Issue
04
2017
GOING VIRAL MASTERING VIDEO MARKETING
NAVIGATING WELCOME HOME LOANS
IFA/PAA AWARDS
ALL THE WINNERS
CONTENTS UPFRONT 04 EDITORIAL
The wind of change is blowing
06 NEWS
ASB lauds fixed rate rollovers
10 PEOPLE ON THE MOVE
28 16 FEATURES 08 HOUSING COMMENTARY
Stalling prices and declining sales now characterise the property market - but most experts view the cooler climate as simply part of the cycle.
13 PROPERTY NEWS
Labour Party’s Healthy Homes Guarantee Bill and the latest meth standards revealed.
14 REGULATION CHANGES
How prepared is the industry for the changes the the Financial Services Legislation Ammendment BIll will bring?
28 MY BUSINESS
Wayne Oliver reveals why he always has time to answer questions, even if there is nothing in it for him.
Wayne Oliver
COLUMNS 24 SALES AND MARKETING
Paul Watkins looks at the power of using video as a marketing tool and how to get it right.
28 PAA
The industry's finest recognised and what's coming up around the country.
26 INSURANCE
Continuing his series on cancer, Steve Wright looks at how you can provide the best cover for clients in the event of breast cancer.
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EDITOR’S LETTER
The wind of change is blowing
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here are a few elephants in the room at the moment. One would be news that the Commonwealth Bank of Australia plans to sell Sovereign. There’s little information around, other than the bank putting up the for sale sign. Sovereign is a significant player in the market with a loan book of around $7 billion. From a mortgage adviser perspective, Sovereign has a pretty distinctive offering. While it is a modified ASB home loan, ASB has been clear that if an adviser wants trail use Sovereign, if they want upfront use ASB. There was some speculation CBA may want to keep the loan book; but the counter argument is that Sovereign Home Loans was set up, and is still geared, as a way for Sovereign to sell more life insurance. TMM understands the cross-sell rate is very low, maybe as low as 12%. While that would indicate the strategy isn’t working it does provide an important signal to mortgage advisers. It’s a drum I have beaten more than once before; that is mortgage advisers need to diversify their offering. The days of relying on prime, main bank lending for a living are waning (again). There are lots of reasons for this, high on the list is the simple fact sales volumes have plummeted since the Reserve Bank introduced various lending restrictions. This is one of the themes of TMM’s dedicated
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mortgage adviser conference on October 19. It’s about looking at new opportunities advisers can add to their businesses. The other elephant in the room is regulation. I get that people are holding back, or even reluctant to do anything. After all, even the Financial Markets Authority doesn’t know what the final detail of the new regime looks like. But, there is a simple message; change is coming and you can’t resist it. What you do need to do is think about your business and where you want to be in the future. While it’s not our job to be cheerleaders for the FMA, comments made recently are worth passing on. One is that adviser regulation isn’t the biggest threat to your business, there are plenty of other things on the horizon including digital advice and distribution. The second, and it’s not my comment, is that the proposed new adviser laws are designed to make it easier to give advice to customers. Time will tell if that comes to pass, but if that is the goal then it’s one to embrace.
PAA DECISION As you probably already know the PAA has decided to stop providing TMM to its members as a tangible member benefit. There was no consultation about this decision and we are currently working through our distribution plans for the magazine. In the meantime we are sending you the latest issue as we know mortgage advisers value the content it delivers. If you have any queries please email philip@goodreturns.co.nz
PUBLISHER: Philip Macalister EDITORIAL: Adrian Gallagher SENIOR WRITERS: Miriam Bell CONTRIBUTORS: Susan Edmunds Paul Watkins Steve Wright Jonathan Flaws GRAPHIC DESIGN: Jonathan Harding ADVERTISING SALES: Freephone: 0800 345 675 Kelly Thorpe kelly@tarawera.co.nz SUBSCRIPTIONS: Dianne Gordon Phone 0800 345 675 HEAD OFFICE: 1448A Hinemoa St, Rotorua PO Box 2011, Rotorua Phone: 07-349 1920 Fax: 07-349 1926 tmm_editor@tarawera.co.nz
The NZ Mortgage Mag is published by Tarawera Publishing Ltd (TPL) in conjunction with the Professional Advisers Association. TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and ASSET magazine. All contents of The NZ Mortgage Mag are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.
The NZ Mortgage Mag welcomes opinions from all readers on its editorial. If you would like to comment on articles, columns, or regularly appearing pieces in The NZ Mortgage Mag, or on other issues, please send your comments to: tmm_editor@tarawera.co.nz
Philip Macalister Publisher
NEWS
The best news from TMMOnline ASB LAUDS FIXED RATE ROLLOVERS
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SB has been talking up its investments in digital technology, such as its fixed rate rollover tool – even though Bank Direct, one of its first ventures into offering new services to customers, looks doomed. ASB says around 70% of its fixed rate rollovers are being done on its online platform. Chief executive Barbara Chapman says the rollover tool has been a “phenomenal success” and is an example of where ASB is making investments in technology and innovation. With the online functionality “customers no longer require staff assistance to re-fix their home loan rate. Instead, they can access personalised pricing and complete their re-fix when and where it suits them.”
our business forward, and agents, advisers and real estate consumers will share the positive outcomes.”
PAA HOLDS TALKS WITH ASB
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AA chairman Bruce Cortesi has told members the association had an “open, honest and fruitful” conversation with ASB, as it works to tackle bank practices it says undermine advisers. In June, the PAA sent a fierce email to its members, telling them it had been made aware of the “unsavoury” practices of a major bank, and was taking up the issue. The banks were unhappy about the letter but Cortesi recently sent another letter to members advising them the PAA board had met ASSB to discuss the issues. Cortesi says meetings with ANZ and Westpac are planned.
BUSINESS REBRAND FOR BAWDEN NO PAA GONGS E/MAX New Zealand is rebranding its finance arm, which is run by Geoff FOR LENDERS
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Bawden, as Pivotal Financial. It will leverage from the growing RE/MAX network, its new refreshed brand and its experienced mortgage and insurance advisers, while providing RE/MAX customers a full suite of financial offerings. Bawden says the rebranding brings a new era in full financial service for the RE/MAX network. “We are creating a selling/buying experience within the real estate industry that is an allinclusive experience. Accountability is driving
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he PAA recently handed out its excellence awards, designed to recognise the passion, pride, professionalism and general excellence in the mortgage advice industry. Winners included David Windler (the Mortgage Supply Co), Cameron Marcroft and Tania Ropati from Westpac. But the PAA did not present lender of the year awards as it has done previously because it decided that it would like to recognise and
highlight the contribution of individuals in their lending roles. “The PAA viewed this change as a way to celebrate the person and their contribution, and of course as an extension, the lender they represent."
LENDME REBRANDS TO TAKE ON AUS
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eer-to-peer platform LendMe, now renamed Zagga, has so far processed more than $5m of loans in New Zealand, on average worth $350,000 each. Chief executive Marcus Morrison says the platform had seen a change in the market as banks tightened their requirements and borrowers who are having trouble getting lending from banks sought alternatives. The new name better reflected the company’s direction as an investment vehicle and marketplace lender, he says. It is also expanding its target market to appeal to financial advisers and high-net-worth investors and has launched in Australia, where it has lent $7m in a matter of weeks.
To kepp up with the latest industry news, views and opinions visit
tmmonline.nz
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HOUSING COMMENTARY By Miriam Bell
WINTER OF DISCONTENT
Stalling prices and declining sales now characterise the property market and that is causing some concern. But most experts view the cooler climate as simply part of the cycle, reports Miriam Bell.
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ow is the winter of market discontent. There’s stalling price growth, plummeting sales volumes, and growing numbers of properties for sale. Auckland has been feeling these cooler winds for awhile. But it’s no longer just the Super City being buffeted. The change in climate has spread to the major centres around the country – although some regional markets are still performing
strongly. And the general drop in temperture is leading to calls from various sources, including the Prime Minister, for the LVRs to be reviewed. However, commentators say its all just part of the cycle and property owners shouldn’t panic.
DRAMATIC SALES DROP
Successive sets of data have left little doubt that the market, particularly in Auckland, has
been slowing throughout the year. But July’s data highlights just how much the market has stalled, especially in the sales area where there has been a dramatic decline. The July data from REINZ shows national sales volumes fell by 23.9% year-on-year and by 3.3% on June, once seasonally adjusted. This represents the lowest number of properties sold nationally in a non-Christmas month since August 2014.
DESPERATELY SEEKING MORTGAGE AND OR INSURANCE BOOKS!! I am looking to grow my business and am wanting to chat to you if you are you looking to sell some of or all of your Mortgage and or Insurance book either now or in the near future? ALL REGIONS WILL BE CONSIDERED PLEASE CALL ME IN CONFIDENCE C/O FRANK 0272979351 08 WWW.TMMONLINE.NZ
At the same time, it had Auckland, which has long been a key driver for the national market, seeing sales volumes decline by 29.9% year-on-year and by 2.2% on June, once seasonally adjusted. Clear evidence of plummeting sales volumes also came in July data from the country’s biggest real estate agency, Harcourts. It reveals that sales around the country are down by 18% and there has been an 11.3% increase in unsold properties nationally, as compared to this time last year. In Auckland, sales are down by 19% and the number of unsold properties has increased by 43.5%, as compared to this time last year. Rounding out the Auckland story, Barfoot & Thompson’s July data shows Super City sales were down by 12.6%, as compared to June. They were down by 26.8% on July 2016. This meant it was the quietest July since 2010. Hand in hand with the fall in sales, new property listings are declining while the number of dwellings on the market are rising around the country. Realestate.co.nz’s July data shows new listings fell by 17.5% nationally year-on-year. The decline in listings was widespread with all but one region experiencing a fall. At the same time, the number of dwellings on the market nationally was up by 7% year-on-year and by 49.3% in Auckland.
FLATLINING PRICE GROWTH
House price growth fared better in the July data than sales volumes did. However, it was still far off the giddy pace seen in the notto-distant past. And, in Auckland, it was on the decline. According to QV’s July data, powerhouse regional markets are driving value growth in the property market while values in big city markets are flat-lining. It shows that Auckland saw its slowest rate of annual value growth in over five years. Once adjusted for inflation, average values in the region increased by 3.4% year-on-year while quarterly value growth plateaued at 0.0%. This left Auckland’s average value at $1,044,303. But it is not just Auckland’s value growth that has slowed significantly. QV’s data shows the flatlining value growth has now spread to other major cities notably Hamilton, Christchurch, Wellington and Dunedin. Big city markets drive the national market, so their change in pace has left nationwide annual value growth at its slowest since February 2015. Nationwide values grew by 4.6% year-on-year, once adjusted for inflation, and by just 1.6% over the past quarter. This left the national average value at $641,280 in July. REINZ’s July data told a similar story. It had the seasonally adjusted national median price up by 3.3% year-on-year, which left it at $518,000. But that price was down by 2.3% on June. Auckland’s median house price was down by 2.4% on June and, once seasonally
adjusted, by 0.8% year-on-year, to $830,000. The Bay of Plenty, West Coast and Canterbury also all saw a year-on-year decline in median house prices. Conversely, Northland, Hawkes Bay, Nelson and Otago all saw record median prices year-on-year.
NO REASON TO PANIC
While economists have taken a prosaic view of the current market environment and what the future might hold, others have expressed some consternation. REINZ chief executive Bindi Norwell pointed to the LVRs and the banks’ tightening of lending criteria as the key reasons for the big drop in sales across New Zealand. They create an intimidating barrier to entry into the market, particularly for those saving for their first home, she says. “The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake which is why REINZ is calling for LVRs to be reviewed for first time buyers.” Norwell’s call was echoed by several real estate agency leaders. It was given further emphasis when Prime Minister Bill English suggested it could be time for the Reserve Bank to think about what economic conditions might allow for the removal of the LVRs. However, pleas for changes to the LVRs are likely to fall on deaf ears at the Reserve Bank. Outgoing Reserve Bank governor Graeme Wheeler recently made it clear that the Bank was pleased with the cooling effect the LVRs have had on the market, but believes there is still a risk that the housing market could take off again. This means the odds of the LVRs being lifted are minimal. Other commentators say there is no point in panicking over the significantly cooler housing market – it’s all just part of the property cycle. Harcourts CEO Chris Kennedy says the property market has changed, but real estate goes through cycles and it is totally normal. “Things have slowed, but that doesn’t mean there is going to be a crash. Just an adjustment in sales levels, prices and expectations.” Likewise, Property Institute chief executive Ashley Church says what lies ahead is largely predictable as the market has been there before. Property owners shouldn’t panic – house prices aren’t going to collapse, he said. “While there may be small pockets of the country where prices drop a bit more dramatically, history shows that Kiwi house prices tend to settle, rather than drop, at the end of each boom. You need to go back to the mid-70s to find the last serious collapse in house prices and that was driven by a series of factors that aren’t present in the current housing market.” It is also widely agreed that the twin drivers of ongoing demand, due to strong population growth, and the major supply shortage will counter the cooler market and prevent a crash. ✚
REINZ SALES: DOWN
Once seasonally adjusted, sales volumes fell once again around the country, and particularly in Auckland, in July. The year-on-year decline was dramatic.
INTEREST RATES: UP
Interest rates remain low, but banks continue to announce small increases periodically.
OCR: DOWN
The Reserve Bank left the OCR on hold at the record low of 1.75% in August.
IMMIGRATION: UP
Annual net migration hit yet another new record high in June. Monthly net migration was also up considerably – to just under the record set in January.
BUILDING CONSENTS: DOWN
Once seasonally adjusted, building consents were down in June, after a surprise rise in May. But Statistics NZ still says the overall consent trend is on the increase. July data due out end of August.
MORTGAGE APPROVALS: DOWN
Reserve Bank data shows that both mortgage lending overall and the share of lending going to investors dropped again in June. July data due out August 24.
RENTS: UP
The average national rent remained unchanged in June as did the average rent in Auckland and Christchurch. But rents in Wellington and many regional markets were up. July data due out round August 25.
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
Westpac appoints acting head of third party banking
Rachael Lelean has left Westpac to take on the challenge of a new family business. Lelean's departure continues the pattern of changes at the head of Westpac's third party banking business which started after a restructure several years ago when Kylie Kneale left the bank. Westpac has now appointed Liz Cannon as its Acting National Manager Third Party Banking. Cannon has been with Westpac for 17 years and is currently National Manager, Specialist Lending and Retention.
Mortgage Express and Q Advisor groups join together Rachael Lelean
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Mortgage Express and Q Advisor Groups have combined together to appoint a joint internal Compliance and Training Manager. Leigh Hodgetts is a qualified financial
adviser and compliance specialist with experience in Australia and New Zealand. She holds a Diploma in Financial Planning, NCFS (Level 5) (Financial Advice) and is an AFA. Since leaving Australia, where she ran a successful business as a financial planner, she has worked for the FMA and in a Compliance capacity for two major banks. Before joining Mortgage Express and Q she was undertaking contract compliance work. Hodgetts will manage and oversee both groups’ compliance undertakings and will assist the groups’ advisers on a day-today basis. She is passionate about the financial services industry and will she make a key contribution to both groups assisting them in their quest to provide market leading support to their members, Q managing director Geoff Bawden and Mortgage Express chief executive Sarah Johnston said in a statement.
Avanti ramps up its mortgage team
Tammy Stitt Avanti has ramped up its mortgage team to support the increased demand they have experienced from mortgage advisers seeking nonbank specialist solutions. Since the introduction of their specialist long term mortgage offering 2 years ago they have seen a steady and significant increase in demand for both this product and their other wider product offering. Avanti has been committed to supporting and growing their valued adviser network throughout the country; demonstrated with on the ground BDM support, Paul Rolton based in Wellington covering the lower North Island and Michael Harrison based in Christchurch covering the South Island along with Julia Winterbottom National BDM based in Auckland. They recently created a new Property Portfolio Manager Role. They see this role as key to the continued development and growth of their mortgages channel. This new role will ensure the commitment to delivering proven products and excellent customer service is carried through the entire end to end customer experience. They are excited to announce that Tammy Stitt has accepted this leadership position within Avanti. Many of you may know Tammy from her recent role as Lending Manager with RESIMAC. Tammy brings with her over 20 years of experience in the banking and finance industry and her diverse background, which includes risk management, credit, project management and her knowledge of the specialist lending and adviser markets will be key to Avanti’s ongoing growth and success. Three new staff have also joined their Auckland based lending team. Barry Brown and Liz Downs in lending roles and Lee Alexander in an administration support role. These appointments will support their current experienced lending team to ensure that they live up to their mantra to be the “first second choice” for advisers and borrowers across a broad range of specialist lending products.
Insurance Link new advisers
Martin Kritzinger is based in Hamilton with over 30 years’ experience in the industry. Alan Burns is based in the Wairarapa and has developed solid relationships with some clients he has had for 40 years.
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PEOPLE Mike Pero welcomes five new faces
arena. Welcome aboard. Mark Loheni - Mark who has joined Bruce Patten's team. Mark and comes with over 12 years of lending background in NZ. He will be based north of Auckland in Mangawhai. Welcome aboard. Sandeep Sharma - Sandeep is new to the industry coming from an IT Business background. He has joined Gopal's growing Waitakere LM business and no doubt will be in good shoes to learn the ropes. Welcome aboard.
IRESS new addition Nicholas Schnell Scott Jackson Mike Pero has boosted its mortgage team with the appointment of five new advisers. Scott Jackson has spent 15 years in the finance and insurance industries and has now joined Mike Pero based in Nelson. Originally from Canterbury, Jackson says he is passionate about customer service and 100% committed to helping his clients achieve their financial goals.
Nicholas Schnell says he is passionate about investing in property as a means to securing a positive future. His aims to help people in the Hawkes Bay region realise their financial goals through the sensible use of financial products.
Elizabeth Brogan Elizabeth Brogan has joined the IRESS team in the Auckland office as a Senior Account Executive. Elizabeth previously worked with Sesame Bankhall Group in the UK as XPLAN Configuration Manager, supporting over 11,000 advisers across 4,000 firms. She joins a dynamic local team, helping deliver tangible results to XPLAN clients in New Zealand.
Kirsty Clark
Tammy Goddard Bay of Plenty-based adviser Tammy Goddard says she is passionate about property investment and what it signifies for Kiwis, and she has been personally investing in property since buying his first home at age 19. “I have an excellent understanding of the challenges facing home buyers and property investors in this current climate and am dedicated to efficiently fulfilling your needs” she says. Nigel Sew Hoy is a chartered accountant and brings real world property experience to the Mike Pero team. He actively invests in rental property and has renovated 20 plus properties and traded property in the past. Along with being a chartered accountant (CA) he is also a Registered Financial Service Provider, PAA and FSCL member.
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Kirsty Clark is based in Taupo and has followed a diverse pathway in her career. She brings a lot of life experience to her new role and is a passionate property investor and knows the challenges that exist with constant rule changes within the lending sector.
Mortgage Link awards
Loan Market appoints new advisers
Russell Spencer – Kapiti Coast – Russell joins our expanding Wellington network & will be based on the Coast. From an extensive advice background where previously Russell was a top Adviser for Roost for many years, then more recently a Risk Adviser in Hawkes Bay. Russell will help service the new Ray White network in the region. Greg Thomas - Greg has joined Darren Morley's business in the sunny Bay of Plenty. He's already a member of the group writing risk and was an Ex-Mike Pero mortgage adviser and now ready to launch back into the mortgage
Judy Steiner Judy Steiner was the Insurance and Mortgage Adviser of the Year for Insurance Link and also Mortgage Link Adviser of the year for Mortgage Link. Nick Jan-In was the Mortgage Link Non Branded adviser of the year. ✚
PROPERTY NEWS By Miriam Bell
Policy push for heathier homes
Housing related election policies are coming thick and fast, here’s our take on what they are.
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ne particularly inflammatory issue is the state of New Zealand’s housing stock. It is widely agreed there are too many cold, damp, mouldy houses but it is rental properties that have long been the focus of these concerns. This has prompted a campaign for a “warrant of fitness” for rental properties. It also led to the Labour Party’s Healthy Homes Guarantee Bill, which aims to establish minimum standards for insulation, heating, ventilation and drainage in all rental properties. Labour’s Bill recently scraped through its second reading in Parliament with 60 votes to 59. That means it is just a couple of steps away from becoming law – which is likely to be a challenge for landlords. Auckland Property Investors Association president Andrew Bruce says if the Bill becomes law it will impose extra costs on landlords and rents will go up to reflect that. In his experience, tenants tend to say they want
things like heat pumps until they have to pay for it with increased rent. “Many changes, like those in this Bill, are being proposed which make it harder for the majority of landlords who are trying to do a reasonable job as well as people starting out in property investment.” However, the Bill is unlikely to progress any further before September’s election. As a result, its future progress will be dependent on the next Parliament. The National Party, which is currently ahead in the polls, is opposed to the Bill. Building and Construction Minister Nick Smith says there are already legal requirements for dwellings to be heated, ventilated, properly drained and free of draughts. “The only new issue in the Bill is the requirement for landlords to maintain their property at a minimum indoor temperature – which is impractical.” He says the biggest issue in further improving the standard of rentals is enforcement, but there is good evidence that the standard of New Zealand housing is improving.
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New meth standards
Compliance Support
andlords may have been under siege on the healthy homes and rental tenure front, but they did see some good news over recent weeks. First up, was the release of the long-awaited new meth testing and decontamination standard. The most significant change in the new standard is that a new contamination level of 1.5 micrograms per 100cm2 limit has been set. Under the old guidelines, the limit was 0.5g micrograms per 100cm2. It also establishes clear methods for sampling and testing and competency requirements for samplers and decontamination contractors. This is considered critical given ongoing reports of inconsistent tests and excessive decontamination costs. The standard will also require accreditation for people carrying out testing for detailed assessments and recognised training courses for testing and decontamination operators. The new standard was greeted by government and property industry players as
PI Cover and Disputes Resolution Scheme Package
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a step forward on an issue which has provoked huge public concern, compounded by reports of inconsistent tests and cowboy operators. The NZPIF’s Andrew King says it is great that meth contamination limits have been increased to more realistic levels in the new standard, but that there is still a lack of understanding of the whole issue. “For many people any level of contamination is toxic. That is not the case. The new 1.5 level is conservative – and it is safe. There are likely to be higher levels on bank notes. The government should run a public education campaign so people learn how the levels are established and what they mean.” The new standard is also an important part of the Residential Tenancies Amendment Bill (No 2), which passed its first reading in Parliament in July. The bill, which is intended to allow better management of meth contaminated properties, would give landlords the right to test for meth and enable tenancy agreements to be terminated when levels are unsafe. ✚
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REGULATION LEGAL By Susan Edmunds
Industry navigates new world Some groups plan to become licensed providers but others fear the obligations that come with that.
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ortgage advisers and the companies they work for are mulling the options presented by the new legislation for the sector. Under the Financial Services Legislation Amendment Bill, which repeals the Financial Advisers Act, financial advice will only be
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able to be given by financial advisers, or financial advice providers (FAPs) operating with a licence that covers their nominated representatives. Financial advisers will be individually accountable for complying with the legislative and code of conduct obligations that bind the sector. But licensed firms will be
accountable for their representatives and have some accountability for their financial advisers. Existing qualifying financial entities are expected to become FAPs but other groups may also decide that model fits their businesses. That has left some groups with a quandary: Do they plan to take a licence, and potentially
make the road to compliance easier for their advisers – but at the same time expose themselves to greater levels of accountability for those working under their brand? Bruce Patten, deputy chairman of NZFSG and Loan Market, said Loan Market would take a licence and advisers would have the option to operate under that. Patten had originally planned to get a licence for his own business but he was starting to question that. “It’s whether it’s worth me doing it.” He had talked to advisers who worked for Loan Market in Australia and had been through a similar transition. Some with big businesses had opted for a licence at the start of the new regime but then a couple of years down the track had realised that with the administration requirements and other compliance costs they were better off using the Loan Market one. He said it might be better to opt to work under the Loan Market or NZFSG licence at first and then consider the benefits of one for his own business once the details became clearer. NZFSG and Loan Market would get one licence for the branded side of the business sand one for the non-branded, he said. “It’s a big liability for the company to carry. We don’t know what that looks like at the moment.” He said regulators would probably hope that some of the bigger groups were willing to step up and take on more responsibility for the thousands of registered financial advisers not currently officially caught in the regulatory regime. “If groups like us don’t take a licence the FMA is going to be [overwhelmed]. Our group is 1100, if everyone took their own licence imagine the costs involved with trying to sign all of those off. That’s why the FMA will encourage aggregators to take a licence.” Jenny Campbell, chief executive of the Mortgage Supply Company said it seemed likely her firm would become a FAP. She said that was likely to be the model that would fit most groups. “But we don’t know what it looks like for the rest of the market. The regulator keeps saying they don’t want to regulate out the one-manbands. We’ll have to see what it looks like. If the fees make sense then we’ll do it but there might be a bit liability piece we have to work out way through.” She said it would be difficult for groups to pick up liability for advisers they had no control over. Glen McLeod, of Edge Mortgages, is part of NZFSG and said he too would have to work out whether it would go under that organisation’s licence or set up on its own. “We will look at what the cost and what the administration cost would be for us to do it. That’s the big thing, we’ve got to work through those numbers before we can commit to going either way. The idea of being our own business has huge appeal and probably would be my first choice but I’m not going to commit to that until we understand what it means.” He was worried that increased compliance
“The regulator keeps saying they don’t want to regulate out the one-man-bands. We’ll have to see what it looks like. If the fees make sense then we’ll do it but there might be a bit liability piece we have to work out way through.” – Jenny Campbell
requirements could reduce his ability to offer advice to clients, which he said was his favourite part of being in business. David Ireland, of Kensington Swan, said QFEs would be the most advanced with their systems and would be best placed to get sorted to apply for FAP status. “It’s unlikely their current processes and documentation will be a perfect fit for the new regime. But whatever the licensing requirements may be they have a bit of a head start.” He said the other big advantage for QFEs over other groups was that when the Financial Services Legislation Bill became law, only existing QFEs would be able to engage nominated representatives under
their transitional licence. He said only QFEs would be able to give the regime confidence that they would have the systems to oversee and control the activities of their nominated representatives. “For other groups it’s a bigger step up to deliver those systems from scratch.” He said dealer groups and aggregators might choose to become FAPs but that would mean they were taking on a lot of the responsibilities and accountability for their financial advisers. “Can they be confident they have the systems in place to control that?” He said comments from Commerce Minister Jacqui Dewan that the regime would be simpler because there would be one licence instead of ten adviser business statements might not prove correct. “That’s not a great analogy because I don’t think you get the understanding of the complexity and the hoops you might need to jump through to get your licence. It’s not just a straight numbers game. Ten ABSs are not automatically more complicated than one licence it’s quite likely the other way around>” But he said there was a concerted effort to make the regime fit the stated aim of making advice more accessible. Advisers could call the regulators out if what they introduced went against that, he said. Sue Brown, of Sue Brown Solutions, said what was required would be resolved as the FMA developed its transitional and ongoing licensing criteria. “The FMA’s licensing criteria tend to focus on capacity, capability and resources including processes, so I’d expect entities that have been used to operating in a licensed environment - either themselves or working with a group of AFAs - will find the switch over to the new licensing regime less of a new challenge than entities that haven’t been licensed at all and who will likely need more help getting to the starting line.” ✚
MORTGAGE ADVISERS WANTED Are you looking for extra opportunity to build your Mortgage Advisory career and helping others realise their dream of building or buying a brand new home? This could be the opportunity for you! We are a Mortgage Advisory business based in Auckland and operating across New Zealand to service the G.J. Gardner Homes franchise network, NZ's No.1 builder. Our business also covers all forms of non-construction mortgage advisory work and insurance. We are now looking for established, energetic advisors across NZ who are looking to add another business source to their mix by joining the Onion group of top performing finance professionals. This is a very exciting opportunity for individuals craving success to be a key member of an expanding and dynamic team associated with the highly successful G.J. Gardner brand. If this sounds like the opportunity for you, email us at: info@onionhomeloans.co.nz or call Brett Dent on 0800 38 48 48 Onion is the trading name of Porteous Fraser Dent Limited. The controlling interest in this company is held by parties who also own a controlling interest in Deacon Holdings Limited, which is the New Zealand Master Franchisee for G.J. Gardner Homes.
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LEAD: YOUNG GUNS
Growing numbers are joing the mortgage broker ranks, but a select few young guns are showing the industry the way forward – and its through relationship building and communication. By Miriam Bell
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t’s been a heady few years for the mortgage broking industry. The booming housing market meant most brokers were seeing good business. But, over the last year, the market has tapered off and times have got more challenging for brokers. That’s water off a duck’s back for some of the industry’s fresher faces. The young guns of today’s broking world are writting many millions in loans and thriving in the current environment. They might hail from a diverse range of backgrounds. They might be tackling mortgage work in their own distinct ways. But they share some common traits. They are all passionate about the industry and they all point to a holistic approach involving effective communication and the building of solid relationships as key to success.
James Kingscote
❝ I take everything
Paulette Trotter
Paulette Trotter has only been an adviser since February but she’s proving to be a quick draw with an expected $21 million in lending written by the end of August. But Auckland-based Trotter is no stranger to the finance industry: she has over 25 years working in banks under her belt. The last 10 years were spent at ASB, with seven of those as manager of first the Counties and then the Auckland Broker Centres. Much of her time at ASB was spent motivating brokers so, when she left, she thought it was time to give it a go herself. Veteran adviser Bruce Patten offered to give her a chance at Loan Market and Trotter jumped at it. She says she is fortunate to be working for Patten as his large client base has opened up many good leads straight away. “Obviously, I have to seal the deal myself but I do get good clients and some advisers don’t have that. But I’m getting a lot of referrals too. I’m confident in my abilities and I love what I do. I’m very passionate about it. I think that
back to the basics and focus on building relationships.❞ - Paulette Trotter comes through as people are happy with the results and refer me to on to their friends.” Her mission is to make the complicated very uncomplicated, she says. To that end, she puts everything in laymen’s terms and keeps everything simple. “That helps to win over clients. I take everything back to the basics and focus on building relationships.” Ultimately, it’s about communicating well and being accessible to clients. Trotter, who enjoys spending time with her family and running when not working, also ensures she doesn’t over promise and under deliver. “If I say I’m going to do something then I do it. I always keep clients in the loop and informed about what is going on. And I make sure they know that I’m always available to help.”
Former ski instructor James Kingscote moved from the snow into mortgages two years ago but, in his view, the two jobs are not that dissimilar. Kingcote, who works for Mike Pero Wanaka, is often asked how a ski instructor becomes a mortgage broker. In reality, the advising process is nearly the same as teaching people to develop their ski-ing skills, he says. “As brokers, we build rapport, analyse, set goals, make plans, present information and guide our clients through the process. These steps involve my knowledge and understanding of learning styles which allows me to present information in a way that best suits the individual. All of which are key components to teaching.” In this sense, he doesn’t think his job has changed much - except he now helps people into homes or to purchase investment properties which he finds just as rewarding. While living in the Queenstown Lakes region means he is able to pursue his many outdoor hobbies (including ski-ing, fly fishing and boating), the market does have its own particular challenges with many people earning their income via self-employment or through seasonal work. Further, one of the specialities of the business he works for is construction loans. “My first client was someone who wanted to do a self-managed build. It was a tough one to start my career with, but I have quickly become an expert in this area.”
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And it is all paying off, with the business growing rapidly. Kingcote says Mike Pero Wanaka is now in the top 10 Mike Pero franchises in the country – even though the region has a permanent population of less than 40,000. “I pride myself on creating a great client experience and try to give back to our community by holding free educational evenings with other local professionals. I believe that by involving many local professionals and their complimentary services that I give clients the best personalised advice and financial future.”
Cat McMenemy
Taking on challenges has always been a prime motivator for sharp shooter Cat McMenemy who has written $55 million in her two years in the business. After migrating from Scotland back in 2010, McMenemy spent several years working at Housing New Zealand in the property development and asset management. But, as a property investor herself, she grew increasingly interested in learning about the
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❝ I like face to
face meetings and building up relationships with people. Social media is not my thing.❞ - Cat McMenemy financial side of property. She became a mortgage adviser with the help of SuperCity Mortgages business development manager Ammon Acarapi. “My husband knew him, so I talked to him, came up with a business plan and SuperCity basically took a chance on me.” The chance paid off with McMenemy soon generating good business. She says being in Auckland has probably helped, but so too does
her enthusiasm for property as an investment vehicle and her love of a good challenge. From the word go, she has embraced portfolio strategizing for clients. She deals with a lot of investors with quite big portfolios who like the fact that she doesn’t have a banking background so she looks at things with different eyes, she says. . “Plus I enjoy a challenge. I like helping a client restructure their portfolio to get more equity or to help it perform better. When I get a client with a portfolio which is a bit of a mess I enjoy the challenge of sorting it out to their benefit.” When it comes to recreational interests McMenemy likes non-traditional pursuits like snowboarding and the aerial silks practiced in circus arts. But when it comes to advising, she takes an old school approach. “We don’t advertise at all. It is all referral based. I like face to face meetings and building up relationships with people. Social media is not my thing. Instead my philosophy is that someone should be a client for life, so it is all about ongoing care.”
❝ A lot of people can be intimidated by finance professionals and are afraid to ask questions. I prefer to find out what my clients are trying to achieve to get a real sense of how I can help, before providing advice on what they can do.❞ - Luke Hawkins-Bellis
file sharing and social media: they all help to make the process easier for clients and generates further business for myself.” Business is booming and that keeps him busy. But, when he gets some down time, he is currently working on renovations of his own. “And, when I can spare a weekend away, I enjoy going south to the mountains for skiing.”
Luke Hawkins-Bellis
Since starting his mortgage career three years ago, Luke Hawkins-Bellis has been on a mission to show clients that advisers aren’t intimidating, rather they are a force for good. Hawkins-Bellis studied Economics at Canterbury University and then went into the property investment industry. He says that while working with clients to grow their investment portfolios he realised how important the right home loan advice could be in the investment process. He learnt more from a contact in the industry and, after being offered a job, made the transition into mortgages from there. Just over a year later, he moved to Auckland and joined Loan Market where he services the always popular central Auckland suburbs. Now Hawkins-Bellis says he likes to adopt a “no question is a stupid question” policy with clients. “From feedback, I have found a lot of people can be intimidated by finance professionals and are afraid to ask questions. I prefer to find out what my clients are trying to achieve to get a real sense of how I can help, before providing advice on what they can do.” To this end, he strives to tailor solutions that add real value to each of his clients. Further, he doesn’t just help clients who are ready to buy now, he says. “I am happy to help those wanting to buy in the future by outlining what they would need to get there.” Hawkins-Bellis has embraced the digital age in his work. “Technology is another big part of my business. Video calls,
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❝ Key to this role
is understanding the needs of clients as each client has different dynamics, requirements and needs. I work for the best interest of my clients, finding a better solution and meeting their required expectations. ❞ - Shafeel Aktar
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Shafeel Aktar
Shafeel Aktar has been working as an adviser for just over a year but, in that time, he has gunned down loans worth millions and now heads The Mortgage Supply Company’s new South Auckland office. Prior to becoming an adviser, he spent many years working in large financial institutions, including 16 years in banking. But it came to the point where he realised that becoming a “free-range” adviser would allow him to provide the best options and solutions to his customers. “That’s because the only way to truly tailor a financial package to suit the dynamic needs of my clients is to offer solutions from more than just the one bank.” An ex colleague recommended that Aktar join the Mortgage Supply team so, in June 2016, he started working with them. From February this year, he has been operating the
company’s South Auckland office. He has now written $39.4 million in pre-approvals and $21.85 million in draw downs. He says his banking knowledge enables him to tailor smart solutions and offer highly informed advice on a wide range of mortgage and property matters. He is also passionate about building a positive working relationship with every customer. “Key to this role is understanding the needs of clients as each client has different dynamics, requirements and needs. I work for the best interest of my clients, finding a better solution and meeting their required expectations. I believe in long-term relationships with my clients.” Strong relationships inform Aktar’s outof-work interests too. “Apart from annoying my seven year old daughter, I enjoy fishing, golfing and occasionally Kava session with mates.”
❝ I focus on explaining
how clients can pay their loan faster compared to a standard 30 year term. Simultaneously, I focus on protecting them by clearly explaining what personal insurance they should take. And I emphasize yearly reviews to ensure the client is on track on their mortgage plan.❞ - Aseem Agarwal
Aseem Agarwal
International experience has helped Aseem Agarwal to write $600 million of loans since joining his father’s South Auckland business full time in 2013. He started his working life in the IT industry but, a few years in, he decided to switch tracks and get into finance. His father is industry veteran Ajay Kumar of Global Financial Services and he was looking for a new pair of hands for GFS. At the same time, he was looking for a career change, so it all worked out perfectly, Agarwal says. But he took some time to head overseas to gain experience in Hyderabad and to get an MBA from the Kellogg School of Management in Chicago before joining the company full time. The years since have been busy and full of highs. He now heads GFA’s mortgage division and prides himself on his ability to handle large, complex deals. “Buying a house is the biggest cost, asset and liability for people, and to have the right advice is very important.” For Agarwal, who likes travelling and cars along with tennis, squash and soccer for recreation, being an effective adviser is all about providing hands-on assistance and expertise in a straightforward way to clients. It is critical to make the numbers really simple to customers and, also, to explain to clients all the things that could go well – or not so well - in a transaction. “I focus on explaining how clients can pay their loan faster compared to a standard 30 year term. Simultaneously, I focus on protecting them by clearly explaining what personal insurance they should take. And I emphasize yearly reviews to ensure the client is on track on their mortgage plan.” ✚
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SPECIAL REPORT - LENDING By Susan Edmunds
Loans offer way home Welcome Home scheme a way around increasingly tight bank requirements, advisers say.
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anks' tighter lending criteria are driving more firsthome buyers to opt for Welcome Home Loans, mortgage advisers say. Housing New Zealand data shows that for the March quarter, the most recent for which data is available, 650 Welcome Home loans were approved and 438 settled, across New Zealand. That is down from the previous quarter, when 735 were approved and 337 settled but a significant increase from the previous two quarters, before banks clamped down on lending. During that period, fewer than 1,000 were approved in total. Welcome Home Loans are offered by lenders and supported by Housing New Zealand, as a way to help first-home buyers into the
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property market. Borrowers only need a 10% deposit and the loans do not count towards the banks' permissible quota of low-deposit lending. There was $379 million in loans above 80% loan-to-value in May, Reserve Bank data shows. Income and house price caps apply, which limits how frequently the loans are used in Auckland in particular. A single person can earn up to $85,000 and a couple $130,000. In Auckland, existing houses up to $600,000 are eligible, or $650,000 for new builds. Other main centres are $500,000 and $550,000 for new builds, and the rest of the country's limits are $400,000 and $450,000. Welcome Home Loans are offered by Westpac, TSB, Kiwibank, SBS, NZCU Baywide and NZCU Employees, The Co-Operative Bank
and NBS. In many cases, borrowers using their KiwiSaver funds for a deposit also qualify for the KiwiSaver HomeStart grant, of up to $5,000 per person, or $10,000 when a house is being built. Buyers have to have been contributing to KiwiSaver for at least three years to qualify for that grant, and for five years to receive the full amount. Broker Glen McLeod, of Edge Mortgages in Auckland, said a Welcome Home Loan was a good option as borrowing through other channels became harder. "We're doing them a bit and I enjoy doing them. First-home buyers are my favourite part of the job. It's nice to get people into their own home. This gives them a chance, if you structure it right, to get them off to a good
start," he said. Robyn Johnston, of The Mortgage Supply Co in Tauranga, said she was encountering more demand for Welcome Home Loans as people's KiwiSaver balances grew to the point that they could consider a purchase. "Now KiwiSaver is 10 years old, most people qualify for the grant as well as their KiwiSaver savings having increased - if you're a couple buying a $500,000 house they have easily got $50,000 in KiwiSaver. It's definitely much easier, I think." She said banks were keen to take applications as Welcome Home Loans where they could, because it did not use up any of the 10% of lending they are allowed to do over 80% loan-to-value. She said buying conditions were improving, too. Previously, when more houses were going to auction or being sold in multi-offer situations, buyers had to do their due diligence to be prepared to buy, without knowing whether they had a chance at success. She had one client who had paid for four sets of valuations and building inspections before putting in a successful offer. Now, they could make an offer subject to being approved for a Welcome Home Loan, and the other criteria they needed to satisfy. "It's a change from where it has been. It's much better for first-home buyers." But borrowers must have a clean application to be accepted. The criteria are stricter than a standard home loan application. "They're pretty strict around what information we have to give," McLeod said. "They ask for more than with a normal loan. Because they have to go to Housing New Zealand to get sign-off." Johnston said it helped to have a broker to navigate the process because there were more hurdles and nuances to understand. "I do everything for them. Under Welcome Home Loans, you have to produce six months' bank statements and they have to be really good."
❝ First-home
buyers are my favourite part of the job. It's nice to get people into their own home. This gives them a chance, if you structure it right, to get them off to a good start.❞ - Glen McLeod
She said she would sometimes advise would-be buyers to wait six months, focus on getting their bank accounts in order, and then apply, instead of rushing in as soon as they could. "You're not allowed any overdrafts - a one-off
might be okay if you can explain it. You have to have been in your employment a year. They just want really good borrowers." McLeod said he would encourage borrowers to wipe out any short-term debt they could with their savings, if they had more than a 10% deposit. House price caps have been lifted but Johnston said they were still not high enough. She said $500,000 for an existing home in the Bay of Plenty was too limited, and it was not possible to find a new build for less than $550,000. "They do review them and you have to hope that they increase them again - even $50,000 might make the difference. What buyers are tending to do at the moment is go a little further out." Another Auckland broker, Karen Tatterson, said she would only deal with a handful of Welcome Home Loans each year for that reason. Borrowers must pay a fee of 1% of the loan account as lender's mortgage insurance. Some lenders also charge other fees. Gavin Earle, chief executive of NZCU Baywide, said Welcome Home Loans had been popular for his organisation when it first started offering them in 2011. But momentum had dropped off since then. But he said, because the credit unions are not bound by the Reserve Bank’s loan-to-value restrictions, they were doing more lending over 80% LVR in general. Andrew Quayle, general manager of sales, marketing and channels at NZCU Baywide, said the union would want to see much the same sort of application as a bank would require – including payslips and identification. He said the net servicing ratio would be the most important consideration for the bank. “We need a lot of confidence but we do a lot of it. It’s easy to do as long as the information is available.” He said there was increasing interest from advisers and customers in what alternatives to the banks were available. ✚
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SALES & MARKETING LEGAL By Paul Watkins
Lights, camera, action Video as a promotional medium is a direct, fun, interesting and informative way of communicating with your clients. Don't sit back and watch the credits roll, take action now, says Paul Watkins
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hen you scan the newsfeed on Facebook, what entries do you most stop and look at. It will be video. Those auto-playing videos, often humorous or with in-you-face opening scenes. Video as a promotional tool is rising at exponential rates. This is because it works! World renowned serial online entrepreneur Gary Vaynerchuk, has said, “The single most important strategy in content marketing today is video. Whether it’s video on Facebook, Instagram, Snapchat or Youtube, the content you need to be thinking about creating and marketing on social for your business is video. Period.” Consider the Air New Zealand safety videos. Loaded to Youtube, the Middle Earth video has been seen by nearly 17 million people. This is an excellent example of content marketing that uses video. It doesn’t offer discounted fares, or new destinations, or new special features – just a highly entertaining video that shows innovation and imagination. And of course it shows the airline brand up in a great light. It’s a well-established fact that social media is dominating marketing activity right now. And a key way it is doing that is through the use of video. I get feedback from brokers who say they don’t personally use social media and think it may even damage their brand by being
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❝ video is the
key to current promotional efforts. It is not only visual but is the way consumers are now wanting to absorb messages.❞ seen on it. If you do hold that view, here are some up to date facts, from June 2017. Instagram: 33% of all internet users between the ages of 30 and 49 use Instagram. It is 68% female and 32% male and is fast becoming the chat medium of choice among younger users. Facebook: Users are 53% female and 47% male. 72% of online users with incomes more than US$75K are on Facebook. Snapchat: Also
female skewed, 26% of users are aged between 25 and 34. LinkedIn: 13% of LinkedIn users are aged 20-34 and this platform has a male and business owner skew. Youtube: Almost 5 billion videos are watched on Youtube every single day! Youtube users spent 40 minutes on average per session, up more than 50% year-over-year. User percentage by age: 25-34 – 23%, 35-44 – 26%, 45-54 – 16%, 50-64 – 8%. So it covers all age groups that could take out mortgages. All of these platforms have video advertising options and can used very effectively for promotional purposes. So how do you create good videos? Here are a few tricks to include: The first thing to get right is the subject of the video. Examples could be, “Don’t think you will ever get into your first house? Think again” or “The 3 reasons investment property is still worth the investment in August 2017.” Remember that it’s not a mortgage they want, no one want to be in debt. It’s the lifestyle or investment opportunity that the mortgage will buy them that they are after, so
the headline has to reflect the ‘why’ not the ‘what’. Next trick is to make sure the first 3 to 5 seconds gain their attention. That’s all the time you have to stop them scrolling past it in Facebook. In Youtube you have slightly longer. Youtube has recently introduced six second pre-roll videos that you can’t skip. Called ‘Bumper Ads’ these give a quick brand opportunity. Another key is that on Facebook, most people watch video with the sound off, you must have it subtitled. This can be achieved for just a few dollars. The final tip is to get a professional videographer to make them for you. Their services are generally quite reasonably priced and worth every dollar. There is one exception to using a professional videographer as you will read below. The cost to have your videos featured on the various social channels is a cost per click through to your web site. For example, your video might have 1,000 views and 100 clicks which take the viewer to your website. You only pay for the 100, so it is performance based advertising. No one clicks, no cost to you. Radio and press charge you regardless. The video ads can be very tightly targeted. Each of these platforms knows their users age and other key demographic characteristics. For example, you can choose to have your Facebook video only seen by users aged 25 to 35 within a 25 kilometre radius of where you operate from. For such a targeted group your message may be the first home owner message. Youtube can also target specific viewers in the same way for your pre-roll ad. All of the how-to do-this knowledge you need to know is on Youtube itself. Just search for “how to place a video ad on Facebook” or whatever you are wanting to know. There will be multiple videos show up in response to your request. Advertising on social media is one option. You can also make your other marketing activity more visual, this being an important factor to consider with today’s consumer. For example, spice your website blog up with different forms of media. Rather than just written posts, mix in media like infographics and videos. The exception to using a professional videographer is for blog entries. As blogs are generally a casual comment on topical issues, it is perfectly acceptable to shoot these on your phone. It could be turning the phone on your face and explaining an interesting client you have recently dealt with (not by name obviously) and how you were able to help someone in those circumstances. It could be filming yourself driving through a suburb of affordable homes for first home buyers. Whatever the top of the day is. Such videos are interesting, informal and feel very real to potential clients. And if they are on your blog or Facebook page, they are shareable to client’s friends. Continuing with the theme of video and making your marketing visual, consider an online live interactive webinar. These are increasingly popular and attract hundreds and sometimes thousands of registrations. There has recently been a professional marketer offering a process for increasing leads to mortgage brokers through this medium. If you were one of the registrants, then you will know how these work. I work with a company that offers a professional service (not mortgages) and decided to do this on a Monday. They placed some Facebook ads and texted all their existing clients about the webinar happening that Wednesday evening at 7:30. They had dozens of registrations and the hour long live webinar went very well, with lots of great questions asked. New business immediately followed! By the way, the technology used for the webinar was free to use as a trial and can be learned in minutes. In summary, video is the key to current promotional efforts. It is not only visual but is the way consumers are now wanting to absorb messages. They want fun, interesting, informative videos. The reason for this rise in video can be attributed to smart phones. Over half the massive viewership of Youtube is now on a mobile device. Video is king right now, so don’t ignore it as your competitors won’t. ✚ Paul Watkins writes blog content and newsletters for financial advisers.
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INSURANCE By Steve Wright
Will the trauma insurance product you recommend do the best job when cancer happens?
PART TWO: BREAST CANCER
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n the last edition of TMM we explored what trauma cover might pay for skin cancer. This time we focus on breast cancer. Breast cancer is the most commonly diagnosed cancer in NZ for women (and did you know men get it too? – 26 in 2013, according to the NZ Cancer Register). The most common form of breast cancer, ductal carcinoma, forms in the cells of the ducts. Like many cancers, breast cancer is often diagnosed at the ‘early’ or ‘in-situ’ stage - before it has spread. This is just as well since treating breast cancer early, long before it spreads, gives the greatest chance of cure and recovery. Early diagnosis of breast cancer and the subsequent treatment is still however a very serious matter, with medical and financial consequences:
MEDICAL CONSEQUENCES
Breast cancer treatment will typically involve surgery to remove cancerous cells and stop their spread, followed up by a variety of possible treatments, including radiotherapy (daily treatments typically lasting 4-6 weeks), hormone therapy and chemotherapy, for example. Surgery might involve breast conserving surgery (for instance lumpectomy), or, removal of the entire breast (mastectomy). Very often lymph nodes are removed as well. Breast cancer surgery is no small deal and will likely be followed up by further rounds of reconstruction surgery. All this surgery and treatment results in direct and indirect costs, time off work and lost income.
FINANCIAL CONSEQUENCES
If the client has good health insurance (one that covers treatment costs regardless of PHARMAC funding or not), the medical costs, including chemotherapy, which can be the most expensive part, should be covered. However, health insurance will not compensate the client for the costs and expenses not related to medical treatment. For this the client needs some trauma cover. From discussions with breast cancer claimants, it seems to me that the various breast cancer treatments are very likely to result in at least one year off work. Income protection and mortgage repayment cover may help to cover some lost income but won’t pay for extra costs and expenses. One of the things that struck me most from my discussions with breast cancer survivors was just how valuable it was for their partners or spouses to be able to take time off work or away from the business, to look after them and
the family, but this means lost spouses income too! There may also be additional travel and accommodation costs, for example if your treatment can only take place far from home. The daily radiotherapy treatments may simply not be available nearby and daily travel thereto may not be feasible. For these other, nonmedical expenses, trauma cover is essential.
❝ Aside from
calculating a sum insured, an important question for advisers is: what will the trauma product I am recommending pay if my client is diagnosed with breast cancer?❞ Aside from calculating a sum insured, an important question for advisers is: what will the trauma product I am recommending pay if my client is diagnosed with breast cancer? It is an important question because, being a very likely cause of any trauma claim, the coverage provided for breast cancer and how much will be paid, is an important factor in recommending a provider’s product. Benefits paid for early stage breast cancer can range from nothing to the full sum insured, care and good advice is essentail. As I mentioned last time in TMM, while I don’t believe the law requires advisers to be medical cancer experts, I do believe the law requires, and clients expect, advisers to know, at a product level, what cancers will and will be not be covered by the trauma cover they recommend and, if covered, how much of their cover the client will be paid.
BREAST CANCER – WHAT MIGHT BE PAID?
When it comes to breast cancer, traditional trauma products* typically pay benefits for breast cancer depending on the treatment recommended and undertaken. There is a potentially big difference in what providers will pay for early stage cancer or carcinoma-in-
situ of the breast where less severe treatments may be appropriate. When advising clients, understanding how much various provider’s products will actually pay for early stage breast cancer is essential for making an appropriate provider recommendation. Early breast cancer without major treatment: The most generous policies will pay a partial benefit of 25% of sum insured to a maximum of $100,000, regardless of treatment, while other options might pay less and the least generous will pay nothing. In some cases the client might get nothing unless you select an additional ‘early cancer option’ and pay additional premium. Breast cancer with major treatment: Major treatment is typically radical surgery (removal of the entire organ), chemotherapy or radiotherapy. A few generous provider’s policies will pay the full sum insured for breast cancer requiring either radical surgery or chemotherapy or radiotherapy. In other words, limited breast conservation surgery (for example lumpectomy) with either chemotherapy or radiotherapy will still result in a full payment. Breast cancer with full mastectomy: For most providers however, clients will need to undergo the removal of the entire breast (mastectomy) before they are entitled to the full benefit. As breast cancer is the most likely trauma claim for women, understanding what a provider’s policy will pay is ‘mission critical’ in my view. *Traditional trauma products do not include trauma policies that pay benefits only for severe trauma events or severity based trauma products. Advisers recommending any trauma products should make their own analysis of how much, if anything, the trauma products they recommend would pay for breast cancer of varying severity, and, how this accords with their client’s needs. ✚ Steve Wright has qualifications in Law, Economics, Tax and Financial Planning and is General Manager Product at Partners Life. This article is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product.
MY BUSINESS By Susan Edmunds
Personal TOUCH Wayne Oliver is always available to answer questions, even if there is nothing in it for him. HOW DID YOU GET INTO MORTGAGE BROKING? It dates way back to the old Waikato Savings Bank days, in the early 1970s. I worked for the bank when I first left school, before I went overseas. When I came back after two years I joined the New Zealand Dairy Company and was approached by an accountant from Trust Bank Waikato. He said he would like to have a meeting with me over lunch and he offered me a job in their head office and said initially you'll start in the personal loans section. So I started off, I was manager of that area then I moved to the mortgage department of the whole of the bank and was assistant mortgage manager. When I left the bank 10-and-a-half years later I went to another company, Allied Mortgage Guarantee, where I was regional manager doing many residential and farming mortgages. I was with them for 10 years and when they wound up I was approached by Countywide bank and joined them as the area manager for Waikato right through to Taupo. But it was more managing staff and branches and it didn't really appeal so I approached the bank and asked whether there were any jobs on the mortgage side and I went back as a mobile mortgage manager. I left them and set up my own business in 1996 as an independent mortgage adviser.
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WHAT DO YOU LIKE ABOUT WHAT YOU DO? I have always had a bit of a tendency towards figures, I enjoy that. But I mostly just enjoy the fact of being able to assist people into their own homes, finding ways to make that happen. It's not all first-home buyers, once people have bought a home or have other property it's still nice to help because they are often long-term clients but the biggest thrill is helping young people, or an older couple who haven't owned a home before. You see the joy and sense of achievement they get out of it. It's a feeling of helping them to achieve their goals and their aspirations in life. I take a lot of personal satisfaction in that.
HOW MANY PEOPLE WORK FOR YOU? I have three staff. Nine months ago I took on a second mortgage adviser in addition to two administration staff. One of them is like my personal assistant, basically.
WHAT HAS CHANGED OVER YOUR 21 YEARS AS AN ADVISER? It's probably got a bit less enjoyable to work in. It's less enjoyable for the fact that there's no such thing as being able to use your gut feel in mortgage decision-making. The banks have made it extremely difficult for some clients to borrow money. There are greater restrictions - sometimes that's not a bad thing - but compliance is a major thing. The industry probably needed it but it's gone from one extreme to the other. We're now overloaded with paperwork, compliance and regulatory requirements. It takes away a lot of the enjoyment of working in the business. It takes away your ability to think for yourself. These days if you don't fit the requirments the banks have, that's decided. There's no way you can argue against that.
DO YOU THINK YOU'LL STICK WITH IT? Yeah, yeah, it's my life blood. Apart from a two-year stint doing a lot of different things in Aussie I've been in the banking industry, almost entirely in mortgages, the whole time I've been working. I wouldn't do it if I didn't enjoy it and there have been times recently I've thought 'why am I doing this' and it's not because of the banks being difficult or compliance being difficult but it's the enjoyment I get out of helping someone into a house of their own. That's why I get up in the morning.
IS THERE ANYTHING YOU DO DIFFERENTLY TO OTHER MORTGAGE BROKERS? It's the personal aspect. I take a lot of time with my clients and one area where I do things differently is we will help clients whether there is any remuneration benefit to us or not. If they want to come back and increase
their mortgage instalment, or do other things relating to their mortgage and want advice, we will do that. It's not all about what we get in the pocket but helping people through. I would do a lot of appointments where I'm just advising people on different areas in their life, doing a bit of counselling, they might be going through difficulties with their mortgages or with their personal lives as far as finances are concerned. I never turn people away. I always feel that if we can offer a little bit of assistance that's better than nothing. Now 99% of business is referral or word-of-mouth, either from existing clients or people who know of me. Real estate agents send a bit of work my way, probably because they are trusting of me and think if it can be done, I'll get it done. If I don't, there was no prospect of it happening.
IS THERE ANYTHING YOU WISH YOU HAD DONE DIFFERENTLY? I would have been a bit more cautious about being in a partnership. I wouldn't go into another partnership now, I have done that and it wasn't a good idea. I would be more trusting of my own decisions rather than listening to suggestions from other sources. I might have expanded the business a bit more but with that comes other issues - it might be better to grow a business financially as far as volumes but that doesn't necessarily mean you'll operate more efficiently or be any happier with the way things are.
WHERE DO YOU SEE THE MOST POTENTIAL FOR GROWTH NOW? First-home buyers, without a doubt. That's a big area. It's just a shame the government and banks don't see more focused on that. That's an area that's been forgotten about. There's just not enough assistance going out to young people buying a first home. Reverse mortgages are another area of growth. More and more people are getting to retirement and they might have a debt-fre ehome but they don't have cash to call on for living day-to-day. With people living longer that's a big growth market.
WHAT WOULD YOU LIKE TO BE DOING IN 10 YEARS' TIME? I'd still like to be alive and fit and well and able to enjoy each day. In the next five to 10 years I'd like to be working either part- or full-time and being able to enjoy it. Getting up and going to work and enjoying the day, I'd like to see a lot more relaxation from lenders. I'd also like to travel around New Zealand and the rest of the world.
WHAT DO YOU DO OUTSIDE WORK? I spend a lot of time at the beach. I live in Papamoa - I drive to Hamilton and stay with my sister during the week and drive back on Friday afternoons. I catch up with family. I go walking to interesting places and try to get away somewhere once every two or three months. ✚
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LEGAL By Jonathan Flaws
Taking the cross out of cross-lease
T
he device that we call the cross-lease was developed some time ago as a means of enabling the typical quarter acre suburban paradise to be subdivided without the need for a costly subdivision. It was simple solution. You put two dwelling on the site, then sell that second dwelling giving the purchaser a one-half share in the freehold and a 999-year lease of their dwelling. Each dwelling is identified by an outline of the exterior walls, or the footprint of the house, on a plan Deposited at the Land Transfer registry - called a flats plan. Some early cross leases didn’t give each owner the exclusive right to use and enjoy the area around their house – the area traditionally called the curtilage. To avoid
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Properties sharing sections can bring up unexpected issues, but you can help protect your client, writes Jonathan Flaws.
the inevitable arguments that arose when an owner joined the neighbours barbecue party unannounced – because they could; they both owned the freehold - it became customary to nominate on the flats plan an “exclusive use area”. There was one area assigned to each flat and it meant that a cross lease owner now had exclusive use of their flat and its curtilage. The Land Registry would issue each owner with their own “cross-lease title” which recorded their ½ ownership of the freehold and 999-year lease of their flat. Legally each owner is a lessor of each flat in common with the other as well as a lessee of their own flat. It worked well for small two or three flat developments but not so well for multistoried of semi-detached properties where
common ownership and common levies is required. That’s why the Unit Tiles Act was created. But life is never that peaceful and a happy cross lease can quickly turn feral. As a mortgage broker, you may well have had clients who have found the house of their dreams only to find it is a cross lease with issues that may cause a mortgagee to think twice about accepting it as security unless the issue is remedied. A classic issue occurs when the dwelling is extended over time and the “footprint” of the building differs from the footprint on the flats plan. This happens when decks are extended – garages are built in the exclusive use area or alterations to the house extend rooms beyond the original footprint.
The legal problems are: 1. the work may have been done without the consent of the other owner of the freehold (the other lessor) - or if there was consent, no one recorded it and it can’t be found; 2. The lease of the flat only refers to the original footprint so the other lessor could prevent occupation of the additional area. In the majority of case neighbours really don’t care about these issues and would rather just forget about them and get on with life in a friendly neighbourly manner. But neighbours can fall out and a trivial issue can turn into a full scale war over the flats plan and the alterations. More realistically, while you bought the property in a rising market and had to accept the issue or let someone else buy ahead of you, you now find yourself selling in a soft market and the only buyer you have found wants a discount on the price to cover the cost of remedying this defect. Or your mortgagee uses this as an excuse to not lend to you.
A legal solution In 2012, a couple found their ideal home in Western Springs and on discovering that the extension out the back was not on their flats plan they negotiated with the owner of the front house to get her consent to amending, at their cost, the flats plan. It is important to stress that they did absolutely the right thing, legally. Little did they realise how much doing the right thing would cost them until the High Court issued its judgement in April 2017 to settle what had become a bitter and venomous dispute between neighbours. The surveyor on completing the first cut of the new flats plan pointed out that the exclusive use area for the front flat actually ran hard up against the front porch of the back flat. This was clear on the title copy of the original flats plan but neither flat owners had identified this when they purchased their respective flats nor had the real estate agent who had sold both flats. A look at the flats plan on the title to both flats and you might ask why this wasn’t pointed out by their lawyers. Perhaps because their lawyers didn’t actually go and walk around the property and assumed that the closeness of the boundary was not an issue. Even with the best legal due diligence, issues can lie undiscovered without anybody being at fault. Steps from the front porch led onto a concrete path. A fence on the other side of the path separated the front flat from the back flat. But the path was on the exclusive use area for the front flat and the fence was in the wrong place, inside the exclusive use boundary. Because the new owners of the back flat needed the path and the fence to stay in place so they could access their front door, they explained to the owner of the front flat that the plan would also change the exclusive use area. They thought they had the consent of the front owner to this but the Judge determined that they didn’t. The judgement tracks the quick and massive deterioration in the relationship between the two owners and
makes very sad reading. The Judge ordered that it was just and equitable, but only just, that the boundary should be shifted so the back flat could access their front door. But only if compensation, which the Judge acknowledged was generous, was paid and the costs of the plan and survey and legal work to change the plan was born by the back flat. The land cost them $85,000 and the other costs, including the Court costs, are likely to have cost a significant sum on top of that. Despite following the correct legal steps and doing the right thing, neighbourhood harmony was destroyed and the exercise proved very costly. They became very cross-lessees.
❝ A classic
issue occurs when the dwelling is extended over time and the “footprint” of the building differs from the footprint on the flats plan. ❞ An alternative commercial solution It could have been quite different and the purchasers of the back flat could have achieved what they wanted at minimal cost and still be on good terms with their neighbour. There is now a product available to purchaser of a cross-lease property facing this dilemma that, had it been available in 2012, would have only cost $575 and saved them the high cost of the legal solution and retained neighbourhood harmony. It would not have fixed the legal issue – but more likely than not, the legal issue would never have blown out of proportion. Even if it subsequently did, that would not have cost the purchaser and they could have stepped back and left it to another party to resolve for them. Weigh up the two options and which would you prefer $575 or $85,0000 plus. In an article exactly 2 years ago, I wrote about this product in this magazine. It is called legal indemnity insurance. It comes in two forms. The first is called conveyancing
insurance which is insurance you take when you buy a property and it covers things that you don’t know or can’t identify on due diligence. The second is property risk insurance which is what the purchasers of this property would have required. It covers any known or identified risk. In this case, they would have taken out a cross-lease policy which would cover them for the purchase price of the property against: ➤ a third party enforcing the cross lease and challenging their right to occupy buildings outside the footprint of the flat ➤ any claim that the alterations were made without consent of both lessors. The flats plan would not need to be resurveyed and no discussion with their neighbour would have been required. If the issue were ever raised in the future they would simply lodge a claim and the insurer would step in and try and resolve the issue. If the issue could not be resolved then the insurer would recompense them for their loss. The worst case scenario would be that what occurred in the High Court case could occur in the future but more likely with a new purchaser of the front flat. But the owners of the back flat would not be out of pocket. The best case scenario would be that nothing would ever happen as all parties were happy with what they thought they had purchased. It all sounds too good to be true – which is what many lawyers tell me. But it is not. This insurance is issued by a Lloyds of London syndicate. Lloyds syndicates have been taking these sort of risks since 1688. It’s called insurance and legal indemnity insurance or its subsidiary, property risk insurance, is based on the same principles of insurance that chaps drinking coffee in Lloyds coffee house applied to covering risk of merchant cargoes at sea over 300 years ago. This insurance is now widely used in the UK. It was also considered too good to be true there in the mid 1990s when it was first promoted. Now it is commonly used to cover all sorts of annoying little issues that arise when properties are bought and sold. UK lawyers don’t think twice now about contacting a legal indemnity broker for a quote. A common cover in England and Scotland is where the property being sold is identified as lacking building permits for additions or alterations. You can probably recall an issue you have come across where a code compliance certificate or a building permit was missing.
Summary Taking the cross out of cross- lease may just be a matter of finding a commercial rather than a legal solution. After all, your client would rather have a result than be a participant in an ugly realty TV show played out in the High Court. ✚ Jonathan Flaws is a partner at legal firm Sanderson Weir.
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Intelligence
NEW MORTGAGE LENDING SNAPSHOT The mortgage lending space in New Zealand has seen its fair share of changes over the past 12 months, so how are lending figures stacking up compared to last year? Total lending ($million)
Jun 2016
6,803
5,097
738
713
OTHER OWNER OCCUPIER
3,623
3,099
INVESTOR
2,368
1,219
74
66
ALL BORROWER TYPES
FIRST HOME BUYER
BUSINESS PURPOSES
JULY 2016 Higher than 80% LVR lending ($million) ALL BORROWER TYPES
OTHER OWNER OCCUPIER INVESTOR BUSINESS PURPOSES
100
JULY 2017 Higher than 80% LVR lending ($million)
455
FIRST HOME BUYER
0
Jun 2017
ALL BORROWER TYPES
218
FIRST HOME BUYER
191
OTHER OWNER OCCUPIER
45
INVESTOR
2
BUSINESS PURPOSES
200
300
Less than or equal to 80% LVR lending ($million) ALL BORROWER TYPES
400
319
500
05
0
194
116
9 1
100
150
200
250
300
Jun 2015
Jun 2016
Jun 2017
5,283
6,348
4,778
401
520
519
OTHER OWNER OCCUPIER
2,991
3,432
2,983
INVESTOR
1,811
2,323
1,210
81
72
66
FIRST HOME BUYER
BUSINESS PURPOSES 034 WWW.TMMONLINE.NZ
350
Better Business Conference
2017
BROUGHT TO YOU BY
NEW MORTGAGE ADVISER Thursday, ONLY CONFERENCE DATE: 19 October The inaugural Better Business Conference has been tailored specifically for mortgage advisers in New Zealand. A range of industry experts will be focusing on the key areas facing the industry as well as providing valuable and practical advice on how advisers can improve their business.
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PHONE 0800-345-675 VISIT tmmonline.nz
VENUE: Novotel, Auckland Airport Book your seat today for the inaugural TMM Better Business Conference, New Zealand's biggest event solely for mortgage advisers. Numbers are limited, so don't miss out.