TMM Happy 2024 Adviser sentiment bounces 01/2024

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ANNUAL MORTGAGE ADVISERS SURVEY RESULTS

HAPPY 2024 ADVISER SENTIMENT BOUNCES 28

WHY A MEAT WORKER BECAME AN ADVISER

MISTAKES ADVISERS MAKE IN THEIR MARKETING

NEW PECKING ORDER AMONGST BANKS

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NZA Top Adviser of the Year 2023 (and the job, his preference for non-bank loan options and why these loans in particular represent such an important part of the job for him. In a career that spans decades (and continents) what comes across loud and clear is how the human impact of his job and in particular the non-bank deals he does. It’s written into his formal (copyrighted) title: ‘Financial Paramedic’. As he describes it, turning “No’s” into “Yes” is what he really loves best. 02

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“There’s nothing wrong with people who deal just with the banks, and we do quite a lot of bank deals anyway, but it’s much more fun to take someone who, particularly who’s been declined elsewhere and feel that they can’t do what they want to do, and you turn that no into a yes, and to me that’s a real kick. I really get a kick out of that.” When asked about his favourite example of the life changing nature rather lovely family story:

“One of the best was a Pepper Money transaction. First home buyers, high loan-to-value, so it was an 85% loan. They’d come from South Africa, and in order to establish themselves in New Zealand, they’d had to take on a truckload of debt. It wasn’t bad debt, it was to furnish a house, and buy cars. They’d gone round to everybody. They’d given up. These guys had about 150k in consumer debt, but they earned, I mean, a professional couple, seriously good

incomes. She was in tears talking about what had happened. And I listened to her, I went, okay, no promises, but I think we stand a good shot here. I ran it through Mike, the BDM at Pepper. We explained the whole situation so they could understand the ‘why’. They had debt to establish themselves, but the house deposit was all saved – genuine savings which we could evidence over a fairly short period of time. We talked it through with Credit and Credit approved it. When we went unconditional, I can still hear the screams. It was just awesome.” However, not everyone who has had a series of “No’s” gets referred identifies that the only way this is going to change is more education about what non-banks have to definitely becoming more accepted as part of the lending landscape over the last twenty years, he sees many customers - and some Advisers - who still don’t understand how easy and how important non-bank options can be. Like the family described above, it really can be finds people have that gets in the way, is thinking that finding the right deal means always getting the lowest rate. As he explains, sometimes the best deal is not the best rate. Rate is only part of the equation. “My favorite story around that is a while ago somebody rang and said they wanted to buy an investment property. The banks couldn’t do it because of LVR restrictions, a couple of non-bank lenders could, and there was a three-quarter percent rate margin because of being over the usual LVRs. The customer got really upset and thought it should be the same rate. So, he didn’t proceed with the deal. The next day another guy rings up, and the funny thing was, it

was on the exact same property, and it was the very same conversation. “I want to buy that property, I’ve only got 20% deposit for an investment property, can I do it?” “Yes, you can.” “What’s the deal?” So, I explained it and he just said, “Yes, please.” And a few months later he rang me back and he said, “I just want to say thank you again for enabling me to do what I wanted to do. I’ve done some renovation. I’ve had an updated valuation and I’ve made 80 grand profit.” In that period of five months,

of having your BDMs. So, rather than sending in a full application to an underwriting queue, which ties up everybody’s time and it’s an expensive process, you can workshop the deal with the BDM and say, “Look, this is what I’ve got. This is the good bit, this is the not so good bit. That’s the really tough bit. On balance I’m 50-50, what do you think?” And they will come back very quickly and say, “It’s not for us.” Or “Actually, yeah, we can make that work.”

dollars between the rate at a bank, which you couldn’t have, to the rate at the non-bank, which you can have, over that whole period of time was 3 grand extra in interest payment – and he made 80 grand! It just says it all. So, it’s the cost of doing business. It’s the opportunity, can I do what I want to do?”

Pepper Money attitude makes them a place to go and look for it. “Their whole policy of ‘can do’, I think that’s the important thing. If they can help, they will. I can think of two occasions where Pepper Money have helped where nobody else would. They gave the customers a chance.”

If the customer and their Adviser both have a rate-only focus, it can stop a customer getting a loan. A

specialist in non-bank lending who gets a real kick out of helping people.

conditioning’: the result of a market swamped by rate messages and Advisers who are only bank educated. The answer as he sees it is education Adviser and the customer. “So non-bank lending products banks, if you strip away the colours and the slogans, they’re all pretty much the same. They’re all going to want and do pretty much the same thing, whether it’s information, documents, processes, or the way they make decisions. Non-bank, there’s no rules, but they will look at the person, you basically present them with the situation and they will see if they have a product to fit the client, which I like. That’s very customer-centric, in my book.” For those less familiar with the non– because the non-banks’ teams are always an answer. “That’s the beauty

All sorts of people can need non-

If the bank does say no – always give it the Pepper Money non-bank test. Talk to you BDM or call us: 0800 945 658 Applications are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser. © Pepper New Zealand Limited NZBN 9429031065153 | NZ Company Number 3416551 www.tmmonline.nz

Sourcing non-bank finance for your prime clients? If the rates are double digits, there may be a better fit. Keen to know more? Contact the property lending specialists at Resimac.

TMM 01 | 2024

Contents. FEATURES

UP FRONT

EDITORIAL Less doom and gloom than expected in adviserland; and should dealer groups form a new lobby group?

NEWS Dealer group shakeout coming; Pepper settles HSBC acquisition; Adviser awaits sentencing.

PEOPLE Shakers on the move at Avanti, KAN, NZFSG and FANZ.

PROPERTY NEWS Reinstating tax deductibility will bring relief to the housing market.

REGULATION Clawbacks made last year tough for many advisers – and continue to be controversial.

LEAD

HAPPY 2024. ADVISER SENTIMENT BOUNCES TMM’s annual survey reveals what’s really going on for advisers. What’s their biggest concern? And how positive – or not - is the advice community feeling about the industry?

25 NEW PECKING ORDER AT BANKS At least one big bank has plummeted in popularity amongst mortgage advisers - and which is the newlycrowned favourite amongst the smaller banks?

MY BUSINESS

FROM ZERO TO HERO Meet the guy who chucked in his comfortable job as a meat inspector and became a mortgage adviser, despite having “no idea” what he was doing.

COLUMNS

SALES AND MARKETING Stop running generic ads which don’t appeal to people’s emotions.

IMPROVING WELLBEING AIA's second survey of adviser wellbeing shows there has been some improvements, but also some things to be worried about.

HOUSING COMMENTARY CoreLogic's Nick Goodall makes housing market predictions for 2024.

FEWER FANS OF FANZ Membership at Financial Advice NZ falls, as Australian player looks to enter the New Zealand market.

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UP FRONT

EDITORIAL

FUTURE LOOKS GOOD FOR MORTGAGE ADVISERS

he new year is already shaping up to be interesting - particularly with a new Government which has very different views to the previous one. To get a handle on things, we produce our annual mortgage-adviser survey in this edition of TMM. We ran the survey in early December, and again had a great response. I’d like to thank those who completed the survey and offered their views. It was pleasing to see that it is not all doom and gloom out there in adviserland. Overall, mortgage advisers are feeling far more positive than I expected. Coincidentally, AIA released the results of its Adviser Wellness survey, taken earlier in the year. Both surveys provide fascinating insights into how things have changed. Regulation is the big black cloud hanging over advisers, according to both surveys. The concern now is not preparing for regulation, but the fear advisers have of making a mistake and getting into trouble with regulators. Not a particularly pleasant scenario to be working under. The TMM survey also highlighted areas which needed attention, including clawbacks, the actions of the banks and how much control they have over mortgage advisers. As one adviser commented, the banks have provided no support, “just additional requirements and demands”. This is in stark contrast to life insurance companies. In the AIA survey, it was revealed life companies had been the biggest supporter of advisers during the regulatory changes.

Brokers Association of Australia (FBAA) has announced it plans to enter the New Zealand market and challenge Financial Advice NZ. Good luck to them, I say. Interestingly, in the TMM survey, mortgage-adviser membership of Financial Advice NZ has fallen each year. It made me ponder: is there still a place for professional bodies, especially in the mortgage advice space? I have argued previously that mortgage advisers have quite a different set of needs and circumstances than investment and insurance advisers. You deserve a body to actively lobby regulators, lenders and others. It occurred to me that the solution may well be that the dealer groups create a group which discusses issues and lobbies for positive change. After all, every mortgage adviser must belong to a dealer group, therefore they represent the whole sector. It’s certainly an idea worth considering.

Better Business Conference Don’t forget to get your tickets to this year’s TMM Better Business Conference. The date is February 20. We have a new venue: the Hyundai Marine Sports Centre on Tamaki Drive. And we plan a Welcome Function the night before. You can find details on our website: tmmonline.nz Roll on 2024, and may it be a cracker for you.

A great idea As noted before, there is significant change taking place in the dealer-group market. Since our previous issue, the Finance

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A growth mindset: introducing NZHL Group

here's a shift in the market - a slow incline with a more positive outlook set for 2024 - and many advisers are looking to develop a strategy to maximise the opportunity. We've partnered with independent economist Tony Alexander to gather the latest market insights, based on a monthly survey of real estate agents in The NZHL Property Report. Key insights from the November report include: • 36% are seeing more people attend auctions • 47% are seeing more people attend open homes • 26% say there are more investors in the market (up from 14% in October) • 34% say prices are rising in their locations • 60% are receiving more requests for property appraisals. At NZHL, we are well advanced in our growth plans, purchasing LFG (Link Financial Group) in late 2022 to form what is now known as NZHL Group, amplified by the technology of Advicelink: a CRM, sales and servicing tool to support record keeping, compliance and ultimately good client outcomes.

What does this mean? We’ve expanded our footprint and evolved our technology with a brandnew adviser platform and upgrades to DebtNav – our online monitoring and debt-management tool. NZHL Group has the skills and expertise to provide a full homeloan and insurance-service offering, with full market access, enabling NZHL advisers to expand beyond our core proposition. Consolidation trends are developing throughout the sector due to increased regulation, costs and complexity; advisers are recognising the need to combine forces to progress their businesses. Over the last year at NZHL Group,

BY KIP HANNA

'I’M PREDICTING A LARGER FOCUS ON REGULATION IN 2024, SO THE CONSTANT TECHNOLOGY DEVELOPMENTS… WILL BE A GAME-CHANGER’

we’ve seen the collective benefits of two organisations working together, with shared resources and knowledge, optimising what we can achieve and how quickly we can enhance, grow and take some of the manual strain off our advisers. NZHL Group is a people-led, digitally enabled business. As we developed our adviser platform, it struck me how vitally important access to good technology is to the success of advisers. With challenging loan requirements requiring a higher level of advice for homeowners, the industry requires a more hands-on approach. This means processes need to be simplified by technology that offers complete client management, from lead to application, insurance management, and ongoing reviews. We've been able to utilise the power of AdviceLink, a platform proving very popular to other industry groups – with discussions around how AdviceLink can optimise their network and provide a safeguard with built-in compliance and due diligence.

Ahead of the game However, it's important to stay ahead of the game: I’m predicting a larger focus on regulation in 2024, so the constant technology developments, with the operation of an advice business at the forefront, will be a game-changer. As a group, we've taken advantage of our collective skills - from advisers to developers - and close working relationships with service providers, to ensure our client-facing teams can rely on having the latest information available in one place (their

advice platform). As we look toward a brighter 2024, with the full support of our shareholders, NZHL Group is focused on helping more Kiwis achieve their financial goals with the protection of sensible insurance cover. In an environment where increasingly more is expected from a regulatory perspective, and from clients themselves, advisers need to be enabled to stay focused on what they do best: giving advice. Good technology is a must, alongside strong compliance processes and a progressive brand. We can’t be complacent: to meet the needs of the strengthening market, we must continue to develop and refine. We have expansion plans in place for all parts of NZHL Group and I encourage all advisers to ensure they are backed with the technology and support they need for sustainable growth.

ABOUT NZHL NZHL Group is a Kiwi-owned, respected and trusted brand: a purpose-driven (financial freedom, faster) home-loan and insurance network that offers a solution to support advisers and help put Kiwis in a better financial position. Part of Kiwi Group Capital Ltd (KGC), which is 100% Government owned, NZHL Group operates with an independent board and local business owners nationwide. ✚ Kip Hanna is the CEO at NZHL and has written this opinion piece based on his experience. This article is intended to be general in nature and should not replace personalised business or career advice.

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your LINK to a better advice business! The Kiwi Owned and operated Aggregator providing you with the broadest choice in the NZ Market

0800 466 784 www.lfg.co.nz

MORTGAGE 08

TMM 01 | 2024

INSURANCE

KIWISAVER & INVESTMENT

FIRE & GENERAL INSURANCE

OPERATE UNDER THE LINK FAP As an Authorised Body under the Link FAP you will have access to our FAP resources, audits, file reviews & compliance support.

SUPPORT FOR YOUR OWN FAP Aggregate through us using your own FAP licence with options to utilise our systems, processes and compliance support.

BRAND Use your own brand or use ours. (Mortgage, Insurance & Invest Link)

A SIMPLE TRANSFER PROCESS A simple online form & streamlined process for a hassle-free transition.

BUILT IN COMPLIANCE PROCESS LFG Advisers have access to our market leading CRM, Advice Link, providing comprehensive mortgage & insurance workflow management, automated record keeping and much more.

COMPETITIVE PRICING OPTIONS We have competitive pricing options to suit all adviser businesses.

ACCESS TO GROUP PI SCHEME Quality wording and very competitive pricing options

BUILD A PASSIVE INCOME Utilise our in-house Fire & General business (FG Link) and Kiwisaver & Investment business (Invest Link) to create a passive income through referrals.

SUCCESSION PLANNING OPTIONS Talk to us if you are looking at selling your book or looking at options to join a larger group. www.tmmonline.nz

UP FRONT

NEWS

Mortgage advisers expected to move groups this year

New Zealand operations manager Jenny Campbell has been working to get its customer relationship management software adapted to suit local conditions and practices. The CRM is “a critical part” of the aggregator's offering and so it was important to take the time to get it right, she says. “We own it and it was developed in-house in Sydney. It's being updated constantly with new features” as well as the updates from lenders on interest rates and other such information. “It took quite a lot of work to make it appropriate for the New Zealand advice process,” she says.

JENNY CAMPBELL

Australian aggregator Finsure will be making an aggressive pitch for New Zealand mortgage advisers to join up.

Campbell, who set up Mortgage Supply, says she's probably tried every CRM offering in the NZ market over the years. “I can, hands-on-heart, say it's the best one I've seen.” Not only is it easy to use “just follow your nose” - but it covers all local compliance requirements, provides mortgage-specific training modules and can handle just about every configuration of brokerage businesses. So, now she's busy talking to local advisers about what Finsure has to offer them. Campbell says Finsure brings more

competition to the market and expects to see “an awful lot of movement between groups” this year. “The thing about competition is it brings about better results for the client.” Campbell observes that a lot of advisers “got sold a sausage” when the Financial Advice Provider (FAP) regime came into force and thought they should become FAPs themselves. “But really it doesn't add a lot of value to your business” and the costs of maintaining that status can be onerous, she says.

Former mortgage adviser pleads guilty to further dishonesty offences Hawke’s Bay-based mortgage adviser awaits sentencing after pleading guilty to a further criminal charges. Natalie Ann Carter, a former Hawke’s Bay-based mortgage adviser, has pleaded guilty to a further three criminal charges brought against her by the Financial Markets Authority. Carter faced 15 charges following an investigation into her conduct between 2018-2021. She pleaded guilty to eight of the 15 charges during a court appearance in November. Carter pleaded guilty to a further three charges in the Napier District Court in December. The FMA agreed to 010

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withdraw the four remaining charges. The three further charges Carter pleaded guilty are: Making a false document; making false or misleading statements and deceived or attempted to deceive or knowingly mislead the FMA. Between 2018 and 2020, Carter created various false documents for the purpose of obtaining home loans for herself and two clients. The documents were fake pay slips, contracts and employment verification forms from fictitious employers. In total, seven home loans were applied for, totalling $2.91 million in value. At least three of the seven home loan applications were successful to the total value of $1,087,700. Carter’s engagement at the Hawke’s Bay-based brokerage was terminated

in January 2020. The FMA was subsequently notified of several concerns, prompting an investigation. During the investigation, Carter misled, deceived, or attempted to deceive the FMA about the extent of the alleged offending. In April 2021, Carter applied to join another brokerage, with the intention of working under the firm’s Financial Advice Provider (FAP) licence as an Authorised Body, through a company that she owned. During the application process, Carter made false or misleading statements on two FMA documents. It is alleged that she failed to declare that she was being investigated for dishonesty and misrepresented the nature of the FMA’s investigation.

Pepper completes HSBC deal Pepper Money completed the purchase of HSBC’s $1.2 billion prime residential portfolio at the end of last year.

milestone for Pepper. “Pepper Money has built strong and proven capabilities in loan portfolio acquisition and management. “We have been able to acquire HSBC’s mortgage portfolio and integrate

seamlessly within our existing operations, given our scaled technology and customer support. He said deals like this are complex endeavours that require meticulous planning and execution. ✚

WE’LL TAKE A DIFFICULT DEAL AND

MAKE IT SIMPLE, FAST

MARIO REHAYEM

Pepper and HSBC have worked together to ensure a smooth and efficient transition for existing customers, the lender says. It says the deal delivers scale to Pepper Money’s existing home loan business. The Australian non-bank lender has funded the transaction in a similar way to the company’s loan origination activity, namely through a combination of senior and mezzanine funding with Pepper contributing the first loss equity. The portfolio acquired is prime, seasoned and well performing. “The level of first loss required reflects this,” it says in a statement to the ASX. Pepper chief executive Mario Rehayem says the deal marks another

STRAIGHTFORWARD NON-BANK MORTGAGE LENDING At Basecorp, our brokers know us for our dependability with straightforward and We offer: • Competitive, fair rates • Most approvals within two days of loan application • Strong industry knowledge, experience and relationships developed from over 25 years in the business

Get in touch now for simple, smart residential mortgage solutions.

07 839 2999 | info@basecorp.co.nz www.basecorp.co.nz

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UP FRONT

PEOPLE

People on the move Got a new appointment you would like to tell advisers about? Email details and a pic to editor@tarawera.co.nz

Avanti gets new CEO

“We were looking for someone who could bring our growth strategy to life and help us increase our market share on both sides of the Tasman. Fred is the person to do that. He’s held senior positions covering a broad range of functions at ANZ, including product, marketing, strategy, and retail and business banking.

Financial Advice NZ recruits new chief executive from Singapore The association has appointed Nick Hakes as its second chief executive, replacing Katrina Shanks who moved to Melbourne to run ANZIIF. Hakes relocates from Singapore, where he has been the Director of Market Development Asia at Kaplan Professional. Prior to this, he was general manager, member services, partnerships and campus AFA at the Financial Advice Association Australia (AFA) in Sydney. Hakes is a New Zealander and has spent more than two decades working with professional financial adviser associations across Asia Pacific, and to lead Financial Advice New Zealand in its next evolution of success. 012

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Board chairperson, Heather Roy says, “Nick understands the value of the collective voice of financial advisers and brings a wealth of international experience and expertise within the wealth management and financial advice industry, with an extensive background in building strategic partnerships, adviserfocused professional development frameworks, and membership growth for professional adviser bodies.” Financial Advice NZ works with Kaplan in New Zealand to deliver professional development to advisers. Roy says "as we look to the future to grow the demand for quality financial advice, I look forward to meeting, listening, and engaging with our members and the broader advice industry at our THRIVE conference in March.”

“Fred’s experience, leadership style and passion for people and customers is another string to his bow that will allow him to continue to build Avanti over time.” Ohlsson says”there are so many opportunities to grow Avanti and I will be working with the board to take us to that next level.”

NICK HAYES

Ohlsson recently, and somewhat surprisingly, resigned from Amplifi Group where he was managing director. He has extensive experience in senior leadership roles in New Zealand and Australia, primarily at ANZ where he led the Australian division from 2016 to 2019. Avanti Finance founder and chairman, Glenn Hawkins says Ohlsson’s background in sales, strategy and leading an experienced team helped him stand out in the recruitment process.

FRED OHLSSON

Avanti Finance has appointed former ANZ executive Fred Ohlsson as its new group chief executive.

Hakes has held director and chairman positions on the board of Pro Bono Financial Advice Network, an industry-wide collaboration that connects financial advisers willing to provide pro bono financial advice with people facing personal health crisis. He has also served as the vice-chairman on the International Certification and Standards Board, a standing committee of the Asia Pacific Financial Services Association (APFinSA) that governs the professional certifications and education pathways of its professional adviser designations throughout the region.

Baden Martins becomes NZFSG's new CEO

The group describes it as a "strategic move" that marks a new era of innovation, technology advancement and leadership in the company. Martin was previously the head of mortgage adviser distribution at ANZ, and has more than a decade

Big shake up at NZFSG NZ Financial Services Group is looking for a new chief executive. Current chief executive Brendon Smith is stepping down and moving into the chairman's seat. Sam White will continue as executive chairman of NZFSG and Loan Market across New Zealand and Australia. Brendon Smith, who has served as CEO for a decade and will become

of experience in the adviser channel and will bring a fresh perspective to NZFSG. Sam White, NZFSG executive chairman, says "Baden's expertise in digital transformation and his vision for the future are perfectly aligned with our ambitions for 2024 and beyond. He is not just a leader but a strong advocate for the adviser community." Martin's appointment comes at a pivotal moment for NZFSG, as the

company seeks to expand and innovate in the financial service industry. His two-decade-long journey in the sector highlights his respect for advisers, and his dedication to growing the adviser share of the NZ mortgage and insurance market. Martin says his focus will be on empowering advisers with innovative, technology-driven solutions, to help them save time and stay safe, and continue to advocate strongly for advisers, and their clients”.

chairman on June 30. White says the change aligns with NZFSG’s refreshed vision for 2028, with focus on how advisers can work to grow, develop and flourish in a digital world. "NZFSG remains dedicated to its mission to empower advisers to help New Zealanders achieve their financial dreams, while driving innovation and advocating the adviser community," he says. The transition is part of a broader strategy to bring new energy and perspectives into NZFSG’s leadership. “We are keen to help grow the adviser share of the New Zealand mortgage and insurance market and to

keep building on our commitment and promises to our advisers,” White said. "Brendon and I shared a bold vision when we started, and it's inspiring to see it surpassed. Now is the right time for a new leader to come in and build on our strong foundation."

asset to the team. Dilip Patel, a seasoned industry professional, brings valuable experience as an adviser and from his recent role as a business development manager at, Resimac. "Estée and Dilip's appointments mark an exciting chapter for Kiwi Adviser Network," said general manager, Sarah Johnston. "Their combined industry experience and commitment have made them excellent fits for KAN. They've already made

a huge impact within the team and with clients in our growing network of advisers." Badenhorst and Patel will play crucial roles in assisting KAN's members with their compliance obligations, building and nurturing client relationships, and contributing to the continued success of KAN and its members. Their joint addition underscores KAN's commitment to assembling a team of exceptional professionals. ✚

BRENDON SMITH

New Zealand Financial Services Group (NZFSG) has appointed Baden Martin as its new chief executive.

KAN adds two The Kiwi Adviser Network (KAN) has two new additions to its team, Estée Badenhorst and Dilip Patel join the group as compliance and relationship managers, bringing a wealth of industry experience to KAN. Badenhorst, with an extensive background in compliance and relationship management, particularly within the realm of mortgage aggregators, joins KAN with a proven track record of success. Her dedication to regulatory compliance and client satisfaction makes her an invaluable

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UP FRONT

PROPERTY NEWS

Property Investors' Federation president Sue Harrison says the coalition Government’s changes to tax deductibility will bring relief to the housing market. The National-ACT coalition agreement says the Government will "restore mortgage-interest deductibility for rental properties with a 60% deduction in 2023/24, 80% in 2024/25, and 100% in 2025/26". Harrison says rising expenses for landlords need to be managed, just like in any other business. “You just have to hang on and keep digging into your pocket, or however you can stave off the bank and Inland Revenue. That's what people are doing, that's what the owners of many of these properties are actually doing." She said the changes will stop

SUE HARRISON

Reinstating tax deductibility will bring relief

the sell-down of rental properties, helping supply. However, the Council of Trade Unions (CTU) says the move means an extra $3 billion over four years staying in landlords' pockets, which will be unavailable to help the Government with an already tight budget. "It's going to be Christmas for landlords fairly soon, but it's going to be austerity and cuts for anybody else," the CTU says. National says some of the details are yet to be considered by Cabinet and will not be made public until finalised. Interest deductibility allows landlords to include mortgage payments as a business expense. The Labour

Government changed this in 2021 with the aim of slowing demand for investment properties, thus helping level the playing field in favour of first-home buyers. The move caused financial hardship for some landlords, Inland Revenue advised against bringing in the changes, saying it was unlikely to boost overall housing affordability, and that the potential benefit for first-home buyers was outweighed by the likely increase in rents. More broadly, the IRD says it was concerned the measure added to the compliance and administrative burden on affected taxpayers, and eroded the coherence of the tax system overall.

Rent rising sharply Sharp rises in rent will make many young people and productive workers question whether the country’s biggest city, Auckland, is the best place to live. Residential rental growth is running at historically high levels, as wage 014

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growth - and an imbalance between supply and demand - hits home. CoreLogic’s latest buyer classification data show mortgaged investors are responsible for just one in every five purchases, as higher deposit requirements, low rental yields and lack of mortgage-interest deductibility reduce appeal. Nationally, rental yields edged up to

3.2% from a trough of 2.6% for much of 2022 and was at the highest level since late 2020. However, CoreLogic chief property economist Kelvin Davidson said yields are still relatively low by past standards, and less than the income returns on some other asset classes, such as term deposits.

First home buyers and investors vie for homes as mortgage borrowing creeps up Mortgage borrowing is slowly creeping up, as house prices rise and investors and first home buyers slug it out to get houses. The Reserve Bank’s latest data, released at the end of last year, show the value of new mortgages in November rose 8% to $6.5 billion, from $6.1 billion in November 2022.

This was boosted mainly by an 18.9% increase in lending to investors and a 14.8% increase to first-home buyers annually. By contrast, lending to moving-owner-occupiers only rose 3.1% annually. There were 17,700 new mortgages

At Avanti Finance, we’re in the business of opportunities. Our wide range of solutions cover prime, near prime and alternative solutions, helping all kinds of New Zealanders find a path into home ownership.* *Lending criteria, terms, fees and conditions apply

taken out in November, a rise of 6% on the previous year when banks wrote 16,701 new deals. And the average newloan value across all borrowers rose to $369,400, up 0.6% from $367,100 in September. ✚

Talk to us to get to the finish line Lower North Island

South Island

Paul Rolton 021 192 9709

Mark Nolan 021 941 046

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Helen Mulligan 021 226 7191

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0800 33 33 20 | avantifinance.co.nz

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UP FRONT

HOUSING COMMENTARY

A BETTER, BUT MUNDANE YEAR AHEAD FOR THE PROPERTY MARKET BY NICK GOODALL

To be fair, the year is likely to kick off with a positive vibe in the housing market, given that the new Government is now in place and will be working towards its more propertyfriendly stance. Granted, any speculation that a potential relaxation of the foreign buyer ban could add a bit of price impetus to the market is now irrelevant, given that NZ First quashed that idea. But the Brightline Test is still on track to be shortened back to two years for all properties (whether old or new) from July 2024, and this could start to pull some investment demand back into the market. However, given the current strainsts on cashflow, that could easily drive a bit more selling too, as some existing investors find themselves off the hook for capital gains tax sooner than they expected. Ultimately, this might be a sales/ liquidity rather than price effect. That cashflow angle is also vital when thinking about the possible impact of an accelerated time frame for the reinstatement of 100% mortgage interest deductibility for all investors. It’s certainly true that existing investors will see smaller tax bills, and the sums will also start to look more favourable for some would-be new and expanding investors too. But with gross rental yields still low and mortgage rates high, probably for most/all of 2024, a typical property investment purchase will still need a 016

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NICK GOODALL

In sticking with our regular attempt to sum up each year ahead under a key theme/ banner, it wouldn’t be a surprise to see any housing market growth in 2024 turn out to be more subdued than in previous episodes – ie: an underwhelming upturn.

significant top-up out of other income – even after accounting for less tax. This is likely to remain a real-world hurdle for investors, even if their mood is more positive. On the flipside, even if some investors do start to buy again, it’s not likely to be a torrent, and hence first home buyers should still be able to find good opportunities – as they continue to benefit from access to KiwiSaver for their deposit (or at least part of it), with many also likely to make full use of the low-deposit lending speed limits at the banks. Even so, there are some big-picture themes likely to be in play in 2024 that will challenge all of the various buyer groups – and keep a lid on sales volumes and property values. First, even after the recent downturn, house prices remain high; that is affordability is still a major issue. Second, that’s especially true when you consider the likelihood that mortgage rates remain higher for longer especially at the shorter end of the curve. And third, caps on debt to income ratios remain firmly on the cards for 2024, albeit not until the second half of the year. High mortgage rates are currently

doing the job of restricting high DTI (risky) lending, so any formal rules might not be binding straightaway. But over the medium term, they’ll tend to tie house prices more closely to income growth, and limit how many properties an individual can own at any point in time. Indeed, an investment portfolio can only really be grown under a DTI system by getting income higher, and that takes time. It’s also worth just quickly touching on construction. Often in the past, a slump in new housing supply has driven a fast rebound in prices. And it’s true that building activity is currently declining again. But there are also gradually emerging signs that the floor might be approaching, reducing the chances that house prices are pushed up by a serious lack of new housing. But there are also several other reasons to think that 2024 will be a relatively mundane year for the property market. We’re anticipating sales rising by perhaps 10% (still leaving them at below normal levels) and prices seeing growth of around 5%, maybe a bit more. ✚ Nick Goodall is the chief economist at CoreLogic.

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UP FRONT

REGULATION

HARD TIMES AS CLAWBACKS SURGE Clawbacks from mortgage refinancing made last year tough for many advisers.

on-bank lender Resimac, with a mortgage book of $13 billion, noticed a surge in refinancing for lending that has been with the business for less than two years. It meant a significant lift in clawbacks from New Zealand advisers as people rolled onto higher interest rates and looked elsewhere for mortgage financing. This year is expected to be the same. The clawback issue is very real for many advisers as it is estimated 1015% of all mortgages are clawed back per year if they are paid in full or part or refinanced with another lender within 27 months of the original loan. Clawbacks have sparked controversy, with advisers arguing they are unfair given existing regulatory obligations, such as duty in the best interests of clients. Supporters of clawbacks argue they protect lenders from financial losses, which can translate into higher interest rates for borrowers. Clawbacks for Jeff Royle’s iLender business were the highest last year since 1991 – even higher than during the global financial crisis (GFC) of 2008-2009. While he doesn’t have a problem with clawbacks, he does have a beef with lenders’ failure to disclose to clients they may have to pay advisers a clawback fee if they refinance or sell their property before the fixed term loan period is up. “What I don't get is major bank lenders can pay a customer $4,000 to switch their loan across with have no strings attached, but the mortgage broker who works to submit and settle the original loan has their commission in limbo for two years. “The banks need to come to the party and start disclosing to clients that they should check with their mortgage adviser if there will be any fees if they are refinancing within the fixed term.” Advisers risk losing up to 100% of their upfront fee in the 27 months following the origination of a loan – a

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BY SALLY LINDSAY steep price to pay, although it varies from bank to bank. Some banks also charge clawbacks if a lump sum payment is made, but don’t charge anything if regular mortgage payments are increased. Royle gives the example of a client being approached by her bank with a deal to refinance her one year fixed term mortgage with a non-bank lender one month before it was due to expire. She didn’t let iLender know and the first Royle’s business knew about it was when an aggregator’s commission statement was received showing a $3,500 clawback. Subsequently, he invoiced the client a $3,000 clawback fee, the maximum that can be charged. She went ballistic and initially baulked at the fee until Royle pointed out the clawback clause in the agreement she had with iLender. However, to his surprise in the email trail with the bank she showed him, she had asked if there were any other charges if she remortgaged. The bank said nil. “My argument is that had we known or had a heads-up, we may have been able to do something about it and let her know she would be incurring charges because the mortgage was being refinanced before the 12-month fixed term was up. “Lenders should legally have to disclose to clients in any letter or document about a loan that if they are repaying their home loan early and it was introduced to them through an adviser, they should go back to the adviser because they may have a liability in regard to commission

already paid to the adviser. “This should be standard practice. With the exception of Resimac, all lenders have refused to do this,” Royle says. The major banks claim this is not common practice in New Zealand. Royle says they claim this because the agreement between the lender and the adviser via the aggregator is confidential. “This is rubbish. Advisers have to legally disclose to clients how much they earn in commission and the terms under which it is paid. So, it’s not confidential.” Royle says he also doesn’t subscribe to the theory that disclosure by banks will dissuade people from using the services of advisers. “The reality is that more than 50% of banks’ loans now originate from advisers and it’s going to increase.” He says, however, documentation advisers use clearly setting out when a clawback fee can be charged to a client has made a huge difference to the industry. He has been able to recoup from clients about 80% of the clawbacks to lenders. Although he can’t recoup all clawbacks, particularly for hardship, Royle says he is quite happy with that, particularly in comparison to other businesses where there can be bad debt. “There has to be a balancing act – it comes back to transparency from lenders. Advisers have to do this and lay out what their clawback fees are in client contracts. It doesn’t make sense that most of the lenders don’t follow this practice.”

‘The banks need to come to the party and start disclosing to clients that they should check with their mortgage adviser if there will be any fees if they are refinancing’ Jeff Royle

Refinancing surge

JEFF ROYLE

Most of the recent clawbacks have resulted from refinancing because of high interest rates, says Resimac NZ general manager Luke Jackson. Resimac pays both commission and trail on its products. Royle, one of Resimac’s biggest supporters since it opened its doors 11 years ago, has seen his trail book shrink significantly in the past 12 months because people have refinanced out of Resimac. Either they have gone through another adviser, dealt directly with a bank or sold their property. “The industry has been particularly hard hit in that respect.”

Clawbacks wiped Several Australian non-bank lenders have eradicated clawbacks altogether, labelling them as akin to modern day slavery. Jackson says while it might sound good, the industry is based on lenders paying advisers commission. “If we stop clawbacks, then we won't be paying the commission, or we'll pay after two years. The alternative is to make money somewhere else, which might be higher interest rates.” The other option is an industry rethink of more trail and no upfront commission, but that comes with its own set of problems as well, Jackson says.

Stay the same Kris Pedersen of Kris Pedersen Mortgages wants commissions and clawbacks to stay as they are. “Lenders are running a commercial business and it is unfair if they pay us and not get a clawback if loans are repaid early. We deal with a large number of non-bank lenders and don’t have clawback problems with any of them.” He says if clawbacks are removed, commission rates will have to come down or be wiped altogether. “I would rather the commission rates and clawbacks are left at existing levels, but it comes down to an individual choice.” Pedersen says if his business is looking at refinancing for a client, lenders’ commissions to advisers, banks’ cash contributions and clawbacks are clearly laid out. “Many people forget banks can clawback their cash contributions if loans are repaid early. “We always check whether there are any other costs clients need to be aware

of and whether refinancing is in the right interest of the client.” Pedersen says it comes down to common sense whether a client is charged a claw back fee. “In some cases, if we've received a sizable commission and refinancing is towards the end of the clawback period we may not charge it because we've still made reasonable money on the original deal.”

Disclosure essential Another mortgage adviser who is happy with commission based on the loan amount and clawbacks as part of the deal is Hamish Patel of Mortgages Online. “A lot of advisers say clawbacks are unfair because they have done the work on the loan. He believes this is an unjustified stance as Auckland advisers get well paid by lenders. If an adviser is paid $8,000 commission for a mortgage application that wasn’t complicated and didn’t take much time they are well compensated. However, they don’t get paid for the time spent on people who back out of buying a house, lose their job or can’t go ahead after years of looking. “It’s the law of averages and the whole industry operates that way.” He does take issue with large adviser companies, who he claims ruined the industry for a while by their aggressiveness in refinancing clients every two years, particularly in the Indian community, where many people didn’t understand what was happening. “Radio advertisements by advisers would blithely tell people to switch lenders and save 10 years on their mortgage without having to prove how this could happen when their payments would stay the same.”

Patel says the industry has thankfully matured since then to the point an adviser needs to have a paper trail of exactly what has been done for the client and the advice they have been given. He backs Royle’s call for banks to tell customers refinancing through them to contact their adviser about any possible clawbacks. “We get clients who want to refinance from another adviser or bank and we are clear they need to check with their existing adviser on any possible extra costs they could be surprised with. “Some people do forget and some advisers are not great at disclosure either. They might have clawback clauses in their agreement somewhere but don’t verbally tell the client faceto-fact what it means and explain what costs can be involved. This whole area needs tidying up.”

Next steps Royle intends taking up his push to have more disclosure from banks with advisers’ professional body Financial Advice New Zealand (FANZ) at the end of January. He says a lengthy letter was sent about 18 months ago, but FANZ couldn’t understand the problem and he is hoping interim chief executive Tony Dench will grasp its importance and put some plans in place to encourage lenders to up their disclosure game. If not, Royle intends seeking help from Finance Brokers Association of Australia, which is setting up an office in Auckland under a new brand in February. He believes he will get more traction from this organisation as they have already been down this route across the ditch. ✚ www.tmmonline.nz

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Happy 2024 Adviser sentiment bounces What’s the biggest concern for advisers? How positive – or not – is the advice community feeling about the industry? And which big bank’s popularity has plummeted? TMM’s annual survey reveals what’s really going on for advisers. BY JENNY RUTH

ost mortgage advisers have a good-to-“bloodybrilliant” outlook on the mortgage-advice business, but regulatory change is what most keeps them awake at night.

Adviser optimism rising TMM’s latest survey of mortgage advisers found that nearly 25% believed the future for advisers was “bloody brilliant”, while another 64.2% saw a bright future but with a few clouds on the horizon. Only 9.5% of those surveyed thought the outlook was “not too flash,” with another 1.5% unsure. This was a marked improvement from

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the answer to the same question in the 2022 survey, when less than 11% of those surveyed thought the outlook was “bloody brilliant” while 20.5% thought it was “not too flash.” This high level of optimism in the 2023 survey was despite the Reserve Bank having lifted its official cash rate (OCR) from 4.25% to 5.5% since the 2022 survey. Of respondents, 41.5% said their volume of settled loans in the year ended September was higher than in the previous 12 months. Another 49.5% said their loan volumes were lower than in the previous year. But of those who had higher loan volumes, 15.7% said the increase was

greater than 25%. Another 12.2% said their loan volume increase was between 15% and 25%, while 14.2% said it was between 10% and 15%. Fewer than 6% reported no change from the previous year.

Steady OCR raises mood One reason for advisers’ optimism is that the OCR has held steady at 5.5% since May 2023. While RBNZ did some sabrerattling in November, threatening another OCR increase if inflation didn't abate sufficiently, the data since then has come in on the weak side of expectations - notably GDP for

‘Regulation was by far the biggest concern for the second year running, with 26.6% saying it kept them awake at night’

the September quarter coming in at negative 0.3%, compared with RBNZ's forecast of 0.3% growth. That has most economists scrubbing any expectation of a further OCR hike and instead focusing on when the first OCR cut will happen. The consensus currently is that it won't come until the second half of 2024 at the very earliest.

Biggest concern for advisers Regulation was by far the biggest concern for the second year running in 2023, with 26.6% saying it kept them awake at night and another nearly 36% describing the issue as of some concern. That's hardly surprising, given that by March 2023 all advisers had to have achieved level 5 of the New Zealand Certificate in Financial Services (NZCFS) if they wished to continue in the industry. The Financial Markets Authority is already consulting with the industry on how the level 5 qualification should be improved. However, the level of anxiety about regulation has receded significantly since last year's survey, with a

Reasons to be optimistic Advisers certainly have reason to be optimistic, with the housing market, although still sluggish, having lifted off its lows. More than that, mortgage lending still grew, despite the economic difficulties, by $10.21 billion, or 2.96%, in the 12 months ended November 2023, according to Reserve Bank data. Advisers generate lion’s share While that was down from the $15.68 billion, or 4.77% growth, of the previous year, results from three of the four largest banks show advisers keep taking an ever-greater share of mortgage origination. Advisers accounted for 60% of ANZ's new lending in the year ended September 30, up from 56% the previous year, and for 48.1% of BNZ's new mortgages in the September half-year, well up on the 34.3% in the September half last year. Westpac doesn't provide new lending data for advisers, disclosing only the total of its mortgage book they account for - but that also shows third-party origination continues to climb. Advisers had originated 51.9% of the mortgage book at Sept 30, up from 50.1% a year earlier. ASB doesn't disclose its origination data in any form. One caveat is that RBNZ lending data covers deposit-taking banks and non-banks only, so non-banks

Bloody Brilliant Good, but a few clouds on the horizon Not too flash Not sure

2021 16.22% 61% 19.69% 3.09%

that get their funding from other sources aren't included. But the increasing dominance of mortgage advisers in originating home loans reflects a number of factors, not least the changes to the Credit Contracts and Consumer Finance Act (CCCFA) which came into force from December 2021. While the amended law had been intended to target fringe lenders preying on poorer people unable to access bank finance, in practice, it made the process of approving home loans much more onerous for all lenders, including the major banks. Despite much tinkering with the regulations by the previous Labour Government, the banks still say it's harder now to approve loans, and that they have to seek far more information from customers than previously. Small wonder then that more would-be home buyers have sought the expert advice brokers offer to help them navigate the new requirements. Another regulatory uncertainty is whether the new National Party, Act Party and New Zealand First Party coalition government will carry through with National's pre-election pledge to abandon the Financial Markets (Conduct of Institutions) Amendment Act (CoFI), which is set to kick in from March 31, 2025.

2022 10.92% 68.09% 20.52% 0.47%

2023 25.54% 63.5% 9.5% 1.46%

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combined response of 62% this year rating it a top concern - down from 72% last year. But rising interest rates and falling house prices have clearly taken their toll on household finances and have fed into increased anxiety for advisers about clients' debt servicing ability. In this year's survey, 14.7% of advisers said this was a problem that kept them up at night while another 41.6% said it was of some concern; another near 30% said it was mildly concerning. This was less of a concern in last year's survey - the first to ask this question - although more than half of advisers rated it of some concern then. In RBNZ's November monetary policy statement, it said the full impact of its OCR increases was yet to be fully reflected in household cash flows and that the average interest rate on outstanding mortgages was expected to rise from 5.4% then to 6.4% by mid2024. That would mean the share of disposable income going to debt servicing for households with a mortgage would rise from 15% to 19% and that “pockets of stress” were likely to increase for highlyindebted households.

Better turnaround times Perhaps one benefit of Covid has been that it forced most of us to adopt new technology and different, more efficient ways of working. That's possibly the reason why fewer than 10% of survey respondents said

‘Succession planning continues to bubble away as a minor concern – not surprising given more than 45% of respondents had been in the industry 10 years or more’

turnaround times kept them awake at night and slightly more than 8% said getting loans approved was similarly worrying. Last year, the turnaround question had fallen to the sixth biggest concern, after ranking number two in the 2021 survey and number one in both the 2020 and 2019 surveys. But before the banks congratulate themselves for having licked this problem, it is of rising concern again now: with the Covid pandemic behind us, regulation ranks as the third biggest concern in the 2023 survey.

Who will take over? Succession planning continues to bubble away as a minor concern – not surprising given more than 45% of respondents in the latest survey had been in the industry 10 years or more.

Was the volume of loans settled in the 12 months to September 30 higher than last year?

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‘Who will take over?’ was a question keeping 4.6% awake at night, about the same level as last year, with another nearly 22% saying it was of some concern, up from 14% last year. About 40.4% said succession planning wasn't an issue. Only 3.5% of respondents said they were new to the industry and 5% said they'd been in the industry less than two years. Another 20% said they'd been in the industry between two and five years, and more than 26% had been advisers for between five and 10 years. Obviously, this question bears watching, although it's clear it doesn't yet amount to a crisis.

Trail commissions still here In the wake of Australia's Royal Commission into misconduct in banking, superannuation and financial services, conducted between 2017 and 2019, which recommended the outlawing of trail commissions, many in the New Zealand broking industry feared a similar recommendation would be implemented in New Zealand. That seemed a reasonable assumption, given that the big four Australian banks own the big four New Zealand banks, which in turn control about 88% of the banking system. In the event, mortgage advisers across the Tasman escaped this prohibition: Australia's Government called off the crackdown in 2022, at a time when the average Australian mortgage adviser derived about A$130,000 a year from trail commissions. In 2019, 32% of respondents to TMM's annual survey believed trail commissions were here to stay; 23% believed they were about to go. Those fears now appear to have been overblown. Just over 7% of this year's respondents said they derived between 50% and 75% of their remuneration from trail commissions. More than 31% said 25-50% of their income came from trail commissions, while nearly 55% received up to 25% of their incomes from trails. Only 2.5% said they received no trail commissions. The question of trail commission bears a direct relationship to the succession issue: if your client list consists of a significant amount of trail commission, that gives an adviser wishing to retire an easily quantified asset to sell at some multiple of the trail commission, directly dependent on its size and duration.

Over the next 12 months, what amount of business will go to non-banks compared to last year?

The growth of non-bank lending looks to be slowing with a falling number of advisers looking to increase their use of this sector, while the number not changing their use has grown significantly.

Few plan to diversify In a market as subdued as the mortgage market is currently, you'd expect mortgage advisers to be interested in expanding the services they offer. However, fewer than 44% of respondents to this year's survey expressed interest in expanding their advice, with more than 56% saying they weren't interested.

Of those who were interested, nearly 25% expressed interest in business finance and more than 20% were interested in advising on KiwiSaver. Asset finance interested another 15.5%, while insurance appeared attractive to 11.5%. Those willing to explore homeequity-release products, such as reverse mortgages for retired homeowners, amounted to just over 55% of respondents.

The survey showed nearly 87% of respondents advised on mortgages only, with nearly 9.5% also advising on insurance. About 2% also offered financial planning services. Nearly 33% of respondents worked under their own financial advice provider (FAP) licences, but nearly 65% were working under their aggregators’ FAP licences. ✚

What percentage of your income is trail commission?

100%

50-75%

25-50%

0-25%

No Trail

Don't know/ Don't want to disclose

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New pecking order amongst banks ASB Bank's popularity among mortgage advisers has plummeted this year, while support for the governmentowned Kiwibank has surged, pushing out SBS Bank as the most-favoured small bank. The Mortgage Mag's latest annual survey found only 16.4% of respondents rated ASB their preferred large bank, down from 25.3% in last year's survey. In the previous two years, more than 20% had chosen ASB as their preferred large bank. Squirrel chief David Cunningham put his finger on the problem with ASB earlier this year, noting comments from ASB's Australian parent, Commonwealth Bank of Australia (CBA), that it wanted to protect profit margins. In September, he noted that ASB's published rate for the most popular term, one-year fixed mortgages, was significantly above the rest of the market. The difference then between Kiwibank and ASB “would cost you $1,500 more each year on a $500,000 mortgage. Not exactly chump change,” Cunningham wrote in his blog. Earlier in 2023, CBA chief executive Matt Comyn had complained about poor returns on New Zealand mortgage lending. Advisers have noticed. One noted that that ASB's market share was taking a hammering. “I think they just found out the hard way that they've ceded home-loan origination to brokers who will not put up with pricing well above market,” the adviser said. The numbers bore out his contention: in the September quarter, ASB’s

mortgage book shrank by $152.2 million, according to the Reserve Bank's bank financial strength dashboard. That meant ASB's mortgage book fell to $73.75 billion at Sept 30, putting its market share at 21.38%, down from 21.57% in June and compared with 21.75% in September last year. A one-percentage-point share of the mortgage market was worth $$3.46 billion at Sept 30.

‘I think [ASB] just found out the hard way that they've ceded home-loan origination to brokers who will not put up with pricing well above market’ Anonymous adviser

ASB's loss in popularity was Westpac's gain: the bank with the big, red ‘W’ was the second most popular large bank, with 20.6% of respondents naming it their preferred large bank, although that was down from 25.3% in last year's survey. ANZ Bank New Zealand remained the most preferred large bank, but its support had surged compared with last year's survey. About 52.1% of advisers named ANZ their most preferred large bank, up from 38.9% last year. The bank’s support in 2020 and 2019 had been more than 50%.

Favourite smaller bank Kiwibank chief executive Steve Jurkovich has been very vocal in assuring the market his bank was going all out to capture advisers' hearts and minds, and his efforts have clearly paid dividends. This year's survey showed 41.6% of advisers named Kiwibank as their preferred smaller bank, up from just 18% in last year's survey. Kiwibank started its engagement with advisers a few years ago, but set a slow pace as it built its capacity to handle the third-party distribution model. In February, Jurkovich said advisers could one day account for as much as 85% of Kiwibank's mortgages. By August, he told Good Returns that between 30% and 40% of Kiwibank's mortgages were already originated by advisers and that his bank had signed up more than 80 firms in the previous 12 months, taking the total number the bank dealt with to 250. “We do really support that adviser model,” Jurkovich said. “It’s really clear to me: more and more customers are choosing the support and expertise they get from advisers.” Kiwibank's surge has displaced SBS in brokers' affections, with the number naming the latter as their preferred smaller bank falling to 26.7% this year from 39.7% in last year's survey. The survey showed support for nonbank lenders was much more diffuse, with Avanti and Sovereign the most preferred brands - and Bluestone coming in third place. More than 78% of advisers placed up to 25% of their loans with non-banks. ✚

50% 40%

Kiwibank Growth

30% 20% 10% 2020

2021

2022

2023

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Fewer fans of FANZ

nly 41% of respondents to the latest survey of mortgage advisers said they belonged to the industry association, Financial Advice New Zealand (FANZ). That's down from 45% a year ago and has declined from nearly 60% in 2019, when FANZ - an amalgam of three former associations - was created. That suggests fewer mortgage advisers feel FANZ is catering to their needs and that the Australian mortgage broker association, FBAA, which plans to set up shop in NZ, will find fertile recruiting ground on this side of the Tasman. Geoff Bawden, who used to chair one of FANZ's predecessors, the NZ Mortgage Brokers Association, says advisers have questioned what the value proposition is in belonging to FANZ. He says that when he attended the first couple of annual FANZ conferences, he felt there was little in it for the mortgage-advice side of the industry. “It was all risk-based and very little mortgage stuff. There was very little visible in the mortgage space,” Bawden says. His view is that FANZ should have formed three separate colleges within the organisation, representing financial advisers, insurance advisers and mortgage advisers. “There was a bit of an attempt to do that, but it never really got off the ground,” he says. Instead, many of the larger mortgage aggregators have been holding their own conferences, leading to greater fragmentation and less of an ability for the industry to speak with a united voice. Bawden is sceptical that the FBAA will provide that voice. “People can't just come from Australia and apply the same guidelines just because the same banks operate here. It's very different.” One of the problems at NZMBA that Bawden perceives is that “not many people can take their hat off and put their own interests as secondary to the industry, and that's what you have to do.” He says an industry association will work only if the decisions made are to benefit the industry as a whole, not just the chair's own business.

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Call for community Jenny Campbell, who used to represent mortgage advisers when NZMBA merged with the Professional Advisers Association in 2012, says the focus in New Zealand in recent years has been on regulation. She says there hasn't been a good appreciation of how mortgage advisers differ from insurance advisers in many respects. “A lot of people are looking for the advocacy piece,” she says - and that's the part that’s perceived to be missing, along with mortgagespecific training resources and networking opportunities. “The old association was really good at building a sense of community, and that's really been lacking ever since,” Campbell says. However, FANZ says its upcoming conference in March will host a lending breakfast meeting, “where mortgage advisers will get the opportunity to hear from a lending panel about the issues facing lenders today.” It says it provides members with a number of exclusive benefits, including weekly webinars which regularly attract between 120 and 180 attendees. It

notes it has a lending Super Wednesday webinar coming up on Feb 7. FANZ also offers members its Trusted Adviser mark. “It was rewarding in December to be discussing the Trusted Adviser mark with many of our mortgage adviser members, as they have progressed in our professional development online platform to a point where this is very achievable,” says Sarah Maxwell, FANZ communications and social media manager. Maxwell says FANZ personnel are “champions of professionalism” and that it expects to be representing mortgage advisers when the new Government conducts its review of the already much-tinkered-with Credit Contracts and Consumer Finance Act, as for the select committee inquiry into banking competition. FANZ's good relationships with government and industry organisations such as the Financial Markets Authority “will be critical,” Maxwell says, noting that FMA chief executive Samantha Barrass will be addressing the March conference, and the FMA's director of deposit taking, insurance and advice, Michael Hewes, will be taking a workshop. ✚

Are you a member of Financial Advice NZ? 60% 50% 40% 30% 20% 10%

2019

2020

2021 Yes

2022 Undecided

2023

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UP FRONT

MY BUSINESS

From zero to hero Jason Salle talks to TMM about having an epiphany on waking one day, chucking in his comfortable, salaried meat-inspector’s job and plunging into the world of mortgage advising. BY SALLY LINDSAY

‘I've been asked numerous times to move to a bigger centre… but the trade-off is higher costs, having to stop at traffic lights, and losing the lifestyle a smaller town offers’ 028

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ason Salle had glimpsed life as a future mortgage adviser on television advertisements - and while his job as a meat inspector at Affco, in Taumaranui, was easy, he wanted a change. Something completely different. With zero experience, he took on an Adam Parore Mortgages franchise with no customer base, in a small town where loan sizes are substantially smaller. A steep learning curve ensued, as Salle admits he had no idea what he was doing. At the time, training was limited: he spent three days with a mentor and a week at the franchise’s Auckland head office, watching how other advisers operated, and was told to “just get on the phone.” The second week in business, he got a phone call from a good friend who wanted to borrow some money. That was his first deal. Business picked up, and Salle did well for two years, until the global financial crisis struck at the end of 2008 and his mortgage writing and income evaporated. He walked away from the franchise. But after contemplating going back to the safety of a salary, he decided he was not the sort to give in

without “giving it a shot”. Needing to keep earning a living, he became an insurance adviser for Hamilton-based Millennium Insurance Group while keeping his hand in the mortgage market through referrals from his insurance colleagues. Although he was the only mortgage writer in the group, deals were few and far between.

What are the advantages of being in a small town? I hear a reasonable amount of time that some advisers working within big centres don't get too enthusiastic about seeing clients in smaller towns. But it’s my belief that people in regional small-town New Zealand

‘It’s hard yakka building a client base from scratch’ But the insurance work propped up his mortgage business, enabling him to earn some income during the hard times - and it’s a model he has stuck with. He’s faced a similar scenario since the beginning of last year, when the housing market slumped as inflation soared and mortgage writing dropped. Millennium was sold last year, and Salle set up on his own through JS Mortgages and Insurance, still in his hometown.

How difficult is it to operate in a small town? You wouldn't survive if you were a mortgage adviser only and stayed in a small rural town, such as Taumarunui, with a population of, say, between 5000-8000 people, and it was a fulltime occupation. It would be very hard to do. There's not enough business, and obviously the loan sizes are a lot smaller. To make it work, I have spread out in terms of geographical areas. The vast majority of my customer base is in the Ruapehu/King Country district, but I also have clients in the Bay of Plenty, Taranaki, Waikato, Whangarei and even Invercargill, where some have moved. I spend a lot of time on the road.

Was it expensive to set up your own business? There were certain costs I had to take on board with new legislation and compliance. In terms of people resources, I’ve not been afraid to use other organisations’ BDMs; they have been a big assistance. The thing I found is that generally customers in smaller regional towns like it if you can provide both mortgage and insurance services.

deserve the same access to mortgage and financial advice. Living and working in a small town has been a bit of a trade-off during my career. I've been asked numerous times to move to a bigger centre, where the loans and commissions are bigger. But the trade-off is higher costs, having to stop at traffic lights, and losing the lifestyle a smaller town offers.

How do you keep up-to-date with the market? To keep your finger on the pulse, you've got to make your own way, and get out and catch up with people, whether on the mortgage or insurance side of the business. The advice part of the business is the same in both, whether dealing with banks or insurance companies. Taking a similar approach to both: reading, not being lazy, getting on the phone. And travelling to bigger centres for meetings with those you know around the country, in both industries, keeps you up on the latest developments.

What part of the business do you most enjoy? Advising and servicing my clients: finding the solutions to the challenges that come along for people when they're trying to buy their first home, a rental, or something else. Because the lending environment is quite challenging for people, there can be a level of misunderstanding. Many clients just don't understand how difficult it is, and what sort of requirements and criteria you need to get a loan approved, particularly on the mortgage side. And on the insurance side, getting claims paid at the time when customers

need it is a special feeling - being able to help people in those circumstances.

What problems are facing the mortgage sector? In the past two or three years, the Government and its new legislation has been a big challenge. The CCCFA legislation is really inhibiting the money-go-round. Advisers across New Zealand will be able to tell you stories about clients that really should be getting money, or getting [at least] some money, and they're not. That stops the money-goround, and there are further effects downfield within the economy. There needs to be more careful consideration when a Government makes those decisions, and put laws in place, as to the effects they're actually going to have. Another concern is the gap which seems to be widening between the lender at one end and the customer at the other end. [For example], we're starting to get emails from corporate entities - the banks and insurance companies - that don't have a name or a phone number on the bottom. It sometimes makes it a little bit harder to service a customer you're trying to help. It’s just not very personable - and it’s getting more difficult to communicate. I think banks are just losing their way a little bit more. They’ve already closed branches in many small towns, which has been advantageous to advisers in a similar situation to me, but a shame for customers who like face-to-face interaction.

How important is it to attract younger people to the mortgage industry? I applaud bigger adviser businesses who assist younger people to get into the industry with resources and financial help. If you did it like I did, with little assistance, while it did build up resilience, it’s hard yakka building a client base from scratch. For students leaving school in a small town and wanting to get into the industry, there wouldn’t be many options - but in the cities, it’s imperative younger people are brought into the industry. My intention is to have somebody come on board at some stage, someone who's going to pick up the work and continue on. ✚ www.tmmonline.nz

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COLUMNS

SALES & MARKETING

MISTAKES ADVISERS MAKE IN THEIR MARKETING Many mortgage advisers run generic ads which don’t appeal to the emotions. In other words, next to useless. Paul Watkins explains how to do better.

don’t want to dwell on the negative, but recent ads I have seen from mortgage advisers may not hit the mark. Too many are generic - and trying to offer a onesize-fits-all solution. As I’ve said before, the best test is to put one of your competitors’ names in the ad and see if it still works. In most cases, you could find that it does. If this is the case, then your ad spend must be on brand awareness and Search Engine Optimisation (SEO), to somehow be more prominent in their minds and high in the search results. The problem with this strategy is that it can be very expensive. You are competing against the largest of your competitors, including the lenders, some of whom have massive budgets. SEO is a highly skilled talent few can master internally, so you’d need to contract out such services. You should be doing so anyway, but find niche terms that you can dominate. And is brand awareness the reason clients would choose you anyway? If it were, then the biggest advertisers would be doing all the business. You do need to get your brand out there, but only in respect of how it will help your client acquisition.

It’s not about you Another mistake is ads which overemphasise generic features or make it 030

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all about yourself. The best examples here are in real estate. Most radio, press and billboards for real estate agents read like this: ‘Pick me, I’m good’, ‘Here is a picture of me’, I care for my clients’ and ‘I’m the one who knows how to market your home’ (but don’t, they just follow their company’s sales formula).

‘The home they buy meets one of their biggest life goals. Are you recognising this in your ads or are you simply making them clinically fact-based? ’ I’ve never understood this. There is no attempt to get into the heads of prospective clients. The issue here is that these ads are all about them, not the client. The alternative is to be specific in your advertising.

As a prospective first-home buyer, I want to know that you understand that market in depth. As someone struggling with mortgage payments due to the higher interest rates, I want to find an adviser who knows some possible solutions. As an older person nearing retirement, I want to know the best way to dump my mortgage quickly. As someone who recently divorced, what are my options to get back into home ownership? This will mean running multiple ads to each target group if you want more than one, but that’s how it works now: micro campaigns to highly targeted groups.

Address specific concerns This leads directly to the next mistake, which is not addressing specific client concerns or thoughts. In other words, how do you get into their brains? As just discussed, what are the circumstances of the people you want as clients? This could be in terms of their stage of life, such as marriage, having kids, starting a business, or rebuilding after a divorce. As a matter of interest, there were 18,800 marriages in New Zealand last year – with the average age for marriage now in the early 30s - along with 7,500 divorces (see the StatsNZ

PAUL WATKINS

‘That’s how it works now: micro campaigns to highly targeted groups’

website for more details). As an idea: those who are exiting a marriage is a genuine target group. How do you work out their thinking? When you talk to clients, what do they tell you? Most will explain a lot about their circumstances, thoughts, feelings, family, work and desires. Do you ever note these down and look for patterns? I don’t mean just the demographics, such as age and location, but why they approached you. Why did they need a mortgage, either secured or refixed? What are their family circumstances? Why did they come to you as a broker and not direct to a lender? The more you note, the easier it is to construct high-impact advertising. And what do you do with such information? You write blog posts, you send newsletters to a segmented database, you run social media ads specific to the thinking of each group. Here is an example to explain this better: You notice that you’ve had a few client couples where one partner had held a mortgage in a previous relationship, while the other hasn’t. Is this a problem? Such circumstances may be nothing to you, but could be of grave concern to the couple. Remember that it’s all about them, not you. Following this example, the headline for your blog post could read, “How do

we get a mortgage when one of us has held a mortgage before, but the other is new to property ownership?” This will then become a searchable headline for anyone searching for it. Never assume that the prospect knows as much as you do. Dumb it right down. This blog post then forms the basis of your social media post, linking directly to more detail in the blog post (and the social media should ideally feature you on video).

our most emotional experiences ever! For a long time, we thought it was unachievable, but our adviser, XXX, showed us options we didn’t even know existed. Life can now move on, and it’s such a wonderful feeling not having to pay rent anymore.” The difference is simply shifting the focus off you and onto the client: how they felt after the success of getting the mortgage they wanted.

Appeal to the emotions

I think the biggest mistake many advisers make is to offer a one-size-fitsall approach and not focus on specific niches with targeted messages. This mistake is more or less a summary of the ones raised above. I have raised this repeatedly in these articles, and the main objection I hear is, “But if I focus on just middle-aged, re-fixing clients, I’ll lose the first-home buyers, the investment-property buyers and others”. No, you won’t. You will become famous in your main niche, but can still run other ads aimed at other segments. Take a close look at your promotional activity and ask yourself who are you trying to attract with it, what are the biggest headaches this group has, and how can you get into their heads with emotionally charged messages. ✚

Another mistake is not making your ads emotional enough. Taking out a mortgage is a massive commitment for your clients. It can cause huge stress, emotional outbursts, and sleepless nights. The home they buy with it meets one of their biggest life goals. Are you recognising this in your ads or are you simply making them clinically factbased? Use storytelling and emotionally charged language. Write about specific clients (names and some details changed, of course), focusing on how your guidance made them so much happier. Rather than testimonials that read, “She helped us get the mortgage we needed”, have it read, “The day we moved into our first home was one of

Ditch one-size-fits-all

Paul Watkins is a marketing adviser to the financial services industry www.tmmonline.nz

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COLUMNS

ADVISER WELLBEING

MORTGAGE ADVISERS MORE STRESSED THAN OTHERS It’s official – mortgage advisers are more stressed out than other advisers.

IA has repeated its Wellbeing survey of advisers it first did in 2021. Overall, the mental health risk of advisers was 6.6% lower than in 2021. A publication from the Mental Health Foundation in 2022, cited data from Statistics NZ showing one in five workers in New Zealand reported being stressed by work ‘always or often’. “This suggests that the number of financial advisers experiencing stress most of the time at work, is two times higher than the average worker in New Zealand.” What is more worrying is that AIA’s Wellbeing report said home loans advisers were worse off than investment and insurance advisers on most measures, including work-family balance, wellbeing, stress, stressful issues, impact of stress, alcohol use, mental health risk, AIA head of IFA and group 032

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distribution, Anna Schubert said issues like the cost-of-living crisis, refinancing loans at much higher rates, and floods all add pressure to an adviser’s job. Also there is a lot of emotion from customers when it comes to buying a house which the advisers have to manage. Added to that there is a lack of work/ life balance. “If a deal is on the go you have to do it.” A mortgage adviser, Sue, commented on a webinar that “there isn’t a part of our role that isn’t time bound or pressured.” Everything a mortgage adviser does is deadline based. How about other advisers? Although the overall wellbeing of financial advisers showed signs of improvement since 2021, stress remains a concerning factor. Interestingly the main cause of stress has moved from government regulation in 2021 (as advisers

prepared for the new licensing regime) to compliance. Regulation was the highest cause of stress for advisers in 2021 at 61%. However, this year the main pressure point for advisers was compliance, with 50% rating it as ‘highly’ or ‘very highly’ stressful. “Compared to previous research, we’re noticing a real sense of anxiety which has shifted away from the unknown and towards the fear of making a mistake. This comes as regulation, compliance, and auditing remains front of mind for advisers,” AIA chief partnership distribution officer Sharron Botica says. While there has been improvement since 2021, the impact of stress on advisers’ health and wellbeing remains a concern. The biggest impact was experiencing sleep issues (41%), followed by the risk of taking stress leave (19%), seeking medical support (17%), and using alcohol to manage stress (15%).

Key Points Young advisers not doing well Email worst business tool Video meetings a winner Better work/life balance Mortgage advisers face more stress than other advisers

Not enough time to give advice

Human Performance Researcher, Adam Fraser, who led the study says using alcohol to manage stress does not work. “Alcohol does not help anything. It has no positive effect at all.” Advisers coping well are managing their stress by turning to others for support, including product manufacturers (58.0%), industry peers (57.9%), as well as groups and FAPs (53.1%). Others are tackling stress by adopting good wellbeing habits, such as improving their ability to draw boundaries around work-from-home (increased by 7%), and showing more consideration to self-development in their role (increased by 4%). Fraser was surprised that product providers rated so highly in providing support to advisers as in Australia the result was much lower at 28%. Schubert, described the result as “co-parenting.” Everyone had to come together and get behind advisers as they went through regulatory changes, she says. Fraser noted that advisers have an incredibly varied load of work tasks. Emails, administration and phone calls account for nearly 40% of the workload. “One of the sad things is that advice is only 12% of your time.” Yet giving advice is what energises advisers. Fraser says “email is simply the worst used business tool in the history of

the world.” “Email is primarily designed to send information from one person to another. But what we do is we use it as our to-do list and we leave it open and when it pops up and makes that noise, we go, we look at the email, we either worry about it or action it, and then we go back to what we were doing. “What this does is breaks our workflow, it interrupts our attention and it just devastates our productivity. So if there is one thing that I would get people to do is to start treating email like a task. So you schedule it in your calendar.” Fraser says there has been around a 7% reduction in mental health risk since the previous report. “This is excellent, considering …the external conditions. So people's mental health, well, advisers' mental health has improved.” In the report mental health risk is broken into high, moderate, and low. “One of the biggest shifts we've seen is a lot of people from moderate risk have moved into low risk, which is really, really excellent. “A theme that has come through, is we're seeing just better habits around family or personal time and work.” He says boundary strength (work/life balance} has improved “We're seeing 72% of people are saying, ‘I'm doing a good job balancing work and my personal life.’ Once again, the improvement in my personal time as my own is related to boundary

strength. So when I am turned off from work and I'm in my personal life, I'm feeling like I'm really immersed in that and I'm present and I'm not worrying about work.” Fraser said one of the interesting findings that was really positive is the introduction of virtual meetings. The advisers are saying, "That is saving me so much time in travel and because of that, I can dedicate time to compliance or to proactive marketing." “This is a change that we've seen that's been incredibly constructive.” One of the big areas of concern is that younger advisers are not doing well. Fraser says 23% of advisers in the age group up to 29 year are in the high risk for mental health. “We're not sure what's driving it, whether it's just that they're obviously new and starting businesses, but this is a really concerning finding. And then if you look at the age bracket, it starts to reduce right down for the next ages. It pops up again around 50. “I don't know whether we're documenting a midlife crisis here. And then it reduces again over 60. “But something definitely needs to be looked at around this younger cohort, whether it's mentoring, whether it's any sort of support, but they are really struggling. And what we don't know is, is it coming from the work or elsewhere? ✚

KEY SOURCES OF STRESS

Source: AIA NZ Adviser Wellbeing Research study

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The Top 10 stories on tmmonline.nz A lot has happened in the market since the last edition of the magazine. Here are the most-read industry stories from tmmonline.nz

01 FORMER MORTGAGE ADVISER PLEADS GUILTY TO FURTHER DISHONESTY OFFENCES

Hawkes Bay mortgage broker awaits sentencing after pleading guilty to further criminal charges.

02 BIG SHAKE UP AT NZFSG NZFSG is looking for a new CEO.

03 OCR CUTS - THIS YEAR OR NEXT? The question on the lips of many mortgage advisers: when will the OCR drop and mortgage interest rates fall?

04 MORTGAGE ADVISERS MORE STRESSED THAN OTHERS

It’s official: mortgage advisers are more stressed out than other advisers.

05 RBNZ: RECORD IMMIGRATION

MAY MEAN RATES STAY HIGH FOR LONGER Net immigration has surprised the Reserve Bank on the upside “to the tune of tens of thousands,” raising the prospect that interest rates will remain high for longer.

To keep up with all the news make sure you check 034 TMM 01 | 2024 regularly. Or you can get the www.tmmonline.nz news and rates update sent to you each day.

06 FINSURE PLANS AN AGGRESSIVE PITCH FOR NZ MORTGAGE ADVISERS IN 2024

Australian aggregator Finsure will be making an aggressive pitch for New Zealand mortgage advisers to join it.

07 LENDING DEALS HEAT UP

Mortgage interest rate competition between banks is heating up, particularly for new lending deals.

08 TEN THINGS TO KNOW ABOUT MORTGAGE DEBT

The market has been relatively subdued over the past 12-18 months, alongside the downturn in sales volumes and property prices.

09 DTIS STILL IN THE MELTING POT

Finance Minister Nicola Willis is waiting on RBNZ advice before deciding whether debt-to-income (DTI) restrictions should be implemented.

10 UNCERTAINTY OVER DTI EFFECTS As the Reserve Bank gears up to consult on the possible exemptions and speed limits for debt-to-income restrictions, CoreLogic’s chief property economist says it is difficult to know whether they have worked in other countries.

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