UP FRONT | EDITORIAL
Time for a payrise
I
reckon it’s time lenders, particularly banks, gave mortgage advisers a payrise. Yes, it is time to increase commissions. There are many valid reasons for this. The cost of running an advice business has increased significantly over the years and much of that has been brought on by banks and regulators. We regularly hear stories about other industries passing on cost increases. Think airlines. Air Chathams recently implemented a 20% surcharge to cover fuel price rises. Air New Zealand’s pricing certainly seems to change with the changing costs it faces. Distribution companies are another industry which has increased prices. Mortgage advisers have faced significant cost increases, some from regulation and moving into a new licensing regime. These new regulations have flow-on effects. A great example is professional indemnity insurance. The insurers have come up with a new model to reflect the changes to Financial Advice Providers, consequently premium rates have ballooned. Banks have massively increased burdens on advisers. What’s worse is when they can wind things back, they do not make changes. One example many advisers have given to TMM is that when the new CCCFA changes came in, banks reacted and made things much harder to submit a successful application. The Government has, belatedly, acknowledged the CCCFA regulations went too far, and is now winding them back. Have banks wound back their requirements? From everything we hear, no. While the Financial Markets Authority has a strong dislike for commissions, it needs to suck it up on this one.
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Someone has to pay for advice and, in New Zealand, it is not the consumers. It seems the regulator likes the idea that consumers have choice when it comes to buying a financial services product or service. Frankly, the only way to get advice is to have a strong, vibrant and thriving third-party distribution market. Going to a bank and being offered just one brand is not consumer choice. Consumers have clearly shown they want to use advisers, and that is why loan originations at all the banks is now well over 50%. New Zealand is following Australia and other countries, and I predict that advisers will be writing two-thirds of bank home loans in a couple more years. While that number is changing it’s been a long, long time since we saw any significant changes to commission rates. This is all at a time when there is a cost of living crisis, and Statistics NZ reported annual wage inflation for the 12 months to March 31 came in just under 5%. If there is one sector in New Zealand which can afford to adequately reward key stakeholders, then it is banks.
Philip Macalister Publisher
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TMM 03 | 2022
ISSN 1176-2063 (Print) ISSN 2537-799X (Online)
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