barfoot & Thompson also both recorded increases in average asking prices. But, when it comes to Auckland, Thompson says that while prices have continued to rise, the region’s market has been reined in from rapid price increases and has settled into a more stable trading environment.

WHAT DOES IT ALL MEAN?

While the data throws up some apparently contradictory themes, most commentators are of the view it suggests that, although price growth continues, the market has flattened and normalised.

For QV national spokesperson Andrea Rush,

the general trend is a slow-down in the rate of value growth. “The frenzy in the market of the previous three years, induced by high numbers of investors in the market, subsided and we saw a return to more normal levels of activity in housing markets around the country.”

The slight easing in LVR restrictions is likely to improve activity and demand, while low interest rates, relatively high migration and lack of supply remain as market drivers, she says. That means values are likely to hold for the most part, during 2018, in the main centres.

“But the trend of lower rates of growth is likely to continue. Areas where investors were previously very active may continue to see values drop back where prices remain too high for first home buyers particularly in Auckland, Hamilton and surrounding districts.”

Some regional areas might continue to see stronger value growth than the main centres during the coming year, Rush adds.

When it comes to the former bull market of Auckland, Westpac senior economist Satish Ranchhod says the data points to a firming in the Auckland housing market in late 2017. But he expects that this will be temporary.

Looking at the longer-term trends in the housing market, a softening in conditions over the past year remains apparent, he says.

“Despite their recent firming, sales are still well down on levels seen over the past year.

Price growth has flattened off. And the stock of available listings continues to climb.

“We expect the market will continue to slow over the coming year in response to concerns about changes in government policy and pressure on borrowing rates.”

Meanwhile, Squirrel managing director John Bolton believes the new-build market looks vulnerable. Developers and builders will have to face lower profits as they will struggle to sell at current prices in a softer market.

“Unlike existing stock, developers and builders must meet the market eventually and you’ll see that reflected in prices. I wouldn’t be surprised to see a 10% drop in valuations on completed product and a 20% drop in land values. The same applies for subdivisible inner city sites where speculators have paid too much. But inner-city properties in popular suburbs will hold up.”

The market will continue to see ongoing soft sales volumes for the next two to three years, he says. “Overall, reported house prices will come back 5 to 10%, but will otherwise remain static. It will come down to simple supply and demand. 2018 will be a buyer’s market - just don’t expect vendors to be overly negotiable.” ✚

Once seasonally adjusted, sales volumes were, again, up slightly around the country, including Auckland, in December as compared to November. But sales volumes remain well down on the same time last year.

INTEREST RATES: NEUTRAL

Interest rates remain low, but banks are announcing both small rises and falls in various rates periodically.

OCR: DOWN

The Reserve Bank left the OCR on hold at the record low of 1.75% in November.

IMMIGRATION: DOWN

Annual net migration dropped for the fourth month in a row in November, while monthly net migration remained at the same level as the month prior.

BUILDING CONSENTS: UP

Once seasonally adjusted, building consents rose to a 13 year high nationally in November, after a slump in October. In Auckland, consents were up to hit a 15 year high.

MORTGAGE APPROVALS: DOWN

Reserve Bank data shows that mortgage lending overall dropped in December, as compared to November. New lending to investors was also down while but investors’ share of new lending reached a new low.

RENTS: UP

The average national rent increased again in December. Wellington rents were up to equal the record high but rents in Auckland remained unchanged from November.019

REGULATION LEGAL

By Susan Edmunds

Client-first:

What does it mean?

Under new legislation, all financial advisers will have to abide by a duty to give priority to their clients’ interests. Susan Edmunds looks at what effect that will have on mortgage advisers.

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hen the Financial Services Legislation Amendment Bill (FSLAB) comes into force next year, it will bring all financial advisers in New Zealand into the same regulatory framework.

Everyone will have to abide by the duties laid out in FSLAB, and by a code of conduct, which will tailor some of its requirements to specific advice strands.

Among the requirements of FSLAB is a duty for all advisers, whether they are working for a product provider or as an independent, to give priority to client interests.

While mortgage advisers have previously been expected to act with care, diligence and skill, this will be the first time that the

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client-first obligation has been so expressly applied to them.

Ideally, little should change. Mortgage advisers say anyone who was doing their job properly should have been putting their clients first, anyway.

David Ireland, a lawyer at Kensington Swan and head of the current code committee, administering the code of conduct for authorised financial advisers, said the challenge for most mortgage advisers would be how they provided the proof they were meeting the requirement.

“A combination of factors will be involved,” he said.

At the most basic level, advisers would need to make sure they did not prioritise the interests of anyone else – whether that was

the product provider or their own desire for commission – over the client.

They would also need to look at their requirement to adequately outline their scope of service so that clients had clear expectations of what was being discussed, he said.

“That gives the framework within which you are required to give priority to a client’s interests. It’s not saying you can’t take commission or can’t be remunerated for the service you provide but making sure you’re not materially influenced by those factors.”

Mortgage advisers would need clear systems to rationalise why they were recommending a certain product within an appropriate range of solutions for the client, he said.

WHAT’S APPROPRIATE? ➤ Acting professionally, ethically and with integrity ➤ Providing a service to the standard you would want someone to provide the same service to you ➤ Ensuring the customer is not harmed or disadvantaged in any way

WHAT’S NOT? ➤ Failing to disclose that you make more commission with a lender you’re pushing a client to move to

are ineligible at present for a loan rather than falsify or massage the figures to obtain a loan for a client,” he said.

“The client may want a mortgage but it might not be truly affordable for them.

Explain that the lowest interest rate is not necessarily the only criteria that should be considered. The loan structure also is very important.”

Strategi distributes a voluntary code of lending conduct, in which it notes that mortgage advisers should only recommend moving to an alternative lender when the incumbent does not have a suitable product or there is a material benefit in doing so.

“Changing lenders will incur direct and indirect costs plus customer time and disruption.”

➤ Charging the customer an exorbitant fee or double-charging ➤ Placing a loan with the bank that pays the most commission regardless of who the customer banks with ➤ Regularly churning the loan when it’s outside the clawback period ➤ Recommending a loan structure that gives you more commission but is more expensive than other products Source: Strategi

Advisers would need to constantly review the market to make sure what they offered reflected the best that was available for their clients, he said. “Scanning what they are offering against what is out there.”

For some mortgage advisers, it could be a challenge to ensure they did not just react to what clients wanted.

“If a client were to go to a mortgage adviser and say ‘I want to borrow $1 million against this property’ giving priority to their interests might mean taking an extra level of care and asking ‘does this make sense, this level of commitment?’.”

David Greenslade, of training provider Strategi, said advisers should make a genuine effort to see if a suitable mortgage could be obtained from a client’s existing bank when their loan rolled over or they needed a new one.

They would also need to take all reasonable steps to ensure the information submitted was correct even if it meant the deal did not meet the lender’s criteria.

“It is better to explain to a client that they

❝ If a client were to

go to a mortgage adviser and say ‘I want to borrow $1 million against this property’ giving priority to their interests might mean taking an extra level of care and asking ‘does this make sense, this level of commitment? ❞ - David Ireland

Sometimes the existing lender would offer favourable terms to a customer it already had on its books, the code notes. “This may mean that providing the new loan via the incumbent lender may be more beneficial to the customer than changing lenders.”

Even advisers who only deal with a limited number of product providers – or who only work for one- should be able to meet the duty, provided they make that fact clear.

Jane Standage, a lawyer at Minter Ellison Rudd Watts, said tied advisers could satisfy their obligation by informing clients that they could only advise on a limited range of products, and showing that a reasonable adviser would be satisfied it was in a client’s interests to recommend a product.

Glen McLeod, of Edge Mortgages, said doing the right thing usually meant repeat business and a happy client.

“If I only worked with, say, Sovereign, as long as I disclosed that and did the best I could with the product available then this has happened correctly. If, however I had Bank A who pays more than Bank B and I took everything to Bank A because I wanted the higher commission and Bank B provided better products than Bank A I would be in breach,” he said.

“We have, for many years, disclosed remuneration to our clients and openly let them know who they would qualify with.

We discuss if they have a preferred lender and the benefits of one package or another.

Where everything is transparent issues don’t materialise.”

Ian Webb, of construction finance specialist NewBuild, said there was an increasing need for written disclosure, whether an adviser thought the client would read what they were given, or not.

Ireland said it was inescapable that the new requirements would mean more paperwork as advisers kept clear records of the rules being met. “It will be needed to evidence and support the fact that you have discharged your obligations appropriately.

I don’t profess it will be easy. If you can’t sit back and say ‘yes I can evidence I have discharged my duty to give priority to a client’s interest’, you might need to revisit your business model.”

Webb said he did not understand why legislation was needed. “It’s the first thing advisers should all be doing in the first place.”

He said the effect of regulation so far had pushed some advisers further away from the client-first goal.

Some had become too scared to give their clients advice about mortgage structure or interest rates. “The legislation has been making it harder and harder for me to actually advise.” . ✚

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LEAD – 2018 PREVIEW

LOOKING FOR OPPORTUNITIES Change has become a constant for mortgage advisers. That’s set to continue in 2018 but industry leaders say advisers should make opportunities for themselves by embracing the changes to come, writes Miriam Bell.

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L

ooking for the thrills and spills of a roller coaster ride in your profession? Life in the mortgage advisory industry has provided just that in recent years. There was the dizzying climb to new heights in 2015 and 2016 followed by a descent in 2017.

But while 2017 saw a levelling off of the market – and the related ride – the year was largely marked by uncertainty.

Election uncertainty was followed by a new government which has pledged to more actively intervene in the housing market, Reserve Bank surprises and the tightening of bank finance have all left many wondering just what the future might hold.

For mortgage advisers, market uncertainty is set to continue throughout 2018. But there are further questions to ponder. Interest rates defied expectations to stay low last year but will they continue to do so? Should they be worrying about the prospect of the new legislation? What will Financial Advice New Zealand mean for them? Is roboadvice a real threat?

Industry leaders say that while the market is likely to keep trucking along, plenty of change remains ahead. And the consensus is that for advisers to make it through they will have to seize the day and create opportunities in the new advisory landscape.

RATE PROJECTIONS

The housing market has become one of the nation’s favourite topics. But, for advisers, the dramatic speculation that tends to make up the conversation is of little use. Rather a realistic take on the potential direction of the market is key to how their year might pan out.

To that end, TMM took a look at the integral factors that will shape the housing market this year. First up, mortgage rates. Their difficulty to predict was highlighted last year when commentators forecast rates rises which simply didn’t eventuate. This has left industry participants uncertain of what to expect with rates this year.

Westpac chief economist Dominick Stephens says there is currently some downward pressure on fixed rates and bank margins. That means advisers are likely to see independent reductions in mortgage rates in the months ahead.

In his view, this will be a short-term trend – even though he does not see the Reserve Bank making any change to the OCR before 2019 as it has forecast.

“Despite this financial markets will start to cost OCR hikes in probably from the second part of this year and that will drag rates up later in the year. That means the outlook is a bit of a tick shape (down then up) for

❝ It is reasonable

that there should be a standard in the bank mortgage space. If an adviser doesn’t meet it then they are not writing as many mortgages as they should be.❞ - Kris Pedersen two-year fixed rates. Expect small rates movements but not much.”

Among economists there seems to be a sense that, globally, central banks are moving away from the accommodative trend and interest rates are set to move up. But, on the ground, advisers are questioning how that might play out in real terms.

Campbell Hastie, from Go2Guys, thinks any rate changes are likely to be subtle and gradual. “If you get an interest rate increase of 10 basis points on a $300k mortgage it doesn’t make much difference. It won’t mean $1000s a month – if it is a slight change in either direction. So rates shouldn’t be a huge worry.”

However, NZIER senior economist Christina Leung says advisers need to think about the potential risks for their clients in rates rises.

That’s because household sector debt levels are very high relative to income.

“If there’s a jump in interest rates the household sector is vulnerable in terms of servicing that debt. We expect interest rates to see a measured increase later this year and advisers should communicate to their clients that that could impact on their mortgages and debt servicing ability.”

BANK MOVES

Another critical factor in the housing market equation is the lending criteria of banks. Last year, the banks were imposing noticeably tighter lending requirements. But this year could well be different – with glimmers of change already emerging.

The Reserve Bank surprised many with its pre-Christmas announcement that it would be easing its LVR requirements from 1 January 2018. Speculation about future easing is already well underway, but the Reserve Bank itself says it will only make further LVR adjustments if financial stability risks, including house price inflation, remain contained.

While the easing of the LVRs was only slight, it has increased the banks’ cap on low deposit lending from 10 to 15% which does boost their lending capacity. This seems to have prompted some banks to loosen up a little, becoming more open to lower deposit lending.

ANZ, for example, has announced that their mortgage lending policy will now reflect the easing of the LVR restrictions. Their maximum LVR has increased from 85% to 90%, which means that the bank now considers loan applications with deposits of just 10%, rather than 15%.

Any such changes in bank policy are welcome to advisers, but most believe that banks are still going to play hard ball on the lending front. iLender’s Jeff Royle says nothing has really changed on the bank front and it is significantly harder to get deals accepted than it was 15 to 18 months ago. “More and more deals are coming back and quite a bit of extra work is required to get customers over the line. The tightening of criteria is here to stay. I don’t see it easing much.”

Kris Pedersen, from Kris Pedersen Mortgages, agrees the pressure is not going to come off significantly in terms of bank funding criteria. But he says the banks might ease up a bit. “The LVR easing is pretty positive to date. Banks have adopted the new requirements and are coming on board with the changes. That’s likely to mean more enquiries and more volume.”

For Hastie, bank concerns around debt servicing will continue to be a constraint.

“That means it will still be tougher to get finance from banks for clients. That’s a challenge for advisers. But it also creates opportunities for advisers. When things are harder for borrowers our phone rings more.”

MARKET OUTLOOK

If mortgage rates are expected to rise only slightly, thus remaining very low, and banks are likely to be a little more accommodative when it comes to lending, that spells good news for the housing market. However, it is balanced out by other factors.

Leung says the easing of the LVRs gives more support to housing market activity, but there is widespread uncertainty over the new government and what their policies might

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mean for house prices. “There is the potential for them to do something further to quell demand and subdue activity.”

As a result, uncertainty over the market remains strong and will make many buyers and sellers cautious. “But because of the surge in population in recent years, even though migration is slowing, we are still playing catch-up when it comes to supply.

So, in the long-term, house prices will continue to grow albeit more moderately than in the recent past.”

This outlook might seem contrary to current market data, given the end of 2017 saw house prices on the rise again and some improvement in sales volumes after a major slowdown throughout the year.

Stephens says the market is indeed seeing quite a sharp recovery at the moment.

It’s due to the easing of the LVRs, a recent reduction in mortgage rates and, possibly, a rush to beat the impending ban on foreign buyers.

The positive market should continue for a couple of months but, after that, slowing net migration and new government policy squarely aimed at cooling the housing market will kick in, he says.

“In April, the bright line test change comes into effect. There will be increased realisation that ring-fencing will be next and that a capital gains tax is a real possibility. Mortgage rates are set to rise later this year. And these things will have a negative impact.

“Then the market will start to slow and that leads us in one direction… House prices beyond the current short term blip are likely to fall, or will have a rate of growth below zero. There will be a house price decline – although the conditions are not right for a large downward change, so a crash is not on the cards.”

PROFESSIONAL DEVELOPMENTS

An evolving housing market is not the only challenge on the horizon for the advisory industry.

Rules governing all financial advisers are changing. The Financial Services Legislation Amendment Bill, which replaces the Financial Advisers Act is currently before a Select Committee in Parliament.

The changes proposed with most dramatically hit mortgage advisers who currently operate as Registered Financial Advisers.

While the new regime is not intended to take effect until around May 2019, there’s an

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❝ There is the

potential for them [the new government] to do something further to quell demand and subdue activity.❞ - Christina Leung underlying expectation that advisers should start to prepare for the new competencybased world.

Mortgagesonline’s Hamish Patel says the increased professionalism which will come with the new legislation is good, but it means there will be more expenses and red tape for advisers. In his view, smaller advisers in particular should keep an eye on the progress of the bill, which is now at the Select Committee stage, and the formulation of its details.

“The requirements can’t be too onerous.

That’s where people turn off which is not good for the consumer. It will make it harder for smaller firms with two or three people.

You want to make sure you are not killing those advisers. With more compliance, it has to be effective and usable in the real world.”

But for Royle the changes are long overdue.

He believes that, currently, it is far too easy for anyone to become an adviser with little or no real qualification in New Zealand.

“Advisers need to think would a client go to a lawyer or an accountant that is not qualified? No, so why a mortgage adviser who helps with the biggest financial purchases of most peoples’ lives. New Zealand has always been a bit lax, as compared to Europe where it is a criminal offence to discuss mortgages unless you are suitably qualified. It shouldn’t go that

far but the industry does need to be more professional.”

The new legislation will address a lot of that, he says. “For some that might be a big ask, for others not. I do know of a few advisers who have suddenly decided they are going to do the necessary courses now, under the existing regime, because under the new regime it will just get harder.”

Coming alongside the new legislation is the development of the new adviser association Financial Advice New Zealand.

It will take over the roles of the PAA, IFA and NZFAA and also aims to help boost the level of professionalism in the advisory industry.

Affinity Mortgage Advisors’ Sandra Spence, who is on the Financial Advice NZ mortgage advisory committee, says 2018 will be interesting as the foundation of the industry is on the verge of a major structural shift – which advisers need to proactively accept.

“The abundance of products and choices in our industry has made the guidance and role of advisers more important and more relied upon. More and more Kiwis are relying on the advice passed on by their adviser, so we need to ensure the competency level of advisers adheres to a clear industry standard.

“As a mortgage adviser, who electively become an AFA, I see the standards upheld in this qualification as an asset to my practice.

Opportunity is prevalent for those willing to take change on board and utilise this as an asset in their everyday work.”

DIGITAL ADVANCES

Fast developing technology has thrown up yet another challenge to the traditional adviser: roboadvice. Under the new legislative regime, roboadvisers are allowed.

But they are set to hit the market before the law comes into force. That’s because the Financial Markets Authority has prepared an exemption that will make it possible to provide personalised digital advice by the end of March.

While the arrival of roboadvisers might seem to present an innate threat to the industry, all of the advisers TMM spoke to were positive about roboadvice and its potential to help the industry. Most pointed to the example of Xero, the advent of which initially concerned many accountants but which has, in fact, been embraced by the industry.

Hastie believes roboadvice will, ultimately, function as a highly effective marketing tool to drive sales. People want advice that is tailored, especially in tougher times, and

they want to know they are making the right financial decision, he says.

“Roboadvisers can’t provide that. But they can deliver 100 potential clients, via enquiries and leads, a week and a good adviser can benefit from that. For those advisers who are positive and see roboadvice as a positive opportunity, it could provide an opportunity to get ahead of the game.”

Roboadvice is only a risk for advisers who are just mortgage shoppers and who don’t offer much additional value to their clients, Pedersen agrees.

“It’s definitely a danger for that type of adviser. Advisers who give more than that and who provide specialised advice should be fine. There are enough ongoing complexities around tax changes, insurance regulations, self-employment, and the like to mean that advisers are needed. Roboadvisers can’t delve into those areas. Once you are out of the simple part of the market they won’t have much impact at all.”

Good advisers will bring roboadvice into

❝ 2018 will be

interesting as the foundation of the industry is on the verge of a major structural shift – which advisers need to proactively accept.❞ - Sandra Spence

their business and use it to enhance the service they provide, he says. “It all depends on the individual adviser’s business and how the adviser adapts to new technology. But I don’t see it as a big worry.”

ADDITIONAL TRENDS

On top of the broader waves of change set to wash over the advisory industry, there are a couple of other trends worth noting. One is an apparent drive, which both Royle and Pedersen note, on the part of some of the major banks to push advisers’ games up.

Royle says ASB and Westpac are on a charge with accreditation. “Unless advisers are doing the volumes they expect, those banks are looking at whether or not particular advisers will retain their accreditation.”

There seems to be a general move by banks to clear out under-performing advisers, in Pedersen’s view. “It happened 10 years ago too, it was just one or two banks back then. But it’s across the board now. They are cleaning up shop and don’t want advisers who are doing minimal volumes.

“It is reasonable that there should be a standard in the bank mortgage space. If an adviser doesn’t meet it then they are not writing as many mortgages as they should be and that means they are not doing business properly and can’t adequately advise clients.”

This might increase as the market flattens, he says. “But those advisers who aren’t offering a good service need to be cleaned out. So I support the banks’ stance as it keeps the adviser brand up.”

Another trend, but one which offers opportunity for advisers looking to build the level of service they offer, is the ongoing development of the non-bank sector – which is firmly open for business.

Royle, who has long been a non-bank advocate, sees high growth in the non-bank sector continuing in 2018. There has been one new entrant into the market, with the return of a former major player, Bluestone.

Also General Finance now has new owners who are looking to significantly grow the business.

“Will they make a significant difference to the market? No. But other lenders might reappraise their product range and make them more flexible than they are now. It will also be interesting to see if other Australian lenders now look to get into the New Zealand market.”

There is definitely room for more in the non-bank space, Hastie says. “New Zealand is a tiny market though, with not that many

niches. Yet there is definitely some space – especially for low-doc type lenders or product. Currently, you can get a low-doc loan but they are short-term. There is room for longer term ones.”

He adds there is probably a bit more leeway and flexibility when it comes to lending with a non-bank as opposed to a mainstream bank. That makes the non-bank sector an area worth exploring for advisers who have not used it in the past.

EMBRACING CHANGE

The flatter housing market, the ongoing need to navigate bank requirements, the increased push for adviser professionalism, and digital developments mean there are challenges ahead for the industry in 2018. Yet the advisers TMM spoke to felt there were few real dark clouds on the horizon. Rather they felt that those looming challenges present opportunities for canny advisers keen to grow their business.

Patel, who is also on the Financial Advice NZ mortgage advisory committee, thinks it comes down to individual advisers working out how they can provide their clients with great value in the current environment and then putting that into practice. A lot of advisers do good stuff but they don’t have an effective way of communicating what they do up front, he says.

“So improving communication is a solid business strategy. Be transparent, clear, and upfront. Instead of being completely numbers driven, advisers should make sure they offer a decent, feel-good, human factor in there. Advisers will need to make doubly sure their clients know and understand what they are saying and how it works for them.”

For Spence, the risks for advisers moving forward are for those unwilling to change with a moving industry. Advisers should be putting measures in place to deal with increased education requirements and to deal with changes in remuneration models, as these conversations have been on the table for years now, she says.

“With each change comes an opportunity for businesses to rise to the challenge and use it as an asset. Increased education means a more professional service standard across the board. Creating long-lasting client relationships will be important moving forward and once a relationship is established clients will understand a professional fee for service if commission models are refined. The dark clouds in our industry simply rest with individual adviser’s adversity to change.” ✚

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SECOND MORTGAGES

More please, Sir There’s plenty of demand for second mortgages, however not many advisers are writing them. Here’s TMM's guide to writing second mortgages.

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t’s no secret that banks are limiting credit, but there is still demand for loans and in many cases a second could be the solution for your clients.

Core Finance specialises in this area and its chief executive Grant Donohue gets frustrated more advisers don’t offer this solution to their clients.

He believes it is a good option to help increase revenue, attract and keep clients and grow an advisory business.

From a revenue perspective advisers can make money by offering second mortgages.

Because the key goal of a second is to get the client to a mainstream bank there becomes a second revenue stream.

Christchurch-based Gold Band Finance is one of the players in the second mortgage market.

Chief executive Martin Brennan says there has been increased demand ever since the Reserve Bank tightened the LVR lending rules.

“We’re getting busier and busier with banks saying no,” Donohoe says.

The typical client Gold Band will bank for a second is one who has the ability to aggressively pay off the loan.

“Good income earners with the capacity to clear debt aggressively.”

Kim Lyons is one mortgage adviser who does a lot of second mortgages. The type of client who uses a second mortgage is varied as is the purpose behind the loan.

One group of clients is first home buyers.

However, seconds can be used for many things including debt consolidation, renovations, bridging finance, small lot subdivisions and for business expenses such as stock purchase.

While the term tends to be around four to five years, many pay it off much sooner, he says.

Gold Band tends to do seconds where other non-bank lenders, such as RESIMAC, Liberty and Basecorp, take the first mortgage.

Banks generally won’t even consider a second mortgage situation because of the Reserve Bank rules.

There is a view that if banks accepted

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seconds they would be breaching the intentions of the central bank’s macro-prudential regulation. In a worstcase scenario they could lose their banking licence.

Donohue says when it comes to seconds Core Finance does not have a requirement to have bank consent or a deed of priority.

He asks borrowers to get independent legal advice and nine times out of 10 there is no problem. However, some “old-school lawyers” advise their clients against a second.

Donohue says second lenders aren’t affecting the bank’s position in terms of security and the second mortgage lender is taking on all the risk.

He also says that in the majority of cases the exit strategy is to refinance back to a bank.

Brennan says the goal is to get the borrower to a mainstream bank and prime product.

In terms of getting a deal across the line Brennan encourages advisers to “workshop it”. Ring up, ask questions and find a way of making it work.

He wants to see full information, details of the proposed loan structure and an exit plan.

“Fish hooks are ok, but explain to us what the fish hooks are.”

“The best brokers pre-empt bad news.”

“Here’s what happened; Here’s why it happened and here’s why it won’t happen again.”

Lyons agrees it’s critical to “disclose everything. You have to put all the cards on the table. We want warts and all.”

Brennan reckons around 70-80% of applications that Gold Band receives can be converted into sales.

Donohue gives the same message The ones that fail are where there is insufficient information or holes in the data provided.

With others it’s just the totality of debt.

In this case they should clear some of their other debt, such as credit cards, before seeking a mortgage.

Ideally the first mortgage will be interest-

only, he says and first mortgage holder will have priority of debt and two years interest and charges.

The second mortgage will be aggressively amortised over five years.

The other key piece of information which is imperative is that there is a clear exit strategy.

Both Gold Bank and Core Finance say they need to know what the exit strategy is before the loan is approved.

Interest rates on a second sit around the 14-17% mark. While that may sound high, the reality is actual cost isn’t too significant.

Generally it is only 10% of the total loan and is paid off quickly.

Donohue says advisers have the option of refinancing a bank loan to a non-bank lender when there are issues. In this situation the borrower is, generally, paying a higher rate on all their debt.

The other option is to stay at the bank and use a second mortgage.

Gold Band doesn’t charge fees and leaves it up to the adviser.

“I’ll never tell a broker what to charge.”

There are different ways of dealing with it with some charging clients fees; others will do it for no fee as part of their service. Their payback, he says, comes when the adviser refinances the client to a mainstream bank.

Lyons says he charges a fee for the service he provides. While there is a dollar amount he aims to make from each deal, he preferred not to disclose it.

Donohue, like Brennan, doesn’t pay brokerage on deals He says the fee is disclosed in the loan documentation and capitalised with the loan.

Donohue says second mortgages are a great way for advisers to add to and increase their revenue stream.

He says an adviser could easily charge a 2% fee: “It’s not unreasonable.”

“There’s a massive opportunity. Not only can they charge a fee on a second, but it’s their responsibility to take it off our books (and back to a bank),” he says. ✚

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SALES & MARKETING LEGAL

By Paul Watkins

If you do what you have always done...

You know how this saying ends: If you do what you have always done, you will get what you have always got! It’s a new year, so time to look closely at what you did last year and look for improvements or changes.

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any companies now practice the concept of ‘Continuous Improvement’, which means setting aside dedicated time to look for small but significant improvements to current activities. This approach is also known as ‘Kaizen’, which is a Japanese word that translates as: kai = change and zen = good. This method became famous in a book called, ‘Kaizen: The Key to Japan's Competitive Success.’

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Marketing activity is changing so rapidly; what worked five years ago may still work at times, but it’s not going to be sustainable.

Giving current marketing, selling and client service activity each an improved edge is the key. It is rare that you will find a single change that makes a revolutionary difference to your performance as a broker, but there will be lots of small things that do, and it’s critical that you look for items of continuous improvement.

The process outlined below should be

repeated on a quarterly, but preferably bi-monthly basis. It might look tedious and time-consuming, but will always pay off.

Start by generating a spreadsheet of all new business from 2017. List their names, ages, suburb, type of business ie brand-new clients, refinancing, debt consolidation, and so on. Add a column for revenue achieved.

Your current CRM system should be able to generate this for you.

Now add a column for how you got this business, ie referral, telemarketing, press

❝ Continuous

Improvement meetings help increase gains across many industries.❞

advertising, Facebook, friend or relative, sponsorship, contacting an existing client, newsletter respondent, radio, consumer show (eg Easter Show) or any of the other ways you won the client. I’m sure you can add more to this list. Make this as detailed as you can. For example, “referral” should be from who – an insurance broker, friend, existing client, real estate agent and so on.

Once you have set this up once, updating it takes little time.

Now sort them by revenue, from your most valuable client last year to your least valuable.

Whatever the number you have, focus on the top 20, or go to the top 50 if you prefer. The goal here is to look for little improvements in how these were achieved and serviced, with a view to replicating them. (No point in replicating your bottom 20).

Now look at each one closely. Let’s take referrals as the example. How did you reward the referrer? Can this be improved to encourage more? How often do you meet or communicate with referrers such as real estate agents? Is this too often? Too infrequent? How can the arrangement be improved at each step? Is it by email? Could this be changed to text? Real mail in the post?

As a matter of interest, due to very little mail now being sent, postcards and real mail have huge impact, and emails are increasingly being ignored. Email is very much losing ground now to almost all other messenger services, such as texting or the app-based ones including WhatsApp, Facebook Messenger, WeChat, Instagram and for those aged up to late twenties, it’s SnapChat that rules.

Trace select clients from the initial contact to deal completion and look for small improvements. This includes any sales pitches, frequency of communication to clients, style of communication, (eg moving from email to text or phone). I covered this in depth in the last issue of TMM, so if you want to know more about how to make improvements in this area, re-read the last edition.

Do you prospect by telemarketing? This is worth looking at closely, as over 30% of New Zealand homes no longer have a landline, and this is expected to be over 50% within five years. Think about your own experience.

Most of the landline calls you receive are either from older family members or from telemarketers. I have said repeatedly - we live on our cell phones now. So, for those of you that still do this, find an alternative way of prospecting.

Why me? This is the biggie. And very, very hard to answer. What makes you stand out in the crowd? Why should they choose you and

not another broker or go direct to the lender?

Each Continuous Improvement meeting you have, put this on the agenda. It will take a bit of time to come up with the right answer.

Think of it as completing the sentence.

You all know what an ‘elevator pitch’ is – it’s when someone asks you, “What do you do?”

What’s your answer? It can’t be “I arrange mortgages” or “I’m a mortgage broker”. If the enquiring person doesn’t need one, then they will end the conversation. It must be something that makes them think, ‘Hmm, I know someone who may need your services.’

As already stated, it’s not easy to answer, so take your time, but its well worth coming up with the right answer.

This leads directly to your advertising. What improvement can you make there? First, look at the mediums you use, be it press, radio, Facebook, consumer shows and so on.

Which ones appear to give the best results?

That’s a starting point. Now look to make improvement to the one that seems to work best, in terms of the key message, wording, contact details and images used (please do NOT use clichéd pics of happy families).

Look closely at your business cards and brochures. Do they clearly explain your point of difference? Are they professionally designed and printed? Don’t skimp on these items. Good design is not expensive, and printing is now extremely cheap. The worst case I know of is a broker who had 1,000 business cards printed and still had 900 when we spoke. They are out of date and ugly, but he won’t have them redesigned and printed as he can’t stand the idea of throwing 900 cards away. Dumb!

The entire team must be involved in this process. The Japanese experience showed that most of the small but significant improvements to the businesses came from within the workforce and rarely from management. Set up dedicated times, such as a team breakfast followed by a Continuous Improvement session between say 8:00 am and 9:00 am. They do not have to be long and don’t try to cover too many topics at one time. Just one issue at a time. Make them quarterly Continuous Improvement meetings have now become part of the standard processes within many New Zealand manufacturing and service companies. I have seen them at work and they help make gains in schools, factories, legal firms, retail, public service providers, exporters and on farms. This is because they work. Set one up. Don’t expect miracles from the first one, but the team will enjoy them, and higher sales will follow. ✚ Paul Watkins writes blog content and newsletters for financial advisers.

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INSURANCE

By Steve Wright

INCOME COVER TYPES: WHAT DO THEY PAY? Steve Wright unravels the complexities of the different types of income protection insurance in easy to follow terms.

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ncome protection is probably the most complex insurance product life and mortgage advisers recommend. It can’t be ignored either because protecting a client’s income is fundamental to any risk protection plan. Insurance companies don’t like insuring more than 75% of income. This is because an incentive to return to work is important. However, with careful planning, selection of additional, optional benefits (like retirement protection and total and permanent disability booster type benefits) and careful product combination, effectively insuring more than 75% of income is possible.

Nevertheless, selecting the right income protection type is important.

Aside from ancillary benefits, income

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protection typically has two primary benefits, sometimes simply referred to as the disability benefits: • Total disability benefits: a monthly benefit payable when the client is totally disabled as a result of accident or illness and is unable to attend to work duties at all (some policies will allow clients to work up to 10 hours per week and still apply the total disability benefit); and • Partial disability benefits: a proportionate (proportioned according to how much they can work) monthly benefit payable when the client is not totally disabled but is able to work full time (typically less than 75% of pre-disability hours or earnings).

There are several types of income protection, distinguished by the way they calculate the total disability benefit.

Understanding these differences and how benefits are calculated is essential for selecting the most appropriate income cover product and giving compliant advice.

INDEMNITY PRODUCTS

These products calculate the total disability benefit based not on the sum insured, but on actual earnings pre-disability.

They ‘indemnify’ actual income earned immediately before disability. How this ‘predisability income’ is calculated is important (generous policies define this as the highest

income earned over any consecutive 12 month period in the last three years or the most recent monthly income, whichever is higher). The usual indemnity benefit is simply 75% of pre-disability income less offsets (like ACC) to a maximum of the sum insured (no income protection product pays more than the sum insured the client has paid a premium for).

The formula is often expressed as: (A x 75%) – B. (A is pre-disability income and B offsets)

LOSS OF EARNINGS PRODUCTS

TABLE 2 Product

Benefit formula

Policy pays

Combined benefits

After tax benefit

Indemnity

(A x 75%)–B ($75,000 - $80,000)

$0

$80,000

$62,680*

(A-B) x 75% ($20,000 x 75%)

$15,000

$95,000

$72,730**

A-B (A is sum insured)

$0

$80,000

$62,680*

Best of A-B or A-B) x 75%

$15,000

$95,000

$72,730**

Loss of earnings Agreed value Agreed loss of earnings

*simply less income tax on ACC benefits of $80,000 as calculated on the IRD income tax calculator (ACC is taxable)

These products are ‘indemnity’ in style in that total disability benefits are also calculated based on of pre-disability incomes. The difference is they pay 75% of the ‘loss of income’. If correctly insured this usually achieves the same result as an indemnity product where there are no offsets. However, where there are offsets, the loss of earnings approach is usually more generous because it subtracts the offsets from pre-disability income and then multiplies the resulting ‘loss of earnings’ by 75%. The maximum benefit is still the sum insured though.

The formula is typically thus: (A - B) x 75%.

AGREED VALUE PRODUCTS

Agreed value products don’t take predisability income into account at claim time for total disability benefits. It is our understanding that because agreed value benefits are not based on pre-disability income, the IRD does not regard benefits from agreed value products as taxable income. (Be aware though, some agreed value products have partial disability benefits that are ‘indemnity’, being based on pre-disability income, not sum insured.)

Agreed value products pay the sum insured regardless of pre-disability income even if this

**simply less income tax on $95,000 ($80,000 ACC + $15,000 policy benefits) as calculated on the IRD income tax calculator

is lower than income at application time. This is why they are so useful for self-employed people or people with fluctuating incomes.

Offsets are simply deducted from the sum insured.

The formula is simply: A – B (where A is the sum insured and B offsets).

AGREED VALUE/LOSS OF EARNINGS HYBRID PRODUCTS

A recent addition to the suite of income cover products, this ‘hybrid’ includes both the traditional agreed value and loss of earnings benefits and pays the one most beneficial to the client on total disability. This means clients get the certainty of agreed value but the sometimes more favourable outcome a loss of earnings contract can provide if there are offsets.

A BASIC COMPARISON OF BENEFIT PAYMENTS.

Please remember actual results may differ based on a number of factors. The following is simply to illustrate, in the most basic terms,

TABLE 1 Product

Benefit formula

Policy pays

After tax benefit

Indemnity

(A x 75%) – B ($75,000 – 0)

$75,000

$59,330*

(A-B) x 75% ($100,000 x 75%)

$75,000

$59,330*

A-B ($62,500 - 0)

$62,500

$62,500

Best of A-B or (A-B) x 75%

$75,000

$59,330*

Loss of earnings Agreed value Agreed loss of earnings

how the different income cover types work at claim time. Let’s assume a client, earning $100,000 at application, with income cover sum insured of the maximum allowed by the insurers ($75,000 for indemnity/loss of earnings and hybrid products and $62,500 for agreed value (although not all companies will allow $62,500 on agreed value with an income of $100,000)).

If they are totally disabled and their predisability income (A) is still $100,000. How much will different income cover products pay on total disability? (See table 1.)

Now add some ACC (Accident Compensation Corporation) benefits into the mix, assume client is disabled due to an accident and entitled to $80,000 and receives $80,000 from ACC. (See table 2.)

Of course this comparison is overly simplistic, it doesn’t take a whole lot of factors into account, like pre-disability being much higher or lower than the sum insured, other taxable income, allowable deductions and so on. ✚ Steve Wright has qualifications in Law, Economics, Tax and Financial Planning and is General Manager Product at Partners Life.

This article is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product.

*simply less income tax on $75,000 as calculated on the IRD income tax calculator

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MY BUSINESS

By Miriam Bell

Getting the picture of advice

A deep passion for helping more New Zealanders move into home ownership is what drives Tahei Simpson, from AIM Mortgages & Insurance, as both an adviser and a TV presenter.

HOW DID YOU FIRST GET STARTED IN THE INDUSTRY?

After the breakup of my marriage, I went back to University to finish a degree in finance and law. I met a woman who suggested I meet her (mortgage adviser) boss, Kerry Alcock, because she thought I would make a good adviser. I was curious and keen to open new doors so I went and met him. He told me all about the advisory business and it did sound right for me.

I was always aware of the statistics around home ownership, especially for Maori. I thought it would be useful to help people into their own homes. So I found myself shaking Kerry’s hand and going into work at AIM Mortgages the next Monday!

WHAT WERE YOUR NEXT MOVES?

Thanks to past work and experiences, I already had a long contact list. So I threw myself into convincing my community of the importance of, and security that comes with, owning your own home. I worked hard at that, especially because I didn’t have a budget for marketing.

I just had to put it out there and say, “this is what I’m all about”, even though I was still learning and getting qualified. But the hard

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work was getting out there and becoming known. That actually took much longer than I thought it would. Those hard yards have now paid dividends because, ultimately, it’s all about relationship-building.

WHY ARE YOU PASSIONATE ABOUT THE INDUSTRY?

We are dealing with people’s lives and helping them to borrow more money than they are ever likely to deal with again. It’s a privilege to be given that responsibility.

And in the process we are boosting home ownership numbers. That feels critically important to me.

To that end, last year I presented a TV show on Maori homeownership (On the Ladder). It was based around my belief that we need to start by inspiring people, especially if they are not even close to owning their own home.

One of the best ways to do that is to tell other people’s stories and that’s what we tried to do with the programme.

WHAT HAVE BEEN YOUR BEST AND WORST TIMES IN THE BUSINESS?

I feel deeply satisfied with each settlement because it means there is another family in a home. When people think that what you

have done for them makes you a magician, that’s a good feeling! I also love that my TV show has inspired many people with the idea of home ownership.

The worst time for me involved a deal I was doing for some friends. They were going to auction (to buy) but their bank stopped allowing people to get a top-up on a loan for an auction that week – and I didn’t know. So they asked for a top-up and the bank said no.

I wanted to climb under a rock and hide. I wasn’t sure how I had missed it. My mentor told me that I wasn’t going to get everything right all the time. But my expectations are that I will. It was one of the more humbling experiences I’ve had as an adviser.

HOW DO YOU APPROACH BUSINESS DIFFERENTLY TO OTHER BROKERS?

I think my tone - the way I speak and also the way I write for clients - is different. I’m very big on lots of ongoing communication, including monthly newsletters and regular updates. It ensures people know you are available and approachable. But I try to entertain and make people laugh too.

Having my own TV show is probably a bit different for a mortgage adviser. When I was in my 20s I was a pretty successful actor so I

don’t have any problems being in front of a camera. It also means I’m confident on the presenting and speaking side of things.

who l look to for advice and inspiration, but Kerry is the one who has really been there for me from the word go.

DO YOU MAKE USE OF SOCIAL MEDIA AND NEW TECHNOLOGY IN YOUR WORK?

WHAT’S THE BEST ADVICE YOU’VE RECEIVED?

Yes, I’m very active on social media, and I’m particularly fond of Twitter. I’m very aware of my brand as an adviser and how social media can contribute to it. We don’t need to be restricted to traditional forms of marketing these days. But if you don’t have an online presence that counts you out for many people.

WHAT ARE YOUR GOALS AS A BROKER? I love where I am working now. It is the right place for me as I am still building and formulating what my business will look like.

I do plan to grow as an adviser though and, in that respect, I find what Hannah McQueen is doing interesting. I’m also hoping to do another TV show but one that’s a bit different, and possibly involving an online, educative aspect.

WHO IS THE INDIVIDUAL THAT HAS MOST INSPIRED YOU IN BUSINESS?

My boss, Kerry Alcock. There are other people

Make sure that you are visible - because it means people know about you and think of you. Advising is all about referrals and keeping your business growing.

LOOKING AHEAD, WHAT ARE THE CHALLENGES FACING THE INDUSTRY? People not being able to afford to buy houses and the ever-widening gap between those who can afford to buy and those who can’t. It just keeps getting harder. I think KiwiBuild is an excellent idea but we need people to be able to get mortgages. There is no point in building houses if people can’t buy them. So, as advisers, we need to work to ensure that policies match with criteria to help people get loans.

WHAT ARE YOUR TOP TIPS?

Always make sure you do your homework.

Also, you have to align yourself with others.

You would have to be incredibly brave and confident to try and do it all alone. So it’s important to know who the top advisers are and to try and align yourself with them because it is all about reputation. ✚

❝ Make sure that

you are visible because it means people know about you and think of you. Advising is all about referrals and keeping your business growing.❞ - Tahei Simpson

TAHEI SIMPSON From: Originally, Mt Maunganui. But I’ve been living in Auckland for 20 years.

Family: I have three children and lots of brothers and sisters.

Interests: They’re really dictated by what my children are in to. So I go to a lot of punk rock gigs because one of my daughters is in a punk girl band. I also go to all the Pt Chev Pirates games because my son plays rugby league.

For myself, I do enjoy cooking.

Motto: If you don’t like something, change it. If you can’t change it, change your attitude.

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Intelligence Reserve Bank

DOMESTIC FINANCIAL CONDITIONS Bank funding costs eased slightly in the second half of 2017 (figure 1).

Consistent with the decline in funding costs and a fall in the two-year swap rate, the average two-year mortgage rate has declined by around 15 basis points since June 2017 (figure 2).

In contrast, most other mortgage rates have remained relatively stable. Mortgage rates are higher than a year ago across all terms, but remain low relative to history.

FIGURE 1 PRIVATE BANK' MARGINAL FUNDING COSTS

Note: The shaded areas measure the contribution of each funding source to overall marginal funding costs.

FIGURE 2 MORTGAGE INTEREST RATES

Note: For each term the rate shown is the average of the latest rate on offer from ANZ, ASB, BNZ and Westpac.

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Disclaimer: While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Q Advisor Group for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

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