TMM The rise and rise of adviser-originated mortgages 04/2023

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THE RISE AND RISE OF ADVISER-ORIGINATED MORTGAGES

Unlocking opportunities with non-bank lending. It might be easier than you think.

For some financial advisers, non-conforming lending can fall into the too-hard basket. However, it can make good business sense for you, and can be life changing for your clients. For a financial adviser, non-conforming describes a

world of opportunity. When a bank says “No”, they are saying no to loans that do not conform to their credit criteria, which represents their appetite for risk. Yet, they could be saying no to people who are capable of servicing a home loan.

That’s

where

non-bank lenders can help. We price for risk.

Bank “No” decisions to home loans are an opportunity to explore what non-bank lenders

Non-bank home loans can change your client’s lives.

As home loans go, non-bank loans can be a bit special because the people that need them most are often those with some big life changes Here’s how you can make a realnon-bank options.

1. Know the possibilities

Firstly, make sure you ’ re accredited with the relevant lenders. Then you can talk to your clients about non-bank home loans and how the product(s) could meet their situation and needs from the start. So, if a non-bank product is right for them, it’s not new information.

2. Communicate their options

If a non-bank loan could be a

it as a genuine possibility for their situation can be a conversation

starter Understanding their options can open opportunities.

3. Keep things real

Speak in terms the client understands. For example, provide estimated repayments and frequency that coincides with their pay cycle.

4. Make the flexibility visible

When explaining their options, be clear on how the solution could help them meet their longterm objectives. And help them understand that as their situation changes, they may be able to consider new options in the future.

5. Explain account features that might help clients achieve their goals

Features like Additional Advances, for clients to understand how these may help meet their goals.

Are non-bank home loans hard work?

Non-bank home loans are often known as specialist loans, originally named to highlight the expertise required to write them However, this is no longer the case. We’ve made nonbank lending easy so we can help any financial adviser take a client through the non-bank home loan process

Make it easier with Pepper Product Selector Pepper Product Selector (PPS) gives you the option to identify a Pepper Money product fit for your client.

It combines some simple information about your client, together with their credit history information to potentially provide an rate and fees in under 5 minuteswithout impacting their credit score.

Important to know:

With the client’s written consent, answer a simple set of questions online

All applications to us are subject to us completing responsible lending checks and considering the borrower’s individual circumstances. Credit assessment, eligibility criteria, lending limits, terms, conditions, fees and charges apply The information in this article is a guide. It’s not intended to imply any recommendation about any financial product(s) or constitute tax advice. For more information about our products, please refer to our online product guide, or talk to your BDM. Of course, if your client requires financial or tax advice they should consult a licensed financial or tax adviser

*Pepper Product Selector is a great tool for quick responses. But please note that terms and conditions apply to its use.

Pepper Money then makes a credit enquir y on their credit report

identified; Pepper Money will provide it to them

The moral of the stor y?

If the bank says no to your client, give it the non-bank lender test with Pepper Money It could turn a ‘no’ into a ‘yes!’

Do you have a borrower the bank said no to? Talk to us today.

Pepper Money 0800 945 658 scenariocentre@peppermoney.co.nz adviser.peppermoney.co.nz

formal approval for a loan and financial commitments must not be entered into based on that indicative response. It’s not a suggestion or recommendation of any particular loan product. It’s a guide only based on the basic information provided and the credit history information obtained for the primary applicant. The actual interest rate and approval will depend on the applicant’s circumstances and their information verified during the loan application assessment after a formal application has been submitted. The final interest rate may be more or less than the rate provided in the indicative applicants, the circumstances of our decision regarding any formal loan application.

© Pepper New Zealand Limited NZBN 9429031065153 | NZ Company Number 3416551

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.

ADVISERORIGINATED MORTGAGES:

FROM

TO THE TOP

Mother-of-four Zebunisso Alimova has gone from speaking no English to winning multiple awards as a Mike Pero franchisee.

IT’S GAME ON I

t’s game on with dealer groups now that Australian-based Finsure has announced its arrival in New Zealand.

Finsure isn’t a name known in this market, but it is a serious player in Australia.

The group has made a smart move employing Jenny Campbell as its head of operations in New Zealand.

Campbell set up Mortgage Supply, which is now part of Astute; ran the old NZ Mortgage Brokers Association (which became part of the Professional Advisers Association – which then went on to be one of the founding associations for Financial Advice NZ).

While Campbell has been out of the industry for a while she has still stayed in touch with happenings.

Adding to Finsure’s arrival we have The Adviser Platform, tap rolling out its mortgage adviser proposition to the market. TAP has primarily been focussed in the risk advisory space and brings a differentiated offering to advisers.

As we have noted before the space becomes more interesting with the government essentially being the major shareholder of Link Financial Group.

These three developments will put pressure on the existing groups to lift their games and make sure they are delivering value to members.

From an adviser’s perspective there are now a good range of options and some clearly differentiated value propositions.

This is going to be an interesting space to watch.

Talking about interesting spaces to watch, we can add in non-bank lenders.

It came as a surprise to many that Bluestone has scaled back its head count significantly in New Zealand, including making its head of sales, Sue Griffiths redundant.

We still haven’t got to the bottom of what is behind this move but it looks like Bluestone is going to be more focussed on its white label, Select Home Loan, product offered exclusively to NZ Financial Serviced Group.

We have seen some other redundancies in the non-bank space, plus the demise of Zip in New Zealand (except its buy now, pay later product).

All these changes show the market is quite dynamic at the moment and there is a lot for advisers to think about.

Here at TMM we have set the date for next year’s conference and will start rolling out news and information over the next couple of months.

The first announcements will be our keynote economics presenter and we are bringing an awesome speaker out from Australia to do a sales and marketing session.

You can put this date in your diary. February 20. The location will be the Novotel, Auckland Airport.

Philip Macalister Publisher

Design

Publisher Philip Macalister

Staff writers

Sally Lindsay, Kerry Meadows-Bonner, Jonathan Flaws

Contributors Paul Watkins, Kip Hanna, Naomi Ballantyne

Evolving the CCCFA

BY KIP HANNA

Recent changes to CCCFA legislation are (in my opinion) a step in the right direction - giving advisers the ability to use commercial judgment when assessing discretionary expenses indicated by their clients and excluding them from affordability calculations.

This freedom is beneficial for the industry and home loan borrowers alike as it allows for case-by-case evaluation based on individual circumstances rather than sticking to a checklist of rules.

Additionally, it is encouraging to see a relaxation of Loan to Value Ratios (LVR) by the Reserve Bank, granting lenders greater flexibility in accepting high LVR loans. These changes recognise borrowers can adapt to changing circumstances and continue to service their loan repayments. Borrowers may be spending a certain amount to support their lifestyle at present, but they also have capacity to adjust if necessary.

However, this should be taken a step further by allowing qualified advisers - who have a deep understanding of their clients’ circumstances - to apply a level of commercial judgement to loan applications extending to increased flexibility for change of circumstance considerations, at the time of application or soon after.

Essentially, the CCCFA should be a guide to assist advisers in finding a solution in the best interests of their clients. A personalised approach would consider factors beyond strict test criteria, ensuring that borrowers are protected from unnecessary financial hardship - as an industry now supported by qualifications, advisers possess the necessary skill set to apply their knowledge and safeguard clients effectively.

While welcoming these changes, it’s important to acknowledge transitions take time. As an adviser, it’s crucial to proactively seek a clear understanding from lenders of modified processes and lending criteria, as these can vary. Different lenders have different risk appetites based on their portfolios and growth strategies, and they should have the freedom to decide how they want to implement these changes.

With the exclusion of discretionary spending, advisers can add value by supporting clients in budgeting and forecasting income and expenses and recommending appropriate home loan structures based on the changing interest rate environment.

By taking a long-term view, advisers can help clients identify areas where spending can be reduced, if necessary. It’s concerning to witness more individuals making judgment calls to stop or reduce expenses we consider essential, such as insurance, which is crucial for protecting well-being and financial security.

For many advisers, the previous tightening of CCCFA lending criteria posed challenges in assisting buyers to access finance. Now is the opportune time to review previously declined clients to assess if these changes affect their affordability. Ongoing clients in the approval process and those who

have recently submitted applications should also be evaluated for potential flexibility in borrowing amounts.

Looking ahead, if and when debtto-income ratios are introduced by lenders, any impacts should be discussed, and regulations developed in consultation with all market participants. Open dialogue and collaboration will help ensure the industry continues to evolve in a way beneficial for borrowers, lenders, and advisers.

ABOUT NZHL

NZHL is a passionately Kiwi, passionately local home loan and insurance network currently helping more than 50,000 New Zealanders collectively save millions of dollars in interest costs every year.

Part of Kiwi Group Capital Ltd (KGC) which are 100% Government owned, NZHL operates with an Independent Board and 70 local business owners nationwide. NZHL believes in helping Kiwis achieve financial freedom, faster and takes a structured, personalised approach to bring this to life. ✚

*Please note – 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.

'Now is the opportune time to review previously declined clients to assess if these changes affect their affordability.'

KIP HANNA

LFG plans to more than double in size by 2028

Link Financial Group (LFG) is planning a renewed emphasis on growth, as well as technology development, and is aiming to more than double in size by 2028.

Chief executive Josh Bronkhorst told the group's conference in Christchurch that the next five years will be “a

defining period.”

“Over the last 12 months, we've taken the foot off the accelerator in terms of growth,” he said, adding that the group took “a real deep-dive look” at the business, focusing on ensuring its systems were working properly.

The company wanted to work on the best way to help its advisers deliver the

best possible advice to customers, at the same time as being compliant with regulatory requirements.

To ensure the group doesn't just reward volume, it will be introducing some quality measures in the next three or four weeks.

“We've got to the point where we're measuring it as it should be measured.”

That process has meant LFG has had to disqualify some advisers - a step which was “absolutely necessary” to ensure the quality of the people operating under the group's licences, Bronkhorst said.

“It's all about quality advice and the end consumer benefitting.”

In November last year, Bronkhorst sold a majority stake to New Zealand Home Loans (NZHL) - a sister company to Kiwibank, with both ultimately owned by the Governmentbut continues to run the business.

The alliance with NZHL offers the group “a huge amount of leverage,” and management is currently working on efficiencies across the two businesses.

NZHL chief executive Kip Hanna said the alliance broadens the opportunities available for advisers as well as providing referral opportunities, but the two groups will “essentially remain separate propositions.”

Asked by the moderator for a rugby analogy, South African-born Bronkhorst said: “We're going to tackle this market brutally.”

Hanna was quick with a rejoinder: “Without getting caught out by the ref!”

Fast-growing Vega still aims to expand

helped to accelerate Vega's growth, and it now has mortgage advisers covering all Bayleys offices nationwide.

Ferreira says the major banks are closing branches around the country, but Vega wants to put its people back in local communities.

broking, although that's still the largest part of the business with about 65 advisers - up from 29 in March last year.

Fresh from a 20-year career in banking – Ferreira used to head BNZ's lending to small-to-medium-sized businesses – he joined One HQ, an IT and accounting roll-up business.

Within OneHQ was a small mortgage-broking business. When it was about nine months old, Ferreira made an offer in 2019 to buy that broking business and renamed it Vega.

In 2020, he sold a 50% stake to real estate firm Bayleys, a tie-up which

“These local communities all have real estate offices,” he says.

Vega has forged relationships with two other real estate firms - Eves, which operates in the Waikato, Bay of Plenty and Northland, and Aucklandbased Up - and is busy working to cement a fourth.

Ferreira says he's aiming to have mortgage brokers covering about 200 real estate offices by this time next year, up from 152 currently.

Vega is more than just mortgage

The firm also does insurance broking, with 18 insurance advisers; wealth management, including KiwiSaver; and a commercial-property development arm which helps finance businesses needing anywhere from $3 million to $200 million.

All up, the group has about 90 advisers and another 10 support staff.

Ferreira is a fan of the increasing regulation and education requirements for financial advisers.

“That to us has worked in our favour."

“The average mortgage broker these days is much more qualified than the average banker. We hold our people to a standard that I believe is pretty high.” ✚

The Vega advisory group has been growing very fast - and chief executive Harry Ferreira still has his foot on the accelerator.

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Mortgage advising would be better as a profession

While level five of the New Zealand Certificate in Financial Services is a good step in the right direction, but it would better if mortgage advising became a profession, says mortgage adviser and chartered accountant David Green of Advice HQ.

He is pushing the idea for mortgage advisers to eventually be degree qualified and do some sort of post graduate study. “If mortgage advising is to be called a profession we need to go down that track.”

Wellington-based financial planner and mortgage adviser Craig Pope of Craig Pope Financial agrees but says advisers need to upskill themselves.

He has been working through the investment strand paper to add KiwiSaver to the list of services his

business offers. He says it is, however, easier said than done. “Running a mortgage business and trying to find the time to finish the investments strand is difficult,” Pope says.

“I take my hat off to advisers that manage to combine insurance and mortgages work because they are both quite complex.

“To be honest, I think advisers are better off being really good at what they do, be it mortgages for first time buyers or investors and have really good mechanisms and referral partners that can help clients with insurance or KiwiSaver,” he says.

However, a number of advisers have pushed back on this idea. In comments on tmmonline.nz readers

“Some mortgage advisers operating in the industry now have over 20 years’ experience and that level of expertise

simply can’t be taught via a degree,” one says.

Another was highly critical of the Level Five papers he had to sit: “Having over 35 year’s experience in the industry myself, I felt degraded and worthless having to complete the mortgage strand of the new academic requirement.”

“Not only was it far from adequate (not fit for purpose), the case studies were unworkable.” He alleged that the course was based on the Australian banking and adviser system, and was in no way relevant here.

“That to us has worked in our favour,” he says.

“The average mortgage broker these days is much more qualified than the average banker. We hold our people to a standard that I believe is pretty high.” ✚

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 Kiwis find a path into home ownership.

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

Bluestone scales back NZ business

Australian non-bank lender Bluestone has radically restructured its New Zealand business and now has just two business development managers based in this country.

Luke Roberts, national Select partnership manager, acknowledged the current position and that some staff had been laid off as a result, although he refused to provide numbers, but said others had been redeployed to work for the Australian business.

Mike Kinley is the other remaining local staffer and is business development manager BDMs for the South Island.

Among the redundancies is the former head of sales Sue Griffiths. Sydney-based head of marketing, Katie Bell, also avoided answering the question of how many people had been made redundant, but TMM's own reporting can identify at least three

BDMs had been employed in NZ since 2021 who no longer work for Bluestone. Bell explained the situation as Bluestone having “repositioned its business to focus on those New Zealanders who are overlooked and underserved by the banks and help them to realise their dream of home ownership.”

But Bluestone has always operated in the non-conforming lending space, particularly focusing on the selfemployed, those with a checkered credit history and low-doc lending. The man who used to oversee the NZ operations, Peter Wood, left Bluestone early this year after two decades with the company.

TSB CEO Donna Cooper

TSB Bank has appointed chief financial officer Gordon Davidson as its acting chief executive following the resignation of current CEO Donna Cooper.

Cooper is leaving the bank after five years in the role. She said she had steered TSB through a significant increase in regulation and growth in residential lending.

TSB's mortgage book grew by 42% to $6.2 billion between March 31, 2018 and March 31, 2023.

It's net profit in the latest year fell

47.6% to just below $20 million, largely because of a jump in personnel, IT and professional services costs.

Cooper said she felt the time was right to hand over to the next CEO while she spends more time off with her young whanau before looking for her next challenge.

Chairman Mark Darrow said Davidson will hold the helm while the board looks for a permanent replacement.

“Gordon's leadership in the interim will ensure a smooth handover and provide consistency in leadership for the organisation through this time,” Darrow said in a statement.

departs

Specialist lender rebrands

Specialist lender We Fund has rebranded to Specialised Capital Solutions.

The property and development finance facilitator is headed in New Zealand by Sacha Doyle, and former Bluestone business development manager Monique Riley is an associate director.

The firm was founded in Australia in 2019 and is the only lending facilitator of its type in Australasia. The business leverages technology and data to connect commercial, development and property finance funding applicants with lenders to offer fast, competitive and reliable funding.

Applicants are invited to submit loan ‘scenarios’ through its online portal. SCS’s team of analysts then structure

the scenario into a lending proposition, which is presented to accredited lenders (which include institutional and private funds and family offices). Using detailed financial modelling drawing on multiple data sources, SCS provides applicants with a detailed view of project feasibility and profitability with finance options, drawing on multiple loan and debt structures. ✚

DONNA COOPER

THE BEST PROTECTION FROM COMPLAINTS: RECORD EVERYTHING

The message driven home repeatedly at the Link Financial Group (LFG) conference was that advisers needed to record every step of the advice process with each client.

LFG national manager Kelly Brough warned that customers were more ready to complain these days, so keeping good records was an adviser's best first line of defence.

“Clients these days are more knowledgeable and they know how to complain. They know their rights.”

Customers complained for various reasons, but every complaint was an expression of dissatisfaction, Brough told the Christchurch gathering.

“Maybe their expectations have not been met. They may want to express frustration.

“Maybe they made a wrong decision and they're looking for someone to blame.”

Why don’t clients complain?

Not all dissatisfied clients complained – and it’s worth asking why.

“Why don't unhappy customers complain? It's not worth their time and effort, they think nobody will help them resolve it,” Brough said.

But there's a big payoff for an adviser when a customer is happy with their service.

“Happy customers tell at least six people that they're happy with your service. If you do a good job, they will refer.”

When an adviser did receive a complaint, he or she needed to listen carefully to what the client has to say.

“Don't interrupt them. If they're ringing you, don't tell them to calm down; you will only poke the bear.

“Empathise and apologise, even if you weren't in the wrong,” she said. Brough also encouraged advisers to avoid the blaming game.

“Don't claim the blame, unless it was your fault, but don't try to blame them either.

“Try to find a resolution. The longer we give it, the more it escalates,” she said.

Keep a complaints register

“What should you do when you receive a complaint? Record it, record it, record it. Everyone should have a complaints register.”

An adviser needed to keep “really robust records” throughout the application process - and Brough suggested summarising each conversation in an email to each client.

“Then you have evidence to back up any advice you've given. It takes more time to be an adviser now, but record keeping will save you.”

If a complaint came in a few months after the advice was given, the adviser might not remember it, so they needed to record everything, she said.

The bar has been raised

Consultant Karty Mayne, of Rosewill Consulting, who used to be supervision manager at the Financial Markets Authority (FMA), said she was seeing “a lot of noise in the industry - what I call 'the fear factor' - and hearsay about regulation.

“But some advisers have had to down tools. They haven't been able to meet the new standards.

“There's no doubt the world has changed; the bar has been raised.”

Up until now, the industry had been in the education phase, but the regulators were now going to be less tolerant when advisers missed the mark.

“They expect most of the industry to be willing compliers.”

Any guidance the Financial Markets Authority issued “should be like gold for you,” Mayne said.

She referred advisers to the guidance note the FMA issued in February on the suitability of advice.

This note, ‘Reasonable grounds for financial advice about financial products’, explained the FMA's approach to assessing the suitability of advice.

Normally, when new legislation comes into force, there's a grace period, but after a while that would change, she said.

One warning sign was that financial dispute resolution service FSCL had reported complaints were up about 30%.

If an adviser had a complaint which goes through a dispute resolution process, “it's going to be stressful for you. The more you can do to manage the complaint before it gets to that stage, you will sleep better.”

In an age where clients are more knowledgeable and more ready to complain, advisers should keep robust records – even to the point of summarising each and every phone conversation.

‘It takes more time to be an adviser now, but record keeping will save you’ Kelly Brough

Use case studies

Mayne recommended advisers work through case studies with their teams, to gain insights into the dispute resolution process.

In one example, an adviser received an offer for a client late on a Friday but didn't pass it on to the client until the following Monday - and the client had to make a decision by the Tuesday.

“You need to give advice in a fair and timely manner; any time delays can come back to bite you.”

In another example, a client had taken out life insurance in 2006 and then in 2012 got advice to replace their cover with a different provider. The book was then sold to another financial advice provider (FAP), which did a review and found the client had been paying two sets of premiums because the first policy hadn't been cancelled.

The client claimed $17,000 for repayment of the extra premiums, claiming the adviser in 2012 had been negligent in not cancelling the original policy.

But the FAP had no control over that advice process.

The dispute resolution service recommended that the client discontinue the complaint.

Be sure clients understand

Mayne said advisers needed to ensure the client understood the advice and to tailor that advice to the client's particular circumstances; too many clients got standard emails from their advisers which often made them feel their adviser didn’t really know them.

“Really good client servicing” can prevent many complaints, she said.

“Document what you do to show what you do – it will take extra time in this environment to explain things.”

Advisers needed to test whether, if the client implemented their advice, the client's needs would have been met.

They also needed to be sure their advice fell within the scope of their expertise.

“If it's not, refer them to another adviser.” ✚

‘There's no doubt the world has changed; the bar has been raised’ Karty Mayne

Ramping up insurance referrals from mortgages

MDRT is an independent association of the world's leading life insurance and financial services professionals from more than 500 companies in 70 nations and territories.

Bloxham started her mortgage business in 2015 and two years later added insurance into her services. By 2018, the single mother of two, had won New Zealand Adviser of the Year, but at the time no business or money was coming in and she was just about to sell her car to pay the mortgage.

As her business flatlined, she went to a Gold Coast conference, having won Adviser of the Year for the second time, and met Doug Bennett who became her mentor. She speaks to him every week and says this has been an added avenue to her success.

Because Zoom meetings have proved successful, Bloxham doesn’t work weekends, has timed meetings with clients, ends meetings during the week at 5pm and spends Friday afternoons prepping for the next week.

At the end of each meeting she always asks clients if they have anything to ask her. “You're making sure you've put the conversation both ways.”

If her business partner is in an insurance meeting, he will be booking the next meeting, not waiting for office staff to do it.

“I’ve got clients who don’t work Fridays or Mondays because they work weekends. I know they are free on those days, so I rebook the same time the week after the first meeting to keep the momentum going.”

Adding services

Bloxham says if mortgage advisers are not doing insurance themselves, they should think about adding a person into their business who has expertise in the field or the reverse, insurance advisers adding a mortgage

expert into their company.

She says this is important as a mortgage client needs to get insurance before they get the keys to the house, particularly if they have a big mortgage.

There are two reasons for doing this, she says. “Number one, if something happens to buyer while they are looking for house and the adviser has arranged insurance, they can still buy the house. Number two, when a client has the keys to their new house, they really don't want to hear from their adviser again.”

Bloxham does warn against rushing clients into the insurance aspect of buying a house.

She says insurance should be talked about with clients and arranged if possible between when pre-approval for a house purchase is granted and when they are viewing potential properties. “That’s when we want to be doing their insurance because the mortgage part is slowed.

“If the mortgage adviser is passing on the insurance to another party, both don't want to be pressuring the client at the same time,” she says.

“When an insurance referral is made, the adviser must get an overview from the mortgage adviser, as the client won’t know the insurance adviser. All those pieces of the conversation have to be kept going.

“Because I am the mortgage adviser, I can lead the person in from the start because a relationship is already established. I can drop into the conversation about doing insurance as I have a ticked box amongst the preapproval asking if the client would like to be contacted about insurance. You have their buy in, but if people don't want use your services it in writing they have declined.

“Not every single person gets insurance through my business –maybe 40%.”

Insurance conversations

Before it gets to that detail, Bloxham says she will do a fact find on a client and be prepped before the first Zoom meeting, so she is not wasting clients’ time and can work out the insurance conversation. Clients also provide some of the fact find.

If clients agree to Bloxham arranging insurance she will send a fact find form for them to fill out, with information already gathered from the mortgage application. She also does preunderwriting to give clients some information on real insurance rather than just guessing at it.

In other tips, Bloxham says changing mindset can play a big part in success. Her mentor Bennett helped her stop second-guessing. “Pick a mentor and when a problem arises, and ask yourself what would your mentor think? It gives you a different version and then go with your gut instinct and confidence.

She says MDRT tools have also helped her plan. Every Friday Bloxham checks what her business numbers need to be. She is already a month ahead for next year. ‘Nothing of anything we do is by accident.”

She says mortgage and insurance advising all about the process: clients are individuals who are not all the same and can be overwhelmed; keep the conversation going. They have come to you as they are looking for a mortgage; focus on the insurance being in place before they turn the front door key to their new home; for insurance advisers it is about teaching the mortgage adviser when to move the client to you.

Bloxham uses social media heavily, putting up comments about mortgages. “It's all general, so it can't be taken as given financial advice. And people are messaging me. I probably get five or six messages per day coming in from people who often come to see me about a mortgage and then insurance at the back end. ✚

Lets Talk Mortgages and Insurance director Sarah Bloxham shares one of her tips in a recent speech to financial advisers from around the world at the Million Dollar Round Table (MDRT) conference in Nashville last month.

CONFIDENCE SLOWLY RETURNING

BY SALLY LINDSAY

The total number of properties sold last month was 5,752, down from 5,776 in May 2022 (-0.4%), and up 30% month-on-month.

Seven regions, Northland, Auckland, Waikato, Wellington, Tasman, Marlborough and Southland all had a 30% increase or more in sales volumes month-on-month, with Marlborough topping the list with 66.7% in sales.

Nationally, new listings dropped by 18.1%, from 8,983 listings in May last year to 7,359 listings in the same month this year.

In May the median price dropped 8.2% year-on-year to $780,000 but there was no change month-on-month.

In the regions, Nelson had the biggest median price rise in May at 2.7% yearon-year and 6.9% month-on-month to $770,000.

Two districts reached record median prices: Grey District with a 18.7% increase year-on-year ($400,000) and Waitomo District taking top spot with a 53.4% increase year-on-year ($655,000).

The REINZ House Price Index (HPI), which measures the changing value of residential property nationwide, showed an annual drop of -11.2% nationwide.

Prices bounce back in some suburbs

House prices in dozens of suburbs across the country have risen in the past three months.

Kaipara District, in the Northland region had two top performing suburbs over the past quarter, with values in Maungaturoto and Kaiwaka up 4.7% and 3.5% respectively. CoreLogic’s Mapping the Market tool reveals.

Over the past year, the lower half of the South Island has also shown good value with prices increasing in 33 suburbs by at least 2%.

Across the country, the 128 suburbs where prices have increased point to a market that could be near the bottom,

says Kelvin Davidson, CoreLogic’s chief property economist. Seventy one of these suburbs had a median value increase of at least 0.5%.

However, the mapping tool shows over the past 12 months, 860 suburbs declined in value, with 729 of those suburbs down at least 5%.

In Auckland property values dropped in all 195 suburbs analysed over the past 12 months, ranging from less than 5% per cent in areas such as Waiuku, Ponsonby, and Omaha, up to more than 16 % in Parau, Wattle Downs, and Totara Heights.

Nearly $300,000 wiped off Auckland house values

In Auckland, the country’s biggest housing market, the average house value has dropped by $282,647 since the beginning of last year.

The latest QV House Price Index shows the average value of homes across the entire country has fallen $174,835 since the peak at the beginning of last year.

Over the past three months to May the average house value declined by $13,671, leaving the average property nationwide valued at $888,930.

That figure is 13.7% lower than the same time last year and 20.2% higher than its pre-Covid-19 level.

While value drops across the country have remained in the middle 3% range over the past two months, QV operations manager James Wilson says it is still too early to say the market has bottomed out.

The average rate of home value decline has slowed this quarter in 11 of the country’s 16 largest urban areas – including in Auckland (-2.3%), Hamilton (-2%), Christchurch (-2.5%), and Wellington (-2.6%).

The biggest value drop between April and May was in Queenstown Lakes were homes on average dropped $18,380.

Sales lift but prices drop slightly

Auckland property sales have bounced back to what was being achieved at this time of the year preCovid.

Sales of 723 were their best in a month since May last year, after hitting their lowest in an April for 22 years.

Barfoot & Thompson managing director Peter Thompson says May’s sales are another sign the Auckland property market has either hit the bottom of the current cycle or is close to it. Sales were a third higher than the average monthly sales for each of the past three months.

The median sales price for the month at $955,000 is down 4% on that for April while the average price at $1,070,819 is down 1.5% on that for last month.

While the median price paid in May was down 15.1% on that 12 months ago, the average price was down much less at 10.9%.

A good flow of new listings reached the market in May, with 1,262 new listings for the month and at month’s end, the agency had 4,390 properties on its books – the lowest number in 14 months.

Building consents dip

New building consents dropped by 25.9% in April compared to the same month last year.

Stats NZ data shows consents were also down in April by 30.6% compared to March. This comes after a 25.1% drop in March compared to a year earlier.

On an annual basis new house consents in the 12 months to April were down 9.3% compared to the previous 12 months.

April is the third consecutive month the number of homes consented has been down by more than a quarter compared with the same month of the previous year. ✚

Some parts of the country are showing an increase in sales while buyers and sellers in other parts continue to wait, the latest REINZ data show.

Make business happen

The trend is manifestly obvious: mortgage advisers are originating more and more of the major banks' mortgages - and there's little reason to expect that will change.

Back a decade ago, it was a matter of guesswork; the banks weren't disclosing data and so we argued: did advisers account for 30% of origination? Or 35%? Or more?

We did know that advisers in Australia accounted for about 50% of origination back then.

There are differences between New Zealand and Australia: our neighbour to the west is more than five times larger and didn't suffer the mass-scale collapse of finance companies in the noughties that New Zealand did - and its non-bank sector had already been much larger than New Zealand's even before those collapses.

But the many similarities, including similar legal frameworks and shared attitudes towards home ownership, and the fact our big four banks are owned by Australia's big four banks, suggest that the New Zealand market

TMM looks

how high is the market share? And is it due to incompetence on the part of the banks or other factors such as new regulation?

will continue to follow the same path as Australia's as far as the rise and rise of mortgage brokers goes.

According to the Mortgage and Finance Association of Australia, brokers hit a record of originating 71.1% of mortgages in that country in the September quarter last year, before falling back to 69.3% in the December quarter and regaining a little ground to 69.6% in the March quarter.

By the numbers

Three of the four major banks now publish more information than they used to, though it could be improved.

ANZ Bank New Zealand and National Australia Bank-owned Bank of New Zealand provide the most information.

ANZ revealed advisers accounted for 57% of new mortgages in the six months ended March, while advisers accounted for 43.8% of BNZ's new mortgages in the same period.

Westpac didn't provide this information but did say advisers had originated 51.1% of its entire mortgage portfolio at March 31.

Since the equivalent figure for ANZ

was 48%, it appears reasonable to assume the new mortgages figure for Westpac could be even greater than ANZ's.

BNZ, of course, is famous for trying to make a virtue out of its previously poor relationships with advisers by deciding in early 2004 that it would refuse to deal with them at all; at that point, brokers had been writing only about 5% of BNZ's mortgages.

By 2015, after it became clear advisers were here to stay, and that refusing to deal with them meant missing out on business and losing market share, BNZ did an about face.

But that legacy is why, by March 31, brokers still accounted for only 32.7% of its mortgage portfolio.

Commonwealth Bank of Australiaowned ASB Bank has a different balance date: June 30 versus Sept 30 for the other three.

It hasn't disclosed its figures, but has a long history of supporting advisers, particularly since they were a key part of its strategy for moving out of its home market in Auckland.

“Our proportion of adviser-arranged

at the rise and rise of adviser-originated mortgages:

mortgages is in line with the rest of the industry,” ASB told TMM.

“We have good relationships with our adviser community and recognise the importance of the role they play,” it said in a statement, citing a recent survey of mortgage advisers which rated it as “the best bank for processes and systems.”

What about the smaller banks?

As for the smaller banks, TSB refused to answer any questions at all relating to mortgage advisers, on the grounds that “this is commercially sensitive information.”

The truth of this is dubious in light of how much information the other banks were willing to disclose.

Kiwibank chief executive Steve Jurkovich was recently quoted as saying about 55% of its new mortgages in the six months ended December were originated by third parties.

“I don't see any reason why we might not wake up one day and that's 85%,” Jurkovich said.

The government-owned bank says about 20% of mortgages by value were originated by independent advisers in the last 12 months, with the remainder of third-party-originated loans written by the Kiwibank-owned New Zealand Home Loans.

“We are continuing to see growth in this [independent adviser] channel as we have put more focus on it over the last 12 months,” Kiwibank said.

While Kiwibank was founded in 2001, it didn't reach sufficient scale to start working with mortgage advisers until about a decade ago – it is now New Zealand's fifth largest bank – but it says it's only in the last two financial years that it has made the channel a major focus.

Kiwibank now works with about 380 advisers and has about another 140 in the pipeline.

The trend explained

So, what explains the trend, and is Jurkovich right about the likely future?

Massey University banking professor David Tripe has the bluntest of answers: “It's a reflection of the laziness and incompetence on the part of the bank branch networks.”

He notes many advisers come from a banking background, with mobile mortgage managers in particular being attracted to the other side of the fence for entirely pecuniary reasons.

That's because regulatory changes have meant banks can no longer pay staff volume-based commissions.

And bank branches these days don't have qualified staff available, largely because that wouldn't be economic.

“You would have to have somebody in a branch who is competent on a more or less full-time basis - and they wouldn't have enough to do to keep them busy,” Tripe says.

Given increasing regulation and higher education standards for advisers, “probably by now, most of the ratbags in the mortgage sector have been rooted out.”

For ethical reasons, it's probably better for advisers to establish relationships with other professionals in the housing sector, including real estate agents, than for banks to try to do this themselves, Tripe says. “Advisers have got some marketing advantages in that regard.”

KPMG partner John Kensington is more sympathetic to the position the banks are in – he is obviously close to the sector because KPMG is the auditor of ANZ Bank NZ, TSB, Co-operative Bank and SBS Bank.

Kensington says one factor driving

people to engage advisers is that the average level of financial literacy among New Zealanders “is not that strong. I suspect in these tougher times, they're needing all the help they can get.”

New rules partly responsible

The difficulties banks have had in navigating the changes to the Credit Contracts and Consumer Finance Act (CCCFA), which came into force in December 2021, have also played a part in driving customers to advisers, Kensington says.

While the CCCFA regulations have been refined several times since then as politicians tried to iron out the unintended consequences – it had been targeted at marginal predatory lenders but instead had imposed onerous requirements on mainstream banks – they still make it more difficult for banks to grant a mortgage application.

Kensington suggests people who are unsure of whether they qualify for a mortgage are more likely to engage an adviser.

‘The banks are probably seeing a better quality of application than if the applicant hadn't used a mortgage adviser’

John Kensington

“A mortgage adviser is probably not going to allow you to put a poor proposition to a bank. They're going to help you clean it up,” he says.

“The banks are probably seeing a better quality of application than if the applicant hadn't used a mortgage adviser.”

The rapidly rising interest-rate environment has also made banks more cautious, Kensington says. The Reserve Bank has raised its official cash rate from 0.25% in October 2021 to 5.5% currently.

Kensington doubts banks will ever stop writing mortgages directly.

“What's distinguished the market for a period of time has been their ability to raise capital. They have tremendous mechanisms for going out and getting enormous amounts of money and then they have the say in how to distribute it [to borrowers].”

Even where non-banks are now participating in the mortgage market, it's usually via bank funding, he says.

That's rather than non-banks trying to raise money from selling debentures. The debenture market was severely tarnished by the wholesale collapse of finance companies more than a decade ago, and is much smaller these days.

“You might see the indirect funding through those [non-bank] vehicles increase a bit over time,” Kensington says.

Squirrel chief executive David Cunningham, who was Co-operative Bank's chief executive until mid-2021, says changes in the rules for providing financial advice have played a major part in the recent growth.

“Now, you really need to be a FAP [financial advice provider licence] holder and you need Level 5 [of the New Zealand Certificate in Financial Services] qualified advisers,” Cunningham says.

Since mid-March, only those with Level 5 can provide financial advice.

“That's meant an overall reduction in the capability that banks are able to bring to the table - most banks haven't gone down the route of their home-loan specialists becoming Level 5-qualified,” he says.

Banks’ expertise is in “manufacturing” mortgage products, now providing information but not advice, and customers have been voting with their feet by engaging with brokers, Cunningham says.

What say ye, banks?

But what reasons do the banks themselves give for the growing dominance of mortgage advisers?

Westpac's consumer banking and wealth general manager, Mike Norfolk, suggests the lockdowns associated with Covid accelerated the trend.

“The most important thing for Westpac is that our customers have a variety of channels they can use to access our services,” Norfolk says.

“Mortgage advisers will appeal to some customers, while others will prefer to forge a direct relationship with our banking team and benefit from their deep knowledge of our products.”

BNZ specialist banking general manager Adam Ward attributes the growth to increasing regulation, which is prompting customers to seek independent advice and assistance.

“The trend reflects the unique strengths of both brokers and banks. Brokers are highly geographically dispersed across NZ, flexible and work across a range of lenders,” Ward says.

“BNZ welcomes the competition and choice that brokers bring to the home loan market.”

Co-operative Bank's chief product officer, Jon Armour, also points to the CCCFA changes bringing added complexity to applying for a home loan.

“Borrowers are potentially seeking our perceived independent 'experts' to help them navigate the process.

“Also, with the dynamic market conditions, borrowers may have relied more heavily on brokers to 'get the best deal’, given rising house prices and loan requirements and now increasing interest rates,” Armour says.

Kiwibank, too, cites the substantial amount of regulatory changes - in particular, the requirement for independent advisers to

gain educational qualifications.

“We think this has impacted the reputation of advisers and helped the independent adviser industry gain a better level of professionalism,” says Nicole Pervan, Kiwibank's home lending general manager.

“New Zealand is also seeing an increased level of financial literacy across our population, so people are choosing to seek our more independent advice [than] in the past,” Pervan says.

“Buying a house will be, for many people, the biggest single output within their lifetime, so they are choosing to seek out independent advice to help them get the best deal.”

With house prices so elevated, requiring larger mortgages, the need for more advice becomes more acute.

Convenience for customers

Pervan rejects the suggestion that the trend highlights deficiencies with the banks.

“We would argue definitely not,” she says.

“Some customers prefer independent advice and the added convenience of having an adviser do the shopping around for them.

“This is convenience for the customer rather than a deficiency on behalf of the bank,” she says.

“Our in-house advisers are just as capable and professional as independent advisers, and ultimately we will support our customers however they choose to bank.”

Massey University's Tripe notes that banks appear to be putting less emphasis on their in-house mobile mortgage mangers these days, but that's not what the banks themselves say.

Pervan says Kiwibank has made no changes to its numbers of mobile mortgage managers compared with

‘[The trend reflects] convenience for the customer rather than a deficiency on behalf of the bank’

independent advisers.

ANZ Bank says its mobile mortgage managers “are hugely valuable to ANZ. Home lending has become increasingly complex and our mobile teams are experts in this area, focusing solely on home loans.”

ASB says it has slightly increased its number of mobile mortgage managers in the last five years and says they're “still very popular with customers.”

It's probably unsurprising that the banks reject the idea of handing over mortgage origination entirely to brokers.

“We can offer customers a personal, integrated proposition which goes far beyond home loans.

“Buying a home is an important life moment for customers, and one that we will continue to focus on making better for customers over the long term,” says ASB.

Kiwibank's Pervan says it seems unlikely at this stage that banks would bow out of mortgage origination.

“We see future technology development and open banking improvements coming down the pipeline, which will continue to disrupt

and evolve how banks bring business to customers,” Pervan says.

“Mortgage origination will continue to evolve and adapt to where our customers want to be operating.

“But we still see great value in having a balanced portfolio with different origination options to serve our customers.”

BNZ's Ward says “we highly value our proprietary business,” but that having brokers as part of the mix creates “a model that leverages the strengths of both, [which] can offer the best of both worlds.” ✚

‘Most banks haven't gone down the route of their home-loan specialists becoming Level 5-qualified’

David Cunningham

INTRODUCING FINSURE’S COUNTRY MANAGER JENNY CAMPBELL

Jenny is a familiar face to many in the NZ adviser community. She has spent 20 years in the mortgage sector, firstly as a broker, and a lender, then moving into the leadership of the New Zealand Mortgage Brokers Association, and the Professional Advisers Association (prior to the incorporation of Financial Advice New Zealand). Having also owned and managed her own adviser group and aggregator, Jenny comes with a wealth of contacts and experience in the mortgage space.

Why did you join Finsure?

I have long thought that NZ was missing a trick in the aggregation space. I think we were all looking for a group that could pull the adviser community together, and who had the vital infrastructure to support a good-sized group without losing the personal touch.

What excites me about Finsure is this is a group that genuinely cares about its members. I have always felt that mortgage advisers are special people – they spend all day helping hardworking Kiwis make their property dreams come true. Advisers are the champions of their customers, and we want to support the adviser, just as they support and help everyday New Zealanders.

Is it an Aussie invasion?

I think there are massive synergies and benefits to leveraging the trans-Tasman relationship. Mortgage advisers in Australia are very similar to New Zealand, and of course – so are many of the banks!

Australia is a few years ahead of us with financial tech in particular, so it will be great to be able to bring exciting enhancements to advisers businesses here.

Any surprises so far?

I was lucky enough to go to a Professional Development day for the Finsure advisers based in Sydney and I couldn’t believe my eyes! There were 600 advisers in one room!

What does it look like next year?

We do think we are going to shake up the industry a bit in NZ. We will have a really full programme with loads of training opportunities, and regular Professional Development Days.

Finsure is known for its wonderful offshore conferences, and the NZ contingent will be an important part of these events! We will be working really hard on behalf of advisers and strive to get them new opportunities and a fair go with regulators and lenders.

JENNY CAMPBELL COUNTRY MANAGER FINSURE

What customers are complaining about

TMM checks in with the Insurance and Financial Services

Ombudsman to find out what customers are complaining about and how to address these issues.

BY SALLY LINDSAY

Complaints against mortgage and financial advisers have risen recently specifically in relation to fees and charges.

“In some of the cases the information in documents sent by mortgage brokers to clients isn’t sufficiently clear,” IFSO strategic partnerships manager Andrew Gunn says.

“Clawback fees are a big issue –where a mortgage or financial adviser hasn’t provided sufficient information about charging a clawback fee if the client decides to break their mortgage.”

Gunn says these fees need to be explained clearly. In some cases, the ombudsman has found they cannot be charged by the mortgage adviser. (See case studies below)

Advisers under FMA Regulations Code standard 3 are required to outline why the advice is suitable, given their client’s circumstances, and under Code standard 4 ensure their clients understand the advice, its benefits but also the risks, costs and fees attached with the advice.

In Rosewill Consulting director and compliance consultant Derek Mayne’s view this is not enough and mortgage advisers should have a standard client agreement.

“With regulation, the main point is making sure a client actually understands what they are entering into.”

He is not surprised by the jump in complaints against advisers. “It is a sign of the times, people have been put in stressful situations recently and it is easier for them to make a complaint which is probably a good thing.”

Mayne says mortgage loan repayments for many people have risen considerably and they are holding advisers to account for the advice they've been given. “Some advisers are starting to charge fees

and their clients are pushing back a wee bit.”

He says mortgage advisers can avoid issues by ensuring they disclose details of fees clearly in a client document at an initial meeting with a client. He says all advisers should have their own client agreement form.

Key information about fees, including how a clawback fee is calculated and when it is triggered, should be clearly documented in the agreement to be signed by the client.

“Clients may not read all the documentation provided to them. Discussing the contract or documentation to draw clients’ attention to key provisions is essential.”

He says if information is given by phone/in person, it is also good practice to follow up the key points by email or letter. “Keeping detailed file notes of meetings and conversations can help advisers avoid future issues.”

Mayne has come across advisers emailing a client documents as their disclosure statement. “That's not good enough, they have to go through it with their client and explain every facet, including break fees at banks and any clawback fees, how they are calculated, is the fee fair and reasonable and how the client will be charged. Then the adviser has more of a chance of it being paid.”

He has seen difficult models of clawback fees with different amounts being charged if a mortgage is repaid within 12 months, 12-18 months and 18-27 months. “If it is spelled out clearly a client can see exactly what it is going to cost them.”

Detailed notes of any conversations with a client should be kept as this is a record of mortgage advice, Mayne says. “It's there in black and white, and the client sees what they're committing

to. And then we expect the adviser to get that signed, or at least get an email from the client confirming their understanding. This should stand up as evidence if there is a complaint made.”

He says one of the biggest issues arises when an adviser’s client has a mortgage in place and another adviser comes along and says they can get a better deal for the borrower. The client is then moved from one bank to another and the new adviser doesn’t tell the borrower that potentially they are going to be charged a clawback fee by their initial adviser.

“Advisers have duty of care to say if they take the client away from their initial bank, there is the potential for a clawback fee from any previous adviser, potential for a bank break fee, and there will be costs involved. Some borrowers are just starting to push back on that.

Gunn says in this period of high and volatile interest rates it is important mortgage advisers document the interest rates discussed and can demonstrate these were brought to their client’s attention. It avoids problems.

Case study 1

With the assistance of a financial adviser, Mr and Mrs L arranged a one-year fixed term mortgage with their bank.

The agreement between Mr and Mrs L and the financial adviser stated

Summary: Mr and Mrs L’s complaint was settled, because the terms of the clawback fee provision in the agreement were not sufficiently transparent.

that a clawback fee would apply, if the mortgage was discharged within two years of the settlement date. The agreement did not describe what a clawback fee was, or provide any mechanism for calculating the clawback amount.

The financial adviser received commission of $3,536.94 from the bank for arranging the mortgage. The bank reversed the commission received by the financial adviser, and the financial adviser then clawed back the commission from Mr and Mrs L, according to the agreement.

Mr and Mrs L refused to pay the clawback fee, because they said it was not explained to them when they signed the agreement and a one-year fixed term mortgage had been arranged.

Case manager’s assessment:

The case manager considered whether Mr and Mrs L agreed to the clawback provision and had to pay the amount of $3,526.94.

The agreement between Mr and Mrs L and the financial adviser stated it was a binding agreement. The financial adviser said he gave every client a copy of the agreement and warned them to read it before they signed.

There was no disagreement that Mr and Mrs L signed the agreement. However, Mr and Mrs L said they were told it was a “usual contract” and they needed to sign it before they could start. They also said the agreement, and the clawback provision in it, were not explained to them prior to signing. In addition, they were only given a copy of the agreement after they had been invoiced for the clawback fee and had complained to the financial adviser.

In Mr and Mrs L’s case, the financial adviser was in control of producing the agreement, including how the clawback provision was drafted and presented in it. He was also in control of the process for explaining it to customers, or ensuring his staff properly explained it to customers.

The case manager discussed this with the financial adviser. She told him there were issues with the agreement, because the clawback fee provision was towards the end of the document, did not define what a clawback fee was, and did not provide a mechanism for Mr and Mrs L to calculate what the clawback amount might be.

After further communications, the financial adviser offered to reduce the amount Mr and Mrs L were required to pay to $1,150.

Mr and Mrs L accepted this offer, and paid the financial adviser $1,150, in full and final settlement of their complaint.

Case study 2

Summary: Ms B’s complaint was upheld, because the contract did not allow the financial adviser to charge a fee.

Mrs B signed a contract for a financial adviser to source a home loan for her. Sometime later, when Mrs B refinanced the loan the financial adviser had sought for her, the financial adviser sent her an invoice for a “cancellation clawback” fee. Ms B said she would not pay the fee, because it had not been disclosed to her.

Case manager’s assessment:

The contract said Ms B “agreed to the option(s) indicated above” (none of which were selected). It noted, “if service fee is selected” and if the product/service was cancelled within 24 months, she agreed the financial adviser could “recover its costs” by charging her a “fee ... to recover the cost of time spent by the adviser and administration staff, and any medical examinations that are required.”

Because the Service Fee box was not ticked, Ms B did not agree to pay the fee set out the in the contract. However, even if the Service Fee box had been ticked and Ms B had agreed to pay the fee, the case manager did not believe the financial adviser would be able to charge the clawback amount. This was because the contract referred to a “fee ... to recover the cost of time spent by the Adviser and administration staff, and any medical examinations that are required.” In order for the financial adviser to legitimately charge the clawback amount, it needed to be more accurately related to the time spent by the adviser and administration staff.

The IFSO Scheme’s view is that clawback clauses need to adequately give the customer a way of estimating the fee they will pay. For example, by providing the maximum percentage of the loan they will be charged, or some other method of calculation.

While it can be difficult to provide

the figure which the customer will be charged, the financial adviser was in control of the systems and procedures which would allow the customer some way of estimating how much the fee could be. In addition, from 15 March 2021, under the Financial Markets Conduct (Regulated Financial Advice Disclosure) Amendment Regulations 2020 (“the Regulations”), Part 2, Schedule 21A, the financial adviser is required to inform clients of any fees or charges payable, or that may become payable – as soon as he knew details. If he failed to do so, he would be in breach of the regulations.

As there is no documentary evidence that Ms B agreed to pay the fee or was given any details about the fee, the financial adviser was not able to charge the fee.

The IFSO’s recommendation

The financial adviser requested a recommendation and made the following points:

1. He was an honest, hardworking financial adviser, who had lost faith in the systems which were meant to be there to protect him;

2. He did more than 40 hours’ work and he deserved to be paid (i.e. charge the fee);

3. Ms B lied in her submission and the IFSO Scheme considered this to be irrelevant;

4. Ms B was financially irresponsible and he cleaned up the mess;

5. Ms B agreed to pay the lender’s break fee, so he questioned why he was unable to be paid; and

6. His documents were compliant at the time and Ms B was using the wording to wriggle out of paying a financial commitment.

The IFSO noted the financial adviser had not provided any new evidence which would change the decision. The fact was that the contract did not allow the financial adviser to charge the fee. The IFSO noted Ms B had also complained about the financial adviser subsequently breaching her privacy, by posting about her loan on social media.

This was in breach of the financial adviser’s obligations under Code Standard 2 “Act with Integrity” and Code Standard 5 “Protect Client Information”. The IFSO noted Ms B was able to take her complaint to the Privacy Commissioner, or the Financial Markets Authority, if she chose to do so. ✚

CELEBRATING EXCELLENCE AT THE LFG ANNUAL AWARDS DINNER

Recognising Outstanding Adviser Achievements in the mortgage and insurance Industry

On Thursday, 15 June 2023, Christchurch City Hall was abuzz with anticipation and excitement as industry professionals gathered for the highly anticipated LFG (Link Financial Group) Annual Awards Dinner. This prestigious event celebrated exceptional performance and recognised the accomplishments of outstanding individuals in the mortgage and insurance industry.

The LFG Annual Awards program

has been a longstanding tradition within the group. Historically, the program primarily focused on production volume, providing recognition to top performers based on their impressive sales figures. However, as regulations have evolved, so too have the awards criteria.

In response to the changing landscape, LFG has adapted the program to incorporate quality measures, placing an emphasis on professionalism, advise process,

compliance, adviser obligations, and adherence to ethical standards.

As the mortgage and insurance industry continues to evolve, so too will the LFG Annual Awards program. By recognising exceptional performance, LFG aims to inspire and motivate advisers to continually strive for excellence, ultimately benefiting clients and the industry as a whole.

It is our pleasure to share some photos of the evening with you.

Above: Everbright Finance had a very successful year on both the mortgage and insurance side. Winning the awards for the National Top Own-Brand Mortgage Office and the individual professional development award to name a few.

Above: Mortgage and Insurance Link Otago had an equally impressive year, boasting with awards like the Top Support Person and National Top Branded

Link Financial Group

Providing you a flexible platform to succeed in an everchanging financial landscape.

If you want to find out more about LFG the link family or becoming an adviser, feel free to connect with us at www.lfg.co.nz

mortgage Office.

Above: The new mortgage adviser of the year award went to Stacey Butler from Mortgage and Insurance Link Manawatu.

Above: Insurance Adviser of the year for Own-Brand category was awarded to Shehan Saparamadu from Advisory Window.

From Tajikistan to the top

TMM talks to mother-of-four Zebunisso Alimova about how she went from speaking no English to owning a successful Mike Pero franchise and winning multiple industry awards.

BY KERRY MEADOWS-BONNER

Zebunisso Alimova left Tajikistan as a teenager and moved to New Zealand, which she initially hated.

“When I first arrived, I came to study in high school in the last year. That first year was really, really hard, especially having to learn English.

“I remember talking to my mom, saying I hate this and want to go home!”

That was 20 years ago. She persevered - and today is a mortgage adviser and franchisee owner of Mike Pero in the Wellington region.

“It’s gone so fast. I’ve spent more time now here than back in Tajikistan.”

Initially, Alimova wanted to become a journalist - her father was onebut had to find a more affordable option due to the high fees for foreign students.

After a degree in international studies at Palmerston North’s International Pacific United, she was offered a role at the campus in recruitment and marketing, attracting students to the institute and helping them adjust to life in New Zealand.

What fits best with family?

Four years later, she and her husband decided to start a family – and quickly

realised the recruitment role would not be the best fit with motherhood, due to the amount of travel involved.

As the pitter-patter of little feet began, she embarked on a post-grad in counselling at Massey University while working part-time at the ASB bank as a personal banker and loan officer.

It was after baby number three that her brother asked her if she’d like to buy his Mike Pero Mortgages franchise, keeping it in the family while he went off to see the world.

“He sold me on the idea of being able to work from home - that it’s a family oriented business - so I said, ‘Ok, great!’ That was five years now.”

Many of her former clients from the bank followed her to the new company.

Initially she focused on refinancing, helping clients find better home-loan deals, but soon became passionate about assisting first-time home-buyers.

“As a mortgage adviser, I suddenly realised I had access to first-home buyer, home-loan deals like [those from] SBS bank, the Cooperative bank, and all these small banks that I didn't really know much about.

“There is a passion of mine to help as many first-time buyers as possible and get them into their first homes.”

Her personal experience as a firsttime homebuyer, and almost losing a house due to a visa-related issue, meant she could relate to the importance of helping people overcome obstacles to achieve their goals of home ownership.

“Hand-holding is absolutely how I describe my job, because first-time buyers are the ones that don't really know much.

“They are the ones that need the most help - and if you're able to help them, you win clients for life.”

Juggling career and parenting

Transitioning from banking to an adviser role meant Alimova had to adapt to different banking policies, learning about the various options available from each bank.

She also faced the demanding challenge of balancing work with family life, but highlights the importance of setting expectations with clients.

“Being honest to your clients is the key. Not having any family around meant sometimes saying to clients that if they need to see me at this time, I have to bring the baby.

“I grew enough confidence to ask those questions - and discovered, 99% of the time, people were fine with it; they didn’t care.

“Setting those expectations right from the start [is critical]; you can still be the best adviser, but I also have a family that needs me.”

Finding a supportive network was also key to making the juggle work well. Alimova didn’t have a mentor

when starting out, and found being a franchisee was at times isolating - until she joined Venus, a female networking group.

“I found that very powerful. It is only women and you go in there and you’re representing your business, but at the same time, if you are having some life challenges, they are there to help and support you.”

Helping clients

Post-Covid, the 35-year-old has been in turn supporting clients, providing comfort and education, looking at their budgets and assisting them through tough times.

She says with house prices low compared to three years ago, it’s a good time to buy a property.

“A lot of people have no clue that it’s a good time to buy, [nor] what it all means because of high interest rates. With clients it’s important to keep up that education and transparency.”

Part of that education has included countering incorrect or incomplete advice.

“There was a lot of bad advice going around in the industry during Covid times, things like mortgage holidays with no repayments.

“That can be dangerous without context, so it inspires me to set things right with clients and educate them.

She runs monthly webinars and seminars, and posts “tips and tricks” on multiple social media platforms every day.

Recognition for success

It’s a formula that seems to be working.

Now a mother of four, she won the Mike Pero Franchisee of the Year Award in 2022 – the first woman to do so.

“It was mind blowing, because, you know, I’m a mum. Four kids at home. I do this part time.”

This year, she won an Excellence Award in the NZMA’s Adviser of the Year (independent and franchise category) and has made the NZ Adviser Elite Women list two years running.

She has expanded her Waikanaebased business, and now has eight staff working for her: three loan writers/ advisers, three as personal assistants, two in marketing.

“It was lonely working on my own and dealing with the workload, so now, it’s,‘Ok, what’s next?’

Currently serving on two boards as an independent trustee, she is in the middle of setting up the Waikanae Business Association with the support of Kapiti Coast District Council and aims to become a professional director, serving on larger boards such as Air New Zealand.

“There are some other things I want to achieve, maybe getting to $120 million in lending in business.”

Outside of professional life, Alimova has a passion for martial arts, particularly taekwondo.

“I’m a workaholic at heart, so my husband got me into martial arts and now the whole family is into it; I’ve got a red belt now in taekwondo.

“It’s a great outlet to get you through those stresses and the physical workload we have to put up with as mums.”

She also loves to read and listen to audiobooks, and has a newfound passion for drawing – something which started with a drawing app and progressed to art classes, thanks to a gift from her husband.

“I found I really enjoyed the art class membership I got for Christmas, so I kept drawing.”

She says she seems to be “really good at it” – a fact which somehow comes as no surprise. ✚

‘If you're able to help [first-home buyers], you win clients for life’

‘Not having any family around meant sometimes saying to clients that… I have to bring the baby’

DON’T ‘PAY AND WALK AWAY!’

BY PAUL WATKINS

In a conversation with an adviser a few weeks ago, she told me she feels like a marriage guidance counsellor at times, due to the financial stress some of her clients are under - and the tears and arguments that can erupt in client meetings.

Financial stress is one of the main reasons marriages fail.

As full financial advice is outside her expertise, she has referred some clients to a financial planner who can help organise their financial affairs.

What am I leading to?

Run an advertising campaign today and have the phone ring tomorrow: that’s what we all want, but it misses a key component, being your existing clients.

Interest rates are up (and could rise again), house-sales volume is down, and sales prices have declined. A challenging market to be trading in. And it’s compounded by fact that many of your clients fixed or secured a loan during low-interest times.

It’s at such times that switching from a ‘reactive’ approach to a ‘proactive’ approach is needed.

You call them

Don’t wait for the stressed client to call; you need to get hold of them.

As I have written about many times before, you must continually ask yourself, “What value do I add?”

Why should a client come back to you, and not go direct to the lender, with any request for a variation on the

term or to refix?

Lenders now offer ways to change mortgage settings online with no human contact.

Clients get emailed prompts from the lender when it is nearly time; they can adjust the payments and refix from the range of options of repayments and loan duration offered. Quick and easy.

So where do you come in?

Without being cynical, many brokers spend a lot of time arranging the first loan and then ‘walk away,’ as the famous television ad goes.

So, what can you do on a proactive basis?

Contact them well ahead of the expiry date of their fixed-term loan.

This can obviously be by email, but email is a very clinical and impersonal way to do so. It should therefore be the last resort.

Some years back when I had a mortgage due for refixing, I called the lender for some thoughts and options – although I had originally set the loan up through a broker.

He asked me relevant questions and offered me options to refix.

He was clearly knowledgeable, as he should be, and the 10-minute phone call ended with a suitable result for both of us.

I know what you are thinking: why didn’t I call the broker first?

It was because my lender had also become my bank.

I interacted with them through my phone almost daily; it was easy to hit

the phone number and discuss it with them.

My only contact with my broker had been cut-and-paste, emailed, quarterly newsletters, which I had mostly been deleting without reading.

I am sure many of you send out emailed newsletters, which probably all repeat the same content.

How to add value

So, what can you do to be seen to be adding value and reducing financial stress?

First, educate clients: send short video tips of yourself on how to cope with increasing repayments.

Yes, you read right: video, not written text.

We live in the TikTok generation, and only video has any cut-through now. These videos can be of budgeting tips, food shopping, setting up an emergency fund, managing credit cards, mortgage-restructuring options and similar.

Before you say, “But I’m not a budgetary service”, think again.

How are your clients feeling right now? You arranged the single biggest financial decision they will ever make, in the form of the mortgage, so this has implications on their daily spending.

If you don’t want to do such budget or financial advice tips, or don’t feel qualified to do so, find someone you can engage to do them for you.

If you do produce such short videos, like 30-90 seconds, then run them

As the famous television ad goes, many advisers spend a lot of time arranging the first loan and then just ‘walk away’, but there’s so much to be gained by taking a proactive approach.

on TikTok and Facebook, or whatever social media platform your clients patronise.

This will not only impress clients but become your advertising for more clients.

Without wanting to sound critical, it amazes me how few brokers use social media platforms, which are almost the only media that’s working right now.

My own thoughts are that either many of you don’t want to have your face featured on social media or that you don’t understand the platforms enough to know how to use them to affect.

They work and are incredibly costeffective.

Ditch the email

Avoid email! Yes, email can still work, but it is unfriendly, impersonal, and, in many cases, unread.

How many did you received today and how many did you read? Be honest.

Use snail mail instead. Yes, snail mail. It’s quite a novelty to get any mail at all these days.

Write a book! No, I don’t mean a 250-page novel, but a 12-to-20-page, well-illustrated, professionally-crafted booklet called something like, ‘Ten ways to cope with mortgage interest rate rises,’ or ‘How not to panic when your mortgage repayments go up’.

Then post (no, do not email) a printed copy to all clients whose fixed terms will expire in the next few months.

Books, even short ones, give instant

authority to you as the author. They now see you as, “He/she must be good –they wrote the book on it!”

It also puts you in a position of considerable differentiation from your competitors; and since it was posted in hardcopy, they may show friends.

Turning the book into a PDF’d e-book version can then act as a lead magnet for prospecting.

They see the ad on social media and click through to get a copy, requiring them to give their name and email address.

Educate, educate, educate

As you have probably gathered, this is all ‘Education-Based Marketing’.

Instead of ‘selling’ your services, you educate clients and prospects, thereby convincing them that you are on their side and not just a ‘pay and walk away’ transaction merchant. Big difference.

And on this point, be proactive, not reactive.

I will reiterate: call the client for a chat well before their fixed term expires, like as far out as three months. They will appreciate this, and it lessens the likelihood of them being tempted to go direct to the lender.

I have met brokers who ask me to help run ads that make their phone ring, but are terrified of picking up the phone and calling a client.

I don’t get that. We are humans and crave personal contact.

Be proactive and don’t just ‘walk away’. ✚

‘Don’t wait for the stressed client to call; you need to get hold of them’

‘Without wanting to sound critical, it amazes me how few brokers use social media platforms’

Property,

WE’VE COME A LONG WAY, BABY

and

In the year 1975, the vast majority of home mortgages - a whopping 86% - were held by non-banks: solicitors’ nominee companies, the government, building societies and life insurance companies, in that order.

Banks were either trading banks, which held only 2% of home mortgages, or trustee savings banks, which held 12%.

Interest rates that year averaged 6.6%.

Lenders and their lawyers prepared and registered paper mortgages, and moneys were advanced only after documents were physically exchanged at the offices of the lawyer who acted for the lender, or at the local office of the State Advances Corporation.

Borrowers paid the fees of both sets of lawyers according to the Law Society scale of charges - even if one lawyer acted for lender and borrower, which was often the case with solicitors’ nominee companies.

Scale fees were based on the value of the mortgage.

Mortgages were fixed-sum paper mortgages, and one document contained all the financial and security terms.

Borrowers often had two or three mortgages secured against the one property. Consumer credit regulation was almost non-existent.

Mortgage advisers did not exist.

Most borrowers remained with the same institutional lender until they sold the property.

Refinancing with another institution occurred only if the mortgage was short-term, from a private lender, and the borrower qualified under the new institution’s rules.

These usually involved winning a ballot from a terminating building society, or being with the savings bank for the qualifying period, or taking out a life policy.

Credit criteria was very simple and often ranked in importance behind other criteria.

In the year 2000

In the year 2000, registered banks held approximately 90% of all mortgages; building societies and solicitors’ nominee companies were becoming things of the past.

The Law Society no longer required lawyers to charge scale fees for conveyancing, and lawyers were free to charge whatever they could justify for the transaction.

Settlements were still between lawyers but were unattended and relied on undertakings.

In September 2000, my firm sent out and settled the first SwitchMe-style mortgage for a refinance.

A fixed fee was charged, lower than other lawyers usually charged.

Borrowers did not need to employ their own lawyers but instructed us on a limited brief to act for them - to attend to the settlement and registration of the refinance.

The process was the forerunner of what is now called Switchme and could be used only if the mortgage was arranged via a broker, who met the borrower and provided financial advice.

Non-bank lenders, funded by securitisations, were growing.

Interest rates averaged 8.5%, down from a high of 21% in the mid-1980s.

Consumer credit regulation existed for contracts, but not for the growing constituency of unlicensed mortgage advisers and brokers.

Qualifying criteria was now based on credit, and new customers to the bank were encouraged.

Mortgages were still on paper, but the financial terms were now generally in a loan agreement, and the security terms in a paper mortgage instrument which incorporated the general terms set out in a mortgage memorandum registered by the lender.

The registered mortgage secured all obligations owed by the customer to the bank.

Banks prepared the loan agreement and instructed the borrower’s lawyer to act for them to prepare a mortgage on the bank’s standard forms.

It was designed to be faster, better and more cost-effective than the traditional processes.

In the year 2023

In the year 2023, big, registered banks now maintain a major hold on the home mortgage market (approximately 86%) against smaller banks and non-banks.

Mortgage advisers are a mature part of the market now and must be registered financial advisers – and the NZ mortgage advisers’ share of the market is approximately 50% of new originations.

Interest rates are rising rapidly from historic lows of under 3%.

Consumer credit law has developed, and with it a focus on responsible lending and regulatory compliance, including adviser training and education.

One paper document has been replaced by a virtual mortgage, comprising:

(a) a loan agreement;

banking

finance law specialist Jonathan Flaws looks at the massive amount of change in the mortgage industry over the last 50 years – and an opportunity for advisers.

‘The challenge is to keep up with change, understand it and take advantage of the opportunities change brings’

(b) an electronic mortgage incorporating the lenders memorandum of terms; and

(c) a paper client authority and instruction.

Generally, the loan agreement is still prepared by the bank, and one lawyer acts for the bank and the borrower to arrange for signing, certification, settlement and registration.

Borrowers are rightly treating their mortgages as portable, moving their mortgages like they move their energy utilities, from one supplier to another.

The Government has been talking about open banking for many years but really only giving lip service to the concept.

Certainly, it is now more open than it was, but it has still a long way to go. Mortgage portability is a part of open banking. The impediment to date has been the cost and process of switching.

Changes bring opportunities

Over the last 50 years, the main changes in the residential mortgage environment have been:

• the banks’ share of mortgages has increased from 14% to approximately 90%;

• a paper mortgage has been replaced by a virtual mortgage;

• financial advice formerly given to borrowers by lawyers is now given in at least 50% of cases by registered financial advisers;

• the lawyer’s role has reduced to providing legal advice and settling and registering the mortgage;

• mortgage portability has increased.

With change come opportunities. The challenge for those involved in the industry is to keep up with change, understand it and take advantage of the opportunities change brings.

Refinancing change

In 1975, I was a “baby lawyer,” newly qualified and on my feet but still needing to learn how to walk.

By the year 2000, I had seen the developments in the mortgage industry, and the takeover by the banks of the dominant role as the provider of residential mortgages.

I was a banking partner in a large, national law firm and was acting for non-bank lenders, mainly Australian, and was acting similar to an Australian panel lawyer for non-bank lenders.

The mortgage industry was changing. The introduction of advisers meant that financial advice to borrowers was no longer the preserve of lawyers.

I became aware of a refinancing system used in Australia where lawyers played a reduced role in mortgages.

I redesigned the Australian system, the forerunner of Switchme, so it worked in New Zealand and provided benefits for lenders and borrowers.

I haven’t kept count of the number of mortgages my firm has registered in the 22 years since the process began, but it would be well in excess of 50,000.

All of these have resulted in valid, binding, registered mortgages.

Each has been arranged through either an independent or bankemployed mortgage adviser, and each adviser has been trained and accredited by us to participate.

Switchme has matured well and has

been tweaked and refined to cope with electronic registration, but it is still, in concept, the same now as it was when it started.

Initially, we encountered pushback from a minority of lawyers, but this soon faded away.

The process is legally compliant, so banks and regulators are happy. Importantly, brokers and borrowers are happy with a fast and cost-effective refinance service.

Refinancing transactions are a significant part of the mortgage market. If you don’t already use it, introducing a client to Switchme for a simple refinance may be a change to consider.

Sanderson Weir makes the process available to advisers who have been trained and accredited by it and wish to become part of the process of change.

Feedback from some of our accredited brokers concludes that being part of the Switchme process enhances their reputation in the eyes of their clients.

They are providing an efficient, economic service that many of their colleagues do not.

Switchme is usually better, faster, and more cost effective for simple refinances.

For more complex refinancing situations, where it is part of a wider transaction, or where the client’s circumstances require detailed legal as well as financial advice, Switchme may not be appropriate, and the client should take advice from his or her own lawyer. ✚

Jonathan Flaws is a partner at Sanderson Weir.

‘The introduction of advisers meant that financial advice to borrowers was no longer the preserve of lawyers’

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 SOME BANKS WILL BE READY FOR OPEN BANKING BEFORE MAY 2024

May next year is the ‘be ready’ deadline for the four major banks to implement open banking - but they may be ready before that, says Payments NZ chief executive Steve Wiggins.

02 TAILWINDS ARE COMING

Interest-rate cuts will start in about nine months, says KiwiBank.

03 HSBC TO WITHDRAW FROM WEALTH AND RETAIL BANKING IN NZ

HSBC is withdrawing from NZ’s wealth management and retail banking markets, following a review of the operations' small scale - and increasing regulation.

04 HOW DTIS WILL AFFECT MORTGAGE ADVISERS

If the Reserve Bank implements its debtto-income (DTI) restrictions tool, it will put enormous pressure on mortgage advisers, says David Green of Advice HQ.

05 MORE THAN HALF WESTPAC'S BUSINESS IS FROM ADVISERS

Westpac New Zealand is playing “catch-up” in the mortgage market because it had been losing a little market share, says chief executive Catherine McGrath.

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

06 MORTGAGE ADVISING SHOULD BECOME A PROFESSION

Mortgage adviser and chartered accountant David Green says it’s time the industry turned into a profession.

07 RBNZ DETAILS EASED LVR RESTRICTIONS

The Reserve Bank has confirmed its proposal to ease mortgage loan-to-value ratio (LVR) restrictions.

08 COMPETITION IS COMING FOR HEARTLAND'S ONLINE MORTGAGES

Heartland Bank's online mortgage product could be facing greater competition as early as May next year, when the four major banks have to be ready for open banking.

09 AURORA PINGED FOR MISLEADING CLIENTS

Auroa Financial Group has been censured by the Financial Markets Authority for misleading KiwiSaver clients.

10 KIWIS GETTING USED TO HIGH INTEREST RATES BUT WARNED NOT TO FIX FOR LONG

Home-loan arrears dropped for the first time in eight months, the latest Centrix credit indicator report shows.

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