TMM 04 • 2021 • WWW.TMMONLINE.NZ
Advisers optimistic about the future
Advisers react angrily to BNZ's DTI move
Cam Marcroft: The accidental adviser
What do clients really want?
PAGE 24
PAGE 28
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TMM 04
Contents
The Big Story - What advisers are thinking TMM surveys mortgage advisers to find out what is keeping them awake at night. Plus we find out which banks and non-banks are the favourites.
Legal - Understanding CCCFA Lee Kerr of Sanderson Weir looks at the incoming regulation and the effects that will be felt by advisers. PAGE 26
PAGE 18
Features
Up front 04
06
EDITORIAL
Mortgage advice forecast: Changeable.
16
HOUSING COMMENTARY
24
ADVISER REACTION
10
PROPERTY NEWS
12
REGULATION
Advisers take aim at BNZ DTIs.
Columns 28
MY BUSINESS
30
SALES AND MARKETING
32
INSURANCE
NEWS
New next for mortgage advisers, Half ANZ's loans come from advisers.
House prices show no signs of slowing.
Cameron Marcroft joined the industry ‘accidentally’ and has gone from strength to strength.
Paul Watkins uncovers some of the mystery of SEO and how advisers can better use it to reach potential clients.
Fix-Ups, FOMO and Fresh tax rules.
Mortgage advisers voice their concerns over CCCFA.
Steve Wright discusses income and mortgage protection term lengths and when a shorter term may be a good solution.
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03
UP FRONT • EDITORIAL
MORTGAGE ADVICE FORECAST: CHANGEABLE
O
ur unwanted arrival Covid-19 may be causing all sorts of unrest and disruption across the country, but the outlook for mortgage advisers looks pretty positive. In this issue of TMM we have the results of our annual survey of mortgage advisers. The more things change the more they stay the same. One of the biggest issues for advisers is turnaround times for loan applications. The fact this comes up year after year is a sad indictment on the banks. What’s even more concerning is that this issue is only going to get worse once changes to the CCCFA come into effect. ANZ chief executive Antonia Watson was brutally frank when she told TMM that the bank will be harder to deal with. The good news for her is that ANZ continues to be the preferred big bank with mortgage advisers by some margin. As you will see in the lead story Westpac has been the big mover. There is also good news for nonbanks too. Advisers have made it clear they plan to send more business to these lenders. Sixty eight percent of respondents said they planned to increase the amount they do with nonbanks compared to 42% last year. While the outlook for mortgage advisers is good there are clouds on the horizon; arguably more clouds than in previous years. Regulation and CCCFA feature highly on the horizon. Ones we have not for some time are now visible,
Philip Macalister Publisher
Head office and Advertising
Sub-Editors
1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: philip@tmmonline.nz
Publisher
Philip Macalister
Staff writer
Matthew Martin
Contributors
Steve Wright, Paul Watkins, Lee Kerr, Daniel Dunkley and Sally Lindsay
04
TMM 04 • 2021
these include rising interest rates and the state of the housing market. And if that wasn’t enough BNZ has made it harder for advisers with the introduction of debt to income ratios which come through the adviser channel. As we report on page 24 this move has been met with anger from advisers. It’s hard to fathom why the bank took this stand. While Covid-19 has put TMM’s annual conference on hold we are excited to be hitting the road later this month with roadshows in Tauranga, Wellington and Christchurch. Hopefully, we can get into Auckland sometime soon too. These events, assuming we remain in level two, will be limited to 100 people. We are looking forward to catching up with you.
Dawn Adams and Sandra Paterson
Design Samantha Garnier
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TMM is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and ASSET magazine. All contents of TMM are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.
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05
UP FRONT • TMMONLINE.NZ/NEWS
New next for mortgage advisers
Hamilton-based Nest Home Loans is aiming to go national with a series of franchised operations across the country. Founders, Jeff Kerwin and Richard Petersen, say their franchise business model will turn the industry on its head. Nest Home Loans has the potential to provide new competition in a field dominated for years by Mike Pero Mortgages. Although Kerwin doesn’t view Mike Pero as competition. He says the sector has a strong future as mortgage advisers account for an increasing amount of loans originated each year. “I think as time goes by, more and more consumers will turn to mortgage advisers instead of going straight to the bank as their first option.” Kerwin’s aim is for advisers to be able to grow a business that offers a better work/lifestyle balance. 06
TMM 04 • 2021
He says many successful advisers often find themselves working up to 60 hours a week in a room by themselves. “They are unable to get away from their customer’s finance dates and take a holiday, which is a steep price to pay for success.” In order to achieve that Nest has invested heavily in technology, systems and processes, having the right staff in the right areas, and a focus on a great customer experience. Nest have built their own CRM software that is only for use within the Nest Home Loans network. “The CRM software hasn’t been seen by many people, but those who have seen it have said its better than anything they have seen in the market. It is fully workflow driven and is designed to deliver the client and adviser a high quality and replicable experience.”
The CRM is well complimented by a centralised team of admin who drives 80% of the tasks within the CRM and the workflow. The broker only needs to worry about doing their 20% part in the process, and the rest is taken care of by the admin team. Simple things like sending things like email updates to the client is automated through the CRM and admin team. There is a UMI calculator that compares all banks and lenders simultaneously. Under the Nest model advisers have access to a mentoring scheme, and leads are generated through its website and social media platforms. Kerwin says “leads that are handed over from the centralised unit in the past have a 47% settlement ratio.” Franchise owners are also taught how to generate leads at a local level such as farming referral partners and live seminars.
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07
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TMM 04 • 2021
UP FRONT • TMMONLINE.NZ/NEWS
Advisers write nearly half of all ANZ's loans Advisers are getting close to writing 50% of ANZ's new loans. The amount of business advisers send to ANZ continues to grow, but the bank's chief executive warns they are going to be harder to deal with. ANZ said 46% of its new business in the 12 months to September 30 came from advisers. This is up from 42% the previous year and from 40% in 2019. While it is a clear upward trend, chief executive Antonia Watson says she doesn't know if it will hit 50% next year, she told TMM. Watson reiterated earlier comments that "the broker channel is really important to us". She says mortgage advisers are a good source of information for customers who've got questions, and there are plenty of those as lending becomes more and more complex. "We've got some tax changes and we get monetary policy changes and all sorts of things going on, interest rates are going up by the looks of things and certainly have a little bit already.
"We see that particularly in Auckland where it's even more complicated and it's harder to get into a home." She says with changes like the CCCFA the bank will be harder to deal with. "We get harder to deal with as some of these changes come in." Added to that are requirements for 40% deposits, tax rate changes, and affordability assessments changing as interest rates rise. Watson is not a fan of the impending CCCFA changes. "It is going to make it a more onerous process for customers and for our staff to write a home loan because there's just so much more evidence of affordability of suitability that we have to ask for and retain." She describes CCCFA as "unfortunate". "The unfortunate thing is that we were already doing responsible lending. We just now have to do responsible lending with lot more onerous process around it."
While some non-banks think they will have an advantage with the changes, Watson is not so sure. "The non-bank sector still has to comply with the triple CFA and in some ways that might make it harder for them because we've had to put a lot of resource into compliance and under setting of our systems and our control frameworks around them." As for the bank's near $2 billion profit, she says "there's just no question that it's a big number". While people may complain an Australian-owned bank is making such big profits, she says it needs to be put into context. She jokes that even she struggles sometimes calling it millions rather than billions. "We've got $185 billion worth of assets and our shareholders invested $15 billion into New Zealand. So those are types of numbers that you don't see around other parts of corporate New Zealand. "So that's where the big number aligns to, but I can't argue that it's a big number." ✚
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09
UP FRONT • PROPERTY NEWS
Fix-Ups, FOMO & Fresh Tax Rules Sally Lindsay looks at what’s new in property news.
Extension to Healthy Homes sought A 90-day extension on the timeframe for Healthy Homes compliance has been called for by REINZ. From July 1 private landlords have had to ensure their rental properties comply with the Healthy Homes Standards within 90 days of any new or renewed tenancy. REINZ says while many of the properties its members manage are compliant, others have been unable to complete their Healthy Homes compliance checks or work orders because of the extended alert level 3 and 4 lockdown period in Auckland and alert levels 2 and 3 in other regions. “This is particularly impacting those who had planned upgrades, as well as those who have renewed or entered new tenancies,” says Joanne Rae
REINZ, property management head. REINZ has requested the 90-days Healthy Homes compliance timeframe be extended by three months to December 29 to enable landlords and property managers to complete the necessary works. “This means properties that were required to be compliant with Healthy Homes on or before December 28, would now receive additional time to ensure compliance. This request does not have the intention of bringing forward a Healthy Homes compliance due date, rather to keep landlords on the right side of the law,” Rae says. “We have actively encouraged members to work with their clients/ landlords to ensure that all Healthy Homes Standards are met in advance of the final timeline.
“However, we have received significant feedback from property managers that Covid and the various lockdown levels have impacted implementation.” She says there is widespread concern that, despite their best efforts, many landlords and property managers are simply unable to comply because of physical restrictions to personal movement, supply chain issues and the need to postpone or reschedule booked work orders with qualified tradespeople. “Considering these restrictions, we have requested the extension to allow for the delays and enable landlords and property managers to undertake the necessary works and ensure their rental properties meet the correct standards.”
FOMO haunts property buyers Fear of missing out (FOMO) is rising in the residential property market. The latest Tony Alexander and REINZ survey of real estate agents show FOMO remaining at the higher level registered just after the nationwide lockdown started on 18 August. The gross proportion of agents who replied to the survey say they see buyers’ FOMO increasing. It has risen from 66% in July to 71% in August and 72% at the end of September. Alexander says the FOMO gauge shows conditions in the market nationwide were weakest over the April
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— May period immediately following the shock Government announcement on tax changes. “Since then FOMO has recovered, but has yet to regain the levels seen before March 23.” Meanwhile, Investors continue to back away from making fresh purchases of existing properties, while the level of enquiry from offshore remains weak. Measures of investor buyers in the market were easing ahead of 23 March, deteriorated further after the tax announcement, and have only marginally improved from the lows of April through May.
This month a net 33% of real estate agents nationwide have reported seeing fewer investors looking to make a purchase. “Given the government’s explicitly stated goal of discouraging investors from purchasing existing properties and given that most listings are for existing properties rather than new ones, the government can claim success,” says Alexander. “Where they cannot however claim much success is in suppressing the pace of growth in average house prices by much.”
New tax rules touch every area of property investment Although the Government has outlined details on how the new legislation on the phasing out of property investors’ interest deductions will work, the bill also has other effects for property investors. The Government is limiting the ability to deduct interest to make residential properties a less attractive investment option. The Property Council says the changes confirm the Government’s lack of ambition in dealing with the housing and rental crisis. Chief executive Leonie Freeman says while the exemption for new builds is welcomed, it will not incentivise one extra home to be built for a deserving Kiwi family. The Property Council has been
advocating for build-to-rent in New Zealand as a solution to some of the housing woes, and Freeman says it is disappointing the Government hasn’t looked to incentivise a “truly gamechanging asset class” which would see more options for Kiwi renters. “Build-to-rent is flourishing in other comparable countries like Australia and the United Kingdom but the tax legislation does nothing to seize this opportunity for better rental accommodation in New Zealand. Ultimately, this means less supply for Kiwi families.” The Property Council asked the Government requested build-to-rent developments be specifically exempt from the interest deductibility proposal
to encourage this new asset class. “These changes will do nothing to unleash build-to-rent’s potential, sidelining what could have been a potential gamechanger for the local rental market,” says Freeman. “Finance Minister Grant Robertson is right when he says ‘tax is neither the cause nor the solution to the housing problem’. “Our question is, why is it the only lever the Government seems willing to pull? “You cannot tax your way out of the problem. For us to be innovative about solutions the Government has to work with the men and women across the industry who are fighting to increase the options for Kiwis in dire need of better housing,” says Freeman. ✚
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011
UP FRONT • REGULATION
Advisers not looking forward to CCCFA Matthew Martin talks to mortgage advisers to about their concerns of the changes to the Credit Contracts and Consumer Finance Act (CCCFA). BY MATTHEW MARTIN
A
tsunami of new legislation and regulation has charged across the financial advice landscape recently but mortgage and lending advisers say the biggest waves are being caused by changes to the Credit Contracts and Consumer Finance Act (CCCFA). The full force of the CCCFA changes came into effect on December 1 and see lenders being required to place more scrutiny than ever on borrower affordability and to adopt stricter affordability criteria. This legislation requires lenders to be certain the borrower fully understands what they are signing up to and they must estimate borrowers' income and expenses, and verify those expenses, to ensure borrowers can afford repayments. However, mortgage brokers spoken to by TMM say the changes are virtually
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unworkable, that all the banks have interpreted the legislation differently and consumers will be forced into taking out higher interest non-bank loans. MinterEllisonRuddWatts partner Kate Lane said the CCCFA changes will "set a baseline as to what analysis lenders must do in relation to suitability and affordability". "As the regulations basically take a one-size-fits-all approach, potential borrowers who are non-standard might find that they fall in the too-hard basket for some lenders given the detailed verification work required on income and expense information." Lane said the regulation will prescribe that expense information is verified against reliable evidence, a process likely to be "very time consuming". And, according to Squirrel managing director John Bolton, she was right
with Bolton saying it's even worse than predicted. "The problem is that the CCCFA is a very good piece of legislation for managing at-risk borrowers and protecting them from these loan trucks rolling around and backhand finance from dodgy loan operations, but it's not good at all for the sale of property." He says the legislation is like hitting a nail with a sledgehammer and is pushing a ton of bureaucracy onto banks and therefore onto brokers. "We now have a whole heap of compliance bureaucracy and the added costs that will wash through to the mortgage market and produce a lot of unintended consequences." Bolton says government consultation and the resulting feedback on legislation like the CCCFA often falls on deaf ears.
"We don't have a good process of feeding back into these regulation changes. Even the banks don't push back on this stuff, they are very conservative." He says the banks have been doing a perfectly good job managing loans and were already responsible lenders, but the CCCFA has overstepped the mark in terms of regulation and "...it's a pain in the bum from a paperwork perspective - we have to know more about a client's finances than their partners". "New Zealanders are a pretty compliant bunch and often this generates the wrong outcomes...it's going to have a series of unintended consequences that will push back on to homeowners and brokers." He says if the banks won't approve a home loan the onus will then be on nonbank lenders who charge higher interest rates creating extra costs for borrowers. And if the legislation is wrongly interpreted "the consequences are absolutely ginormous". Compliance Refinery chief executive Steven Burgess said he's been dealing with some mortgage advisers who are saying not only do they have to deal with the regulators but the large banks and loan aggregators have been putting the pressure on too. "So, you can also lose your autonomy to these big players - some even mandate CRM usage - and they have significant influence in the market. "The banks don't necessarily want to deal with the smaller businesses and want you to be going through an aggregator and work with the standards they want to put in place." He says for those advisers who dabble in the market that their time could be up. "In the governance space, it's not worthwhile to have a small product
line - it's expensive and is not economic anymore - so they need to make some hard decisions - however, this can be healthy for a business in terms of what they want to focus on." He said the banks have already changed the way they deal with distribution agreements and lenders have had to quickly adapt to those changes. "And when change happens people have different reactions to it...there was a lot of doom and gloom when the new FAP regime came in but there are more advisers than ever before and a lot of them are younger and more diverse. "In terms of mortgage advisers, there are some that the CCCFA is going to impact them more moving forward such as what products they can sell and who they provide services to in different parts of the market." The Mortgage Lab chief executive Rupert Gough says the CCCFA has got the banks in a spin about how they interpret the rules and each one has a slightly different response to them. Gough says while legislation that protects consumers can only be a good thing and the intent of the law is sound, its implementation has been a "...bit of a nightmare". "We don't always know which bank we go to first, so we have to meet all the criteria for all banks, which has been quite frustrating. "The risk groups in each bank have their own mandates and tolerances and it would be good if they could share their thoughts with each other and make it more uniform, but we are in stage one so it's not surprising we are going through this," Gough says. He says he feels sorry for the one-manband operators who are trying to keep up with all the changes and that the days of the sole operator are numbered.
‘The problem is that the CCCFA is a very good piece of legislation for managing at-risk borrowers and protecting them from these loan trucks rolling around and backhand finance from dodgy loan operations, but it's not good at all for the sale of property’ John Bolton "I do wonder what the market will look like in even three months time and, on the whole, I don't think New Zealanders are ready for this especially if there is a sudden loss of their ability to get finance. "I don't think I've ever seen a time when there have been so many bank and regulation changes, plus the CCCFA you wouldn't even recognise it from six months ago." ✚
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013
FEATURES • SPONSORED CONTENT
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ncreasingly, leading non-banks like Pepper Money are building systems designed on the basic understanding, that technology is ever-evolving and that tomorrow, what was the norm today, may need replacement or an upgrade. They are flexible, nimble, more able to adapt quickly and launch new solutions to meet the rapidly evolving needs of clients, and advisers. National Sales Manager, Michelle Sargeant says Pepper Money is committed to creating platforms that are designed with financial advisers and their client’s needs in mind. “We want to create an experience that is as effortless and frictionless as possible and are determined to minimise the administrative work involved in complying with industry regulations. We want financial advisers to focus on what they do best - finding financial solutions for families, and in the case of Pepper Money’s alternative lending products, offering mortgages to Kiwis who don’t fit the criteria of the main lenders.” With the changing lending landscape and economic impacts of the global pandemic, Ms Sargeant says chances are many clients that have never needed to consider an alternative lender in the past are now finding themselves needing a specialist solution. “More and more borrowers need a little bit of personal
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attention to fully understand their situation. Non-banks like Pepper Money provide that,” says Ms Sargeant. Making life easier for advisers is an important part of what sets Pepper Money apart. Ms Sargeant adds: “So we developed the Pepper Product Selector (PPS) – an innovative online tool, that lets brokers assess borrowing capacity and see indicative home loan rates quickly and easily. In less than five minutes the tool can locate the right Pepper product, by simply answering a few quick questions about the client.” The Pepper Money Product Selector can assist in removing some common roadblocks and provides the financial adviser and their customer with more certainty. Within five minutes, the tool does a comprehensive credit check, borrowing power calculation, and puts all the information through an algorithm decision engine to identify a Pepper Money home loan product, interest rate, and fees. This solution also comes in the form of an indicative offer which can be submitted with the application, shared with the client, and used as the adviser’s record of the customer’s requirements. The Pepper Product Selector allows financial advisers to demonstrate their value as a trusted source for their customers. Not only can they give their customers the confidence of the
rate available to them along with the maximum LVR, fees, and loan amount on offer against the security, but they can have deeper conversations with their clients about their goals. According to Ms Sargeant, conversations like what they are looking to achieve, if they are thinking of growing their family, what the next 5 plus years look like - so that they can ensure the solution they put forward supports the customer into future, and they are catered for on all parts of that journey. “Financial advisers have found that this holistic approach and having the loan information upfront has assisted clients in feeling more comfortable with the transparency and certainty provided in the process.”
How can financial advisers help their clients with Pepper Product Selector? “At Pepper Money, we believe that clients should never be in a position where they do not understand their financing options, regardless of their circumstances. That is why the Product Selector was created - to help financial advisers source the best-fit Pepper Money home loan solution for their clients, the first time,” says Ms Sargeant. s Sargeant explains the three key steps to providing a home loan option through Pepper Product Selector:
to get the loan they need to achieve their goals. The client interview is the ideal opportunity for a financial adviser to uncover their story, and better understand their needs and goals, now and in the future.
‘Financial advisers have found that this holistic approach and having the loan information upfront has assisted clients in feeling more comfortable with the transparency and certainty provided in the process.’ Michelle Sargeant Step one. Exploring the client’s financial needs Whether they have an adverse credit history or non-standard income – Pepper Money knows real life happens, and sometimes a client's individual circumstance can impact their ability
Step two. Finding a loan option Once the adviser has addressed the key parts of their research, they can move on to finding potential loan solutions. With the client’s written consent, Pepper Product Selector can quickly and easily help the adviser understand if a Pepper Money loan is a good fit. It follows Pepper Money’s Credit Cascading Model, which provides three Pepper Money solutions (Prime, Near Prime, or Specialist) with a high probability of conversion – removing many typical roadblocks experienced in standard submissions. Once the adviser has accepted the T&Cs, Pepper Product Selector automatically requests a copy of the client’s credit record from the Bureau. This leaves an enquiry on the client’s credit file but will not adversely impact their credit score. It then combines this with some simple information about the client and returns an indicative Pepper Money home loan solution - including information on whether the client can afford the loan. Step three. Presenting a Pepper Money home loan When advisers have confirmed that the client’s scenario passes serviceability
and are comfortable that the solution will provide a benefit to the borrower, they can present the Pepper Money loan option to the client. When positioning a non-bank loan option, advisers need to work with the client to help them understand why they are not eligible for a loan from a traditional lender at this time. This includes clearly outlining how the product meets their needs and what their financial obligations will be. It helps to put this information into context for the client by showing repayments based on their pay cycle and showing that they can afford the loan. Once the adviser has shown them how this solution can help put them on the path to achieving their long-term goals, they simply need to confirm whether the client is happy to proceed with the proposed solution and submit an application when ready. “Since launch, we’ve optimised Pepper Product Selector and consulted with advisers who regularly use the tool to meet their expectations. We will continue to do this as well as evolve and listen to the market to understand the industry-wide pain points that financial advisers face in their interactions. This continued investment in technology will give borrowers a seamless, effortless experience and it will help set financial advisers up for the future,” she concluded. ✚
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015
FEATURES • HOUSING COMMENTARY
Rising house prices show no sign of stopping
H
ouse prices are rising, even as lockdown levels continue to restrict the entire country and listings drop. QV’s latest House Price Index shows the average value of houses increased 3.6% nationally over the past threemonth period to the end of September, up slightly from the 3.3% quarterly growth in August. The national average value now sits at $977,456. This represents an increase of 26.3% year-on-year, down a fraction from 26.6% in August. QV general manager David Nagel says he regards this as an aberration. In the previous three months there had been a reducing rate of growth. Nine of the 16 urban areas QV monitors have shown a slight rebound. Queenstown values rose at a significant 9.4%. In the Auckland region, the average value now sits at $1.391 million, rising 3.3% over the past three-month period, with annual growth of 23.9% dropping slightly from August’s year-on-year growth of 24%. The strongest value gains for the main cities over the past three months have come from Queenstown Lakes District at 9.4% growth in value, well up from 2.9% value growth last month, followed by Christchurch at 7.7% growth, building further on the strong growth of 5.8% in August.
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BY SALLY LINDSAY None of the major urban areas QV monitors have seen a decline in average value, but Rotorua continues to slow at 0.8% compared to its rolling threemonthly growth rate of 1.9% in August. Central New Zealand continues to show the strongest annual rate of value growth, with three of the four fastest growing regions all in the lower North Island. Values in the ManawatuWhanganui region have grown 35% in the past year, while Hawke’s Bay and greater Wellington regions have experienced annual growth of 33.2% and 32.3% respectively. West Coast has the strongest annual rate of growth in the South Island at 32%. The three lowest annual growth rates are all in the South Island, with the Southland region experiencing a still-significant 20.3% increase, the Tasman region showing 22.3% and Otago at 23.3% annual growth.
Big step up in mortgage interest rates predicted Mortgage interest rates could be pushing 4% by the end of next year on one and two year rates and 4.5% into 2023, says CoreLogic. These rates are still low by past standards, but a large proportional increase from existing levels. The major trading banks have already started increasing interest rates since the
Reserve Bank’s lifting of the official cash rate (OCR) this week by 0.25% to 0.50% and a clear indication it would have been increased in mid-August had it not been for Covid lockdowns. ANZ, the country’s largest bank, will increase its floating and flexi home loans by 0.15% from October 12 or new loans and from October 26 for existing loans. Kiwibank says will pass on the full 0.25% OCR increase to mortgage borrowers, although it has pointed out its rates are still below other major banks. The ASB says it will hold rates. CoreLogic senior economist Kelvin Davidson says higher mortgage rates clearly mean borrowers are going to have to divert more money towards paying their mortgage, and some may not be able to access as much home finance as before,” says Davidson. “There is already the sense some property deals have started to get a little stuck, with buyers just pulling back a little but vendors not budging on the asking/reserve price,” he says.
Rents remain at all-time highs despite lockdown Rents nationally remained at an all-time high of $550 a week in August despite the country entering a nationwide lockdown. Trade Me’s latest Rental Price Index shows the national median weekly rent
What’s driving house prices? matched the record high first seen in July and rose 8% on the same time last year. Records were broken in Southland ($395), Waikato ($500), Bay of Plenty ($560), and Canterbury ($490). The median weekly rent in the Wellington region was $600 in August, up 9% year-on-year. This is only the second time rents have reached the $600 bracket after reaching an alltime high of $615 in January. Demand for rentals in the Wellington region was down by 25% last month when compared with the same month last year, while supply was down by 16%. In the Auckland region, the median weekly rent in August remained at $595 for the second month in a row. “This marks a 4% increase on the same month last year. Auckland City’s median weekly rent was $570. The most expensive districts in the region were North Shore City ($630), and Papakura ($620) and Manukau ($605). Trade Me property sales director Gavin Lloyd prices were expected to slow considering tenants and landlords were stuck at home for most of the month. Instead, the rental market charged on. Every region in the country had an annual increase in rent. However, there was an 18% drop in the number of properties listed on Trade Me for rent across the country when compared with the same month last year. Southland was the only region to flout this, with a 10% increase in supply when compared with the same month last year. National demand also dropped by 16% year-on-year in August, mirroring what has happened in past lockdowns. There were some exceptions. Marlborough (11%), Bay of Plenty (4%), Canterbury (3%), and Manawatu/Whanganui (2%) had increases in demand last month when compared with August last year.
Growth in house prices to fall significantly next year House price inflation is expected to fall back to single-digit levels next year. ASB says higher mortgage rates will be a gamechanger but most of their impact will not be felt until next year. Chief economist Nick Tuffley says two of the biggest supports for house prices of the past two years will flip into restraints. “First, the rise in mortgage interest rates has begun and, in time, will tilt momentum. About three quarters of mortgages nationwide are due to refix over the coming 12 months and the
Reserve Bank clearly doesn’t want the mortgage curve to droop.” A change in the supply picture will also remove some of the support for house price increases next year. The combination of slowing population growth due to the closed border and the recent frenzied pace of residential construction should, finally, put paid to the supply air pocket that’s been a feature of the market this year. In Tuffley’s view, 2022 will be the year these shifting dynamics are reflected in a slower rate of house price inflation. “This is ultimately a good news story to the extent the long-running housing shortage is materially reduced.”
Areas where it is cheaper to buy than rent dwindling There are still several areas of New Zealand where paying a mortgage cheaper than renting, but a lot fewer than a year ago. Lower Hutt, Tauranga, and Tasman are some examples of areas where paying a mortgage has switched from being lower than rent a year ago to more expensive now, the latest CoreLogic research shows. CoreLogic has taken the median price in each area and assumed buyers have a 20% deposit, servicing that debt over 30 years at a current 2.8% mortgage rate. It has then compared those fortnightly repayments to the median rent in each area. As things stand, it’s still cheaper to buy than rent in 42 parts of New Zealand. For example, in Rotorua, the fortnightly difference between paying a mortgage versus rent is about $206 lower. However, a year ago it was only a small handful of the most expensive parts of New Zealand where a buyer would pay more on the mortgage than rent – e.g. Thames Coromandel, Wellington, Queenstown, and Auckland, he says. The national difference a year ago was -$138 (i.e. cheaper to pay mortgage than rent). But as values have boomed across the country and the buy-rent margin has switched from negative to positive in more areas, the national figure is now +$22. It’s no surprise to see that many of these areas have been at the forefront of the upswing over the past year. In Porirua, for example, whereas a year ago there might have been savings of about $220 per fortnight on offer to a buyer if they owned rather than rented, that figure has now tipped the other way and buying is about $90 more per fortnight. ✚
UP OCR
The Reserve Bank has increased the OCR by 0.25% to .0.50 and indicated it will lift gradually until it hits 2% in 2023.
•
RENTS
Stats NZ stock measure shows rents were up by 0.2% in September, compared to August and by 3.2% year-on-year.
• INTEREST RATES
With the lifting of the OCR, ANZ, the country’s largest bank, increased its floating and flexi home loans by 0.15% from October 12 on new loans and from October 26 for existing loans. Kiwibank has passed on the full 0.25% OCR increase to mortgage borrowers, although it has pointed out its rates are still below other major banks. The ASB as held rates.
•
IMMIGRATION
The Government has opened up a new fast-tracked one-off simplified residency pathway through its 2021 resident visa, and an estimated 165,000 migrants are eligible for it. Applications have been opened up to migrants on most temporary work visas between December last year and July this year. Critical workers who crossed the border before the end of July are also eligible.
•
MORTGAGE APPROVALS
RBNZ data shows total new mortgage lending to investors was down in August to $1.379 billion and substantially down from the high in March of $2.325 billion. In August a year ago investor mortgage lending was $1.452 billion. Mortgages for first home buyers slumped to $1.391 billion down from $1.605 billion in July. New mortgage commitments were down to other owner occupiers at $5.309 billion compared to $5.655 in July.
•
BUILDING CONSENTS
Residential building consent numbers continue to break records. Statistics New Zealand figures show 4,490 new dwellings were consented in August. This is an all-time high for any month during a year - up 42% on the same month last year. The number of new dwellings consented in the year to August was at a record 46,453, up 24% in the 12 months from August last year.
SLOWING REINZ HOUSE PRICES
Although median residential house prices nationwide were up 15.4% to $795,000 in September compared to $689,000 a year ago, the gain was 6.5% down on the month of August. The REINZ House Price Index reached a new national high of 4,088.
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Mortgage Advisers Tell It Like It Is There’s a strong future for mortgage advisers, but clouds on the horizon and a few irksome issues are keeping them awake at night.
D
ealing with banks is going to be difficult, dealing with bureaucracy even worse - but on the bright side it is a growing industry, populated by enterprising people. These were the latest findings from TMM’s annual survey of mortgage advisers. The survey threw up a wide range of information about advisers: they were predominantly veterans, with more than half of them having been in the business for at least 10 years. Another 25% had between five and 10 years’ experience. Interestingly, and perhaps worryingly, there were not a lot of new-to-industry advisers nor respondents with less than two years’ experience.
BY ERIC FRYKBERG This may be due in part to new adviser regulations which came into effect on March 15. The Financial Services Legislation Amendment Act has raised the bar for entering the industry – and having Auckland, the largest market, in lockdown for more than 100 days was hardly conducive to bringing new advisers into the fold. The survey results were largely reflective of the make-up of the advice industry: TMM estimates there are between 1800 and 2000 practising mortgage advisers. New Zealand Financial Services Group, which includes Loan Plan and Kepa, has a combined membership of around
1000 advisers. Around 50% of survey responses came from “The G”, as the group is known. One of the changes from the previous survey was that SHARE/Newpark was now the second largest group, with around 250 advisers. The other key change was the emergence of Kiwi Adviser Network, with 125 advisers. That puts it on par with the likes of Astute, Mortgage Link, and Mike Pero Mortgages, who all have similar numbers. TMM expects that to change again next year when another group makes a push into the mortgage-adviser market in the first quarter of 2022.
How many years have you been a mortgage adviser? New to the industry 3%
Less than two years 8%
Two to five years 20%
Five to 10 25%
More than 10 years 43%
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e future, Thinking about th vice? k for mortgage ad oo tl ou ur yo is t wha Not sure 5%
Looking to the future One of the survey questions this year aimed to gauge the outlook for the future. While there was plenty of optimism, with 17% going as far as to say the future was “bloody brilliant”, just on 61% said the outlook for the industry was “good, but there are a few clouds on the horizon”. To understand what the clouds were, advisers were given a list of eight issues and asked to rank them: from what keeps them awake at night through to not being an issue. In previous surveys, the biggest bugbear was always turnaround times from banks. That issue has still not been resolved, however this year it came in second. Regulation was the issue most likely to keep advisers tossing and turning between the bedsheets. Their comments were often quite forceful: “It's going to be a bit rocky soon until all settles (hopefully), once the CCCFA beds in. It's definitely going to harder and more time-consuming regardless,” said one adviser. Another spoke of the big picture being ignored while time was taken up dotting i's and crossing t's. A third respondent was even more blunt: “I believe the industry is heading
Not too flash 20%
towards extremely tough times…. the compliance and regulation regime has been a complete balls-up, and is not creating any better outcomes for clients and advisers.” But one adviser saw a silver lining around the cloud of rules and regulations: “More and more people are going to use a broker due to the minefield of policy restrictions.” This view was echoed by another industry professional: “Clients need help to navigate the tough times so be prepared to help any way you can!” Those with a positive outlook argued that the new rules were so complex only advisers could understand them, not the general public, meaning the industry was heading for a better future, not a worse one. Listed numerically (see table), the looming regulatory burden was by far the issue most likely to cause sleepless nights, with more than 52% of advisers putting this at the top of the list. Turnaround times were the next biggest headache - and preparing for full licensing and getting applications approved came in third. High house prices were of some concern to a lot of advisers, succession planning was mildly concerning, while
Keeps me awake
Good, but a few clouds 60%
Bloody brilliant 20%
‘Regulation was the issue most likely to keep advisers tossing and turning between the bedsheets’ the prospect of working remotely was barely a problem. In one interesting development, almost two thirds of respondents worked under their dealer group's Financial Advice Provider, or FAP. Slightly less than a third were their own FAPs. However, it appeared advisers with their own FAPs were slow to apply for full validation: The Financial Markets Authority (FMA) has set firm cut-off dates for businesses wanting to apply for a full licence. Those applying for Class 1 or Class 2 licences have until September 30, 2022, to put their application in, while those applying for a Class 3 licence have until June 30, 2022. All financial advice provider (FAP) transitional licences expire on March 16, 2023. By getting applications in before the relevant target date, applicants give themselves the best chance of ensuring the full licences are processed before their transitional licences expire.
It is of some concern
Midly concerning
Not an issue
Regulatory changes
53%
35%
11%
1%
Turnaround times
35%
50%
13%
2%
Getting applications approved
21%
41%
26%
11%
Preparing for full licensing
18%
24%
25%
32%
House prices
16%
53%
26%
5%
Succession planning
8%
21%
30%
41%
Finding new clients
5%
17%
29%
49%
Working remotely
2%
8%
15% WWW.TMMONLINE.NZ
75% 019
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Who is the favorite lender? ANZ, the biggest lender in the market, also cemented its spot as the preferred big bank, a spot it held last year. This year 50% of advisers named it as their most preferred big bank. At the other end of the scale, BNZ scored poorly, dropping from 7.66% support to just over 4%. This comes on the back of its recent decision to introduce debt-to-income limits on all loan applications received through the third-party channel. Many advisers commented on BNZ’s processes, asking whether it really wanted to work with the broker channel. The big mover in an upwards direction was Westpac, which has gone from 18.77% of advisers naming it as its most preferred big bank to more than 27%. Meanwhile ASB lost ground with advisers in the past year. The comments section of this part of the survey was interesting. One adviser picked BNZ as her least favourite bank, saying it was cumbersome to work with. Another said ANZ had good turnaround times, while Westpac had good communication. But yet another commented that all banks had their idiosyncrasies, and that he had no preference: “horses for courses”. Two of the small banks stood out against their peers. SBS retained its
Which is your preferred big bank?
Which is your preferred small bank?
ANZ 1st
SBS 1st
ASB 2nd
The Co-operative 2nd
Westpac 3rd
TSB 3rd
BNZ 4th
Kiwibank 4th HSBC 5th
number-one spot, followed closely by The Co-operative Bank. Both saw their support rise since the previous survey. TSB plummeted, with advisers dropping from 27% to 18% support, while Kiwibank sat unchanged in fourth place. A new question asked respondents to rate the main non-bank lenders.
Avanti came out on top, ahead of AIA/ Sovereign (even though this is an ASB product, it is categorised as non-bank.) Bluestone/Select came out in third place. Arguably helping its ranking was the fact that Select is Bluestone’s white label product, exclusive to NZFSG, and that this group comprises around half the market.
Lending People Opportunities We’re looking for a new Senior Mortgage Adviser. We’re in the business of backing people to create brighter futures. That could include yours. Do you have: • Considerable experience in home loan lending and/or brokering? • Cert 5? • Established industry relationships? • A relevant tertiary degree or qualification? • A solid understanding of systems in the Fintech space? Yes? Then read on…
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Think we could be a good fit? Send your CV through to Richard — richard@lendingpeople.co.nz
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TMM 04 • 2021
Asset Finance is now Xceda Finance We’re still the same friendly and helpful team. For 25 years Xceda Finance has been offering investment and lending products to New Zealanders. First mortgages UP TO
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*All loan applications subject to Xceda’s credit policy and responsible lending guidelines. Xceda Finance Limited is a Non-Bank Deposit Taker regulated by the Reserve Bank of New Zealand licensed under the Non-Bank Deposit Takers Act 2013. Xceda Finance Limited WWW.TMMONLINE.NZ 021 is the issuer of the term deposits. Our latest Product Disclosure Statement (PDS) is available at: www.xceda.co.nz/investments. The creditworthiness of Xceda Finance Limited has been rated as ‘B Stable’ by Equifax Australia Credit Rating Pty Ltd, a ratings agency approved by the Reserve Bank under section 86 of the Non-bank Deposit Takers Act 2013.
LEAD Cressida Capita 1%
Avanti 37% AIA/Sovereign 33%
Pepper 1% Liberty 3%
Bluestone/Selec 20% Resimac 6%
NZ Home Loans 7%
The big winners The big winners were advisers themselves, along with non-bank lenders. Just on 76% of respondents reported that the volume of loans settled in the 12 months to September was higher than in the previous year. Only 17% had seen a decrease. Broken down further, the survey found a third of brokers settled at least 25% more loans than in the previous year, while around a quarter settled 15% to 25% more. Less than 6% experienced no change; 13% settled fewer loans. An interesting finding was that there had been no significant increase in the use of trail commission. Trail commission is one way advisers can turn their business into saleable assets. A handful of advisers commented that they were trying to reach a 100% trail model. Sixty-eight percent said trail commission represented between 0-25% of their income; this figure was nearly identical to last year. The number who said trail accounted for 25-50% of their income increased just 1% to 20.55%. Two advisers said trail provided all their income, while 4% at the other end of the scale said they were paid no trail commission. The survey provided good news about the future for non-bank lenders. More than two-thirds of brokers predicted
‘More and more people are going to use a broker due to the minefield of policy restrictions’ – survey respondent
What percentage of your income is trail commission?
FMT 7%
Basecorp 11%
they would be doing more business with non-bank lenders in the next year; 20% thought non-bank lending would stay the same; and less that 1% thought it would shrink. In other respects, there was less change. A majority of brokers thought they would not be offering a wider range of lending products this year. An analysis of the comments suggested this was because many were already doing things like life insurance or KiwiSaver, either directly or through referrals. And of those who thought there would be more offerings launched in future, there was no real stand-out product. Of the 40% who added new products, the biggest addition was small-business lending with the likes of Prospa. Finally, 48% percent of advisers said they were members of Financial Advice NZ, compared to 49% last year, while 43% were not. There reminder were undecided. The last section of the survey gave respondents the chance to comment on the state of the industry in general. This opened up the floodgates to more complaints about growing bureaucratic regulation. Advisers were becoming “glorified bankers”, the job was “getting tougher by the day”, and “commissions don't reflect the workload of compliance”. One broker said the job was “not for the faint hearted”. Another called it “challenging and stressful”, while another was “drowning in paperwork”.
Over the next 12 months, what amount of business will go to non-banks compared to last year? Increase 67% Decrease 0.5% Stay the same 19% Not sure 13%
However, another thought the new rules would “weed out more cowboys from the industry”, and a third said it was a “great industry to be in”. There were some clear themes the industry needed to work on: • Dealer groups needed to better support their members, with CRMs coming in for criticism • Commission levels emerged as a new theme: many felt remuneration should be increased because of all the extra paperwork required to get a deal across the line • Bank clawbacks were seen as a growing area of conflict • Advisers wanted better advocacy for the industry, especially with Government and the banks wielding too much power over the sector Just as clear, though, were the silver linings. One respondent suggested the new regime made advisers more essential than ever: “It is crucial for first home buyers to get our help, because otherwise they will never know if they are being offered the right products or rates.” And to sum up life as a mortgage adviser, this final comment: “It’s bloody tough, but I love it.” ✚
Additional reporting by Philip Macalister.
100% 1% 50-75% 4% 25-50% 18% 0-25% 69% No trail 5% Don't know 3%
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FEATURES • ADVISER REACTION
Advisers take aim at BNZ DTIs Criticism has been pouring in after the BNZ announced new restrictions on borrowing through the broker channel.
T
he bank is limiting the amount of money people can borrow under a debt to income ratio (DTI) setting it at six times the borrower’s income. It is making these changes to brokerarranged mortgages initially, but is looking at extending the policy to 'walk in' mortgages as well. The move has led to anger from a number of mortgage advisers, who say it is unfair. Meanwhile other banks appear to be keeping their powder dry, pending any move from the Reserve Bank. Westpac acting chief executive Simon Power says the bank has no plans to follow BNZ. The bank says “currently we don’t directly use DTI ratios in our affordability measurement across mortgage applications.” “However, we do calculate DTI to monitor overall trends and concentrations in our portfolio. This lets us adjust other components of our affordability measurement to limit our exposure to very high DTI levels and meet our responsible lending obligations to customers.” ANZ appeared to be waiting for the Reserve Bank to act. “We’re happy to work in with the regulations and expectations of the RBNZ, noting that all that’s currently proposed is that debt to income will be part of the regulator’s toolkit.” ASB says it already uses DTI. “In certain lending situations, particularly in the current low interest environment, we think it is prudent to consider debtto-income.”
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BY ERIC FRYKBERG Kiwibank simply says it is a responsible lender and takes its obligations seriously. “To ensure borrowers can meet their obligations, we use serviceability calculators which includes income and expenses.” BNZ has explained its move by saying it took its obligations seriously and was looking at the overall level of debt its customers take on to ensure they are in a secure position with rising interest rates. However, a number of brokers have shown little patience with the bank's views. The BNZ was “trying to crush Kiwis buying rentals,” according to Mike Whittaker of Auckland. “How dare New Zealander’s get rich when they work hard ….. this behaviour does not create great outcomes for New Zealanders,” Whittaker wrote. There was further criticism from Jason Hurdle of the Lower Hutt firm, Beyond Mortgages. “DTIs are a very blunt tool and with every mortgage application there are loads of mitigants that apply to the individual deal,” he wrote. An Auckland broker, Stephen Wilton, said DTIs made no sense when applied to rental properties. “Clients trying to get ahead and assist the housing shortage by purchasing new houses as investments are now being told they can't – not sure how that helps.” Another broker, Jeff Royle, said the BNZ appeared to be punishing enterprise. “BNZ looked at the broker channel and found that more applications were of the nature they were 'concerned' about,” Royle wrote.
“Really? You mean a broker that goes into bat for a client and really pushes the boundaries.” In response to these matters, the BNZ reiterated its view that it supports moves to make the housing market more sustainable and accessible....and a standalone DTI assessment is one of the tools it uses. The bank says it has always taken a customer’s existing debts into account, alongside income and expenses, but the DTI test is an additional step to provide more safety and security for borrowers. The BNZ move has been described as a case of beating the Reserve Bank to the punch by Loan Market adviser Bruce Patten. He says BNZ is trying to set the multiple of six as a kind of going rate, in the hope that it becomes the generally accepted figure. The alternative would have been to do nothing and wait for the Reserve Bank to move, and perhaps be stuck with a lower number such as five. The RBNZ has meanwhile reiterated its concerns while still taking no concrete steps. “While Loan-to-value ratio (LVR) restrictions have been the main tool we have used to address housing risks, we will soon consult on the merits of implementing debt servicing restrictions to lean against these risks, the bank said in its November financial stability report. “Meanwhile, we expect banks to be more cautious about high debt-toincome loans given the risks of rising interest rates and to the economic outlook.” ✚
FEATURES • CCCFA
New affordability and suitability regulations Lee Kerr of Sanderson Weir looks at the incoming regulation and the effects that will be felt by advisers.
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A
dvisers will have already noticed that lenders are asking them to make increased inquiry into their clients’ financial positions and the reasons behind their application for finance. This is being driven by new CCCFA regulations coming into force on December 1, 2021. These include minimum standards of inquiry to ensure any new consumer loan is both affordable and suitable for the borrower. The new regulations will be implemented alongside amendments to the Act and a revised Responsible Lending Code. Affordability and suitability assessments are nothing new. However, the new regulations mandate specific inquiries a lender must make and how the resulting information is assessed, verified and tested.
Consequence for advisers The consumer finance law amendments do not directly subject advisers to increased obligations or liability and lenders remain responsible for ensuring compliance with their responsible lending obligations. They are, however, likely to be reviewing existing adviser mandates – do not be surprised if lenders strengthen advisers’ minimum standards of practice. The new regulations should not intrude into an adviser’s relationship with their clients, and nor should they. Lenders are entitled though, to treat information provided via a broker as if it has come directly from the borrower. In saying this, lenders will likely require brokers to implement and maintain appropriate policies and procedures to make the necessary inquiries on their borrower clients and correctly record this information. The regulations are clear that certain income and expense information must be collected in order for the lender to satisfy its responsible lending obligations. Further inquiries into the borrower’s objectives in seeking finance are also required. It is likely that lenders will vet your application forms to ensure that the required information on a borrower’s objectives, income and expenses are collected in sufficient detail. Insufficient collection of the required information will result in the application being declined, or circuitous requests for more information. To this end, advisers should be communicating with their clients at the earliest opportunity
that relatively intrusive inquiries are now required and that a lender will not proceed without sufficient information about their income and expenses, and their objectives in seeking finance.
Prescriptive inquiries required Firstly, the scope and method of inquiries that are reasonable will be set by the lender based on the individual circumstances; increased inquiry will be required for complex or uncommon agreements, high-cost credit contracts and where the borrower is considered vulnerable. Secondly, the lender is required to keep a record of the suitability and affordability inquiries and their results. Lenders may mandate how advisers record, store and share this information.
Suitability Lenders are now required to make reasonable inquiries into a number of aspects of the borrower’s requirements and objectives. Advisers will already be making inquiry into a number of these; standard aspects like the total amount of finance sought, term and the purpose for which the loan is intended to be used. However, some of the required inquiries may be new to advisers. Lenders are now required to make additional suitability inquiries including: • whether the borrower wants fees and charges under the loan agreement to be financed and accepts the additional costs of financing those (ie interest on those fees) or whether they want to pay these fees and charges upfront • in a refinancing situation; the borrower’s objectives in refinancing and whether the borrower is aware of, and accepts the additional costs that could be charged to the borrower as a result (ie potential break, broker and legal fees, etc).
Affordability As part of its compliance with lender responsibilities lenders must now comply with minimum requirements for the scope and level of inquiry into the borrower’s income and expenses.
Income To estimate a borrower’s likely income a lender (or adviser) must ask the borrower
‘The lender must also obtain at least 90 days of a borrower’s transactional banking records’ about each source of income and then verify that income based on reliable evidence. Alternatively, a lender can estimate income based on recent and reliable information the lender holds about the borrower’s income then get this confirmed by the borrower. In each instance evidence is required – in many cases this involves collecting payslips or invoices. Lenders are then required to ask the borrower about potential changes to income.
Expenses Lenders are required to estimate likely relevant expenses, collecting sufficient detail to minimise the risk of relevant expenses being missed or materially understated. Lenders may soon require advisers to ensure their application forms, policies and procedures are robust enough to correctly collect and record this information. Lenders must ask the borrower about certain relevant expenses including all fixed financial commitments (accommodation costs, insurance, school fees), debt, etc repayments, living expenses (including utilities, food, personal expenses, child care and transport) and regular or frequently recurring expenses that are to remain. The lender must also obtain at least 90 days of a borrower’s transactional banking records. Where the results of the inquiries are in conflict with verification evidence collected the lender may make further inquiry on the borrower or adviser. ✚
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COLUMNS • MY BUSINESS
All about the team Cameron Marcroft joined the industry ‘accidentally’ and has gone from strength to strength. BY DANIEL DUNKLEY
In this edition of My Business we speak to Cameron Marcroft who, back in 2017, was named best new adviser of the year at the PAA Excellence Awards. He runs Marcroft Mortgages under the auspices of Loan Market Central in Remuera and covers the high-end suburbs of Ellerslie, Mt Eden, Meadowbank, Epsom and the surrounding suburbs. Marcroft made the move into the mortgage adviser space in early 2016, but he has been working in the broader industry since the early 2000s and was in sales at NZFSG from 2013 to 2015. What prompted you to go into the mortgage advice sector? It was accidental … I went to the UK to play rugby (semi-professionally) and had to get a job as my rugby career didn’t quite work out. So I got a job with the local building society in the North of England specialising in mortgages. From there I worked for a Kiwi mortgage broker based in London and upon returning to New Zealand, I started working with the National Bank/ANZ in 2003.
How did you learn your trade? Being an assessor in the bank broker unit and my experience as a BDM for NZFSG in third party aggregation.
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Tell us about your business. Why are you passionate about being an adviser? I’ve been trading as a mortgage adviser under Loan Market for just over five years. I have an awesome team of nine support staff who make the business run smoothly for me. Up until recently, I have been the sole adviser but I have just progressed one of my team into being a qualified mortgage adviser with two more doing their papers to become accredited. I’m genuinely passionate about our industry and the role we as advisers play in helping our clients create financial freedom and wealth.
How do you approach business differently from other advisers?
What is the best advice you’ve ever received and the worst?
I’m not sure that we do anything too much different than other advisers, but we do focus a lot on the ongoing management of our clients’ lending by trying to help them reduce their debt as quickly as possible to ultimately give them more equity for future wealth creation. We also have a strong focus on our referral partners, in particular, our valued partnership with Megan Jaffe at Ray White Remuera.
My best advice – Don’t focus on the numbers, focus on the people and the numbers will sort themselves out. Worst advice? If I have received any bad advice I can’t remember what it was as I probably ignored it.
Is there any particular area that you specialise in? Residential lending is our bread and butter but as the database has grown we have naturally diversified into commercial, business and asset lending.
Do you make use of social media and/or new technology in your work? We use Facebook and LinkedIn for our social media platforms and we have a new business manager in the team that runs that for the business. We make sure our online brand presence is constantly updated so we stay relevant to our audience and we are constantly improving the way we do things by using the latest technology to streamline our processes and save time.
What has been the high point of your time in the business? And how about the low point? High point – has been the rapid success of the business. Every year we always seem to smash what we set out to do, which is a testament to my awesome team. Low point – Probably the first six months, that was quite tough with the uncertainty of what lay ahead of me.
Do you have a mentor or someone who is an inspiration to you? Brain Greer, the former CEO of Loan Market has always guided me along the way and I have always valued his opinion. I’ve been blessed with other such influential people in the Loan Market fraternity, like Bruce Patten and I can always lean on my fellow Loan Market CIF peers for advice and good banter. Personally, my late brother who died last year was inspirational for various reasons.
Is there a typical working day for you? What does it look like? The day starts on the phone from about 8am-8.30am, then I’m in the office with back to back meetings all day until about 6pm-6.30pm.
What challenges – both for yourself and for the industry – do you see ahead? I will potentially have a challenge around the capacity to continue growing on the trajectory we are currently on. Finding good people to help with the capacity issue is time-consuming and also involves an investment in capital and training. Challenges for the industry is finding our way through the new regulations.
What are your long-term business goals? What would you like to achieve moving ahead? I’ve got some fairly large milestones mapped out for the business with the continued growth. But just as important as those is building a sound and robust infrastructure that is creating a successful career pathway for all our staff.
What are your personal goals? By creating these career pathways for my staff to step up into advisory roles I’m hoping to be able to carve out a bit more of a work-life balance in my own l ife especially with a new baby due later this year.
Finally, do you have some words of wisdom, or tips, for other advisers? When starting out in this industry make sure you surround yourself with good people that not only develop your knowledge but drive your energy. Don’t be afraid to invest in your business for faster future growth and in the words of an industry icon: “Just keep bloody going!” ✚
From I grew up on a dairy/deer farm in Ngahinapouri in the Waikato. After returning from my OE in Europe I based myself in Auckland from 2003 and I’m still here.
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Family Married to Xenia with two kids and one on the way. Living in Pt Chevalier, Auckland.
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Out of work interests Socialising with friends and family, anything sports-related and most importantly supporting my kids with their weekend sports and hobbies.
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Film/TV show The Crowd Goes Wild.
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Favourite book Brendon McCullum’s autobiography Declared.
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Favourite music No favourite as such it depends on my mood as to what I’m into.
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Motto Tough times don’t last, tough people do.
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COLUMNS • SALES & MARKETING
What do clients really want? Paul Watkins uncovers some of the mystery of SEO and how advisers can better use it to reach potential clients.
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I
’m sure most of you have a small agency looking after your search engine optimisation (SEO), or some of you may be knowledgeable enough to do it yourselves. If you don’t, then no matter how amazing your website is, no one will find or see it. SEO is a bit of an art form. The most critical part of SEO is working out what people are searching for. But researching this for better rankings of the website in Google is not the only reason you would want to know this. It will also tell you precisely what people want to know from you. The more you know what clients really want, the more you can tailor your advertising and promotional activity to meet this demand. A good illustration of the need to do some keyword SEO research is seen in ads for legal or accounting firms. They often shout about the new partners in the firm. Is that a compelling reason to ask for their services? I would be surprised if anyone ever searched for “accounting firms with new partners”. It’s not what clients and prospects care about. We live our lives online now. The pandemic has pushed hundreds of thousands of Kiwis online that would not have otherwise done so. Shopping online, be it for click-and-collect, or delivery has exploded, and many Kiwis now see no need to return to some of the bricks and mortar stores for their shopping experience. What I am leading to is that we spend more time than over online,
‘The most critical part of SEO is working out what people are searching for’ so take advantage of that in learning about your clients and prospects.
The 5 basics This article assumes you already have the five online basics in place for your brokerage. 1 A well-designed, easy to navigate, informative website with an active blog. 2 A listing in Google My Business. 3 A business Facebook page (linked to an Instagram account). 4 Monthly emailed newsletters. 5 An active business LinkedIn page. These five online activities are no longer just a good idea, but mandatory for a service business to survive and thrive. While none of these are expensive money wise, they are all labour-intensive. If you do not wish to do them, or have an allocated staff member responsible for
‘If Google can match the result to a website entry then you rank higher in the results’
them, then find someone to do them for you. It’s not expensive.
What are clients searching for? Now with these in place, you still need to be found and know what clients really want, or you won’t know what to write or post. While an SEO agency will be able to give you a detailed report on what is being searched for by your target market, here are some general ones that I discovered in a search using a couple of keyword search tools. Highest on the list right now in New Zealand is “mortgage calculator NZ”, followed by “mortgage calculator ANZ / ASB / Kiwibank” (they name a specific lender as they are obviously clients of these). What can you read into this? It could be that first home buyers want to know what they can afford. Other clients and prospects may be wanting to know how the recent increased interest rates could affect them. It could also denote mortgage stress or people wanting to look at refinancing. The recent rate rise could be prompting such searches. This is how to interpret such search results and are clues to how Kiwis are currently thinking about mortgages. Not far behind those searched were “what mortgage can I afford?” and “how do I get a mortgage?” which would mostly be first time buyers. Then there is a group of search results known as the “long-tail keywords”, which are far fewer in number of searches and
are very much niche Google enquiries. Don’t write these off as unimportant, as they still give an insight into your prospective client base. These are often searches made by those with more knowledge on mortgages. My exercise in finding them showed up such key phrases as: “reverse mortgages New Zealand”; “mortgagee sales”; “refinance mortgage”; “offset mortgage”; “mortgage deposit” and “expat mortgage NZ” among many others. Do your website or blog or social media posts specifically talk to any of these and use them as headlines to attract readers? That’s how searches work. If Google can match the result to a website entry then you rank higher in the results.
Keywords/phrases Here is a simple way to make the most of keyword/phrase search results. First, get this list yourself or through your web SEO agency. Have them give you an extensive list of say 50 popular and long-tail search phrases. Add to these the most common questions you get asked by clients, which are perhaps another 30. You now have 80 topics, entirely based on what clients want to know. Next step is to treat these as what your clients really want, so now you can address their thinking and concerns. Sit at your laptop or with a blank sheet of paper and pen and start writing. Under each of the 80 keyword search results and questions you now write a paragraph
of text in terms of how you would address it to clients or prospects. Maybe brainstorm such paragraph answers with your team. From this exercise you will learn a lot about what mortgage clients want from a broker or lender and therefore how you can add value to their enquiry. This exercise gets you to talk to client needs, many of which will be well known to you, but some may be a surprise. You will also have just created 80 social media posts, 80 blog posts and 80 newsletter articles. As I have written many times before, video is king right now, on Facebook, Instagram and LinkedIn, so you may choose to talk to these questions and search enquiries via a short video – videoed in a chatty style on your cell phone. These also work well as blog posts, and for the adventurous of you out there, you may even want to use them to start a YouTube channel. Having spoken to brokers. I hear such objections as, “but there are only really five things clients want to know about mortgages”. Well, not according to search results in Google. There will always be many variations on each topic, so the five will surprisingly expand to 80. Start with the list and see how you go. You will learn a lot about your clients and attract more due to directly addressing their enquiries. ✚ Paul Watkins is a marketing adviser to the financial services industry.
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COLUMNS • INSURANCE
Is a short payment term acceptable? Steve Wright discusses income and mortgage protection term lengths and when a shorter term may be a good solution.
T
he payment term, the length of time a monthly disability insurance policy, like income protection or mortgage repayment insurance, will pay monthly benefits if you are disabled, is often something a client can select. Payment terms range from very short like six, 12 and 24 months; to medium term, five years; or long-term, to age 65 and sometimes even to age 70. Longer payment terms mean potentially higher claim benefits and accordingly, higher premium, so there can be an incentive to select a shorter payment term to reduce premium. Is this a safe strategy? If one looks at the statistics, it seems pretty clear that most disability claims are of relatively short duration, less than two years, so it might seem like a safe option to recommend a short payment term. However, there are some important issues to consider. 1 As usual, the client’s particular circumstances and needs, their financial position, their age and anticipated remaining years in the workforce and so on, all need to be carefully considered in order to make a sensible recommendation. All things being equal, shorter payment terms are likely more suitable for clients with relatively few years to retirement than they are for clients just starting their working lives.
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‘If premium cost is a driving feature, can a longer wait period solve the concern?’ 2 Although many, maybe even most, clients will not experience long-term or permanent disability, some unlucky clients will – and no one knows who these unlucky clients are until it happens. The financial costs of never being able to work again are massive, the loss of income alone is likely to be a seven-figure amount for most, even those on modest incomes. Loss of such a magnitude invariably requires suitable and adequate protection. The table below shows the aggregate value (to the nearest thousand) over time, of an income lost to disability, by a 30-year-old, indexed by 5% (assuming they get annual increases of 5%).
Annual One income year
Two years
Five years
To age 65 (35 years)
$60,000 $60,000 $123,000 $332,000 $5,419,000
Unambiguously Committed to Independent Advisers
‘As with most things, any actions that result in reduced premium will have consequences’
Yes, that is more than five million dollars over 35 years to retirement age (65) and indexation at 5% makes up $3,319,000 of this, so indexing disability benefits is critically important! I personally could not imagine bringing a desperate, severely disabled, and still relatively young client the proverbial “last cheque” after a payment term of two or five years ends, knowing how much they will have lost. What does a disabled client do once their short payment term (and their disability benefit) ends? How will such clients survive financially? Can they drag themselves out to perform some job? What if they can’t? 3 If premium cost is a driving feature, can a longer wait period solve the concern? A longer wait period may be more survivable than a short payment term. 4 Does the client fully understand the consequences of a short payment term? I would recommend showing them actual figures to give them the full potential financial consequences. I’ve heard it said that if a client is disabled for longer than two years they are probably totally and permanently disabled and that some lump-sum TPD cover tacked onto a short payment term
will do the job. Well, I’ve not seen any statistics to confirm that, and no doubt some clients may well be totally and permanently disabled, but some may not. Regardless, the cost of the very large lump-sum TPD cover sum insured that would be needed to make up the income lost due to short payment terms would probably cost more than the premium saving of the short payment term. And payment of the lump-sum TPD cover is by no means certain even after a shorter payment term expires because the client may not be totally or permanently disabled. Some products allow for fixed payment terms to reset on subsequent disability, allowing the shorter 12-month, two-year and five-year, payment terms to “reset”, meaning the full payment term is again available for subsequent periods of disability. Here there are several things to check and consider. 1 Does the payment term reset at all for new periods of disability caused by a condition for which disability benefits were previously paid, or is it only the unused portion of the payment term remaining (if any) that is available for benefit payments on subsequent disability? 2 If payment terms are reset for new or recurrent disability causes, what is the “stand-down” period that applies between periods of disability (during
which the client must no longer be disabled) before the payment term is reset in full? 3 A “reset” only applies to subsequent and separate periods of disability. A reset benefit is of no consequence to a client who remains continuously disabled over time. As with most things, any actions that result in reduced premium will have consequences. Properly understanding these consequences is necessary for making suitable recommendations, and properly explaining these consequences to clients is necessary for ensuring they understand your recommendation and have enough information to make an informed decision. ✚ Steve Wright has qualifications in Law, Economics, Tax and Financial Planning and is General Manager Professional Development at Partners Life.
This article is for information purposes only, its content is intended to be of a general nature, does not take into account your circumstances, situation or goals, and is not a personalised financial adviser service or legal advice. It is recommended you seek advice from a suitably qualified professional before you take any action or rely on anything stated herein.
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The TOP 10 stories on www.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. 01 RETIRING BANK CHIEF SLAMS STATE REGULATION The departing head of SBS Bank says there is far too much Government regulation of the banking industry.
02 MORTGAGE ADVISER PAYS MORE THAN $3,000 TO END COMPLAINT A mortgage adviser has paid more than $3000 to a woman after a delayed application for a mortgage led to costly engagement with another broker.
03 ASB PREDICTING EVEN HIGHER INFLATION The ASB has turned even more hawkish on inflation, estimating a peak of close to 6% at an annual rate by the end of this year.
04 BNZ FIRST BANK TO INTRODUCE DTIS BNZ has announced sweeping new restrictions on borrowing.
05 ADVISERS ANGERED BY NEW BNZ PRICING CONDITIONS BNZ has introduced new pricing conditions for the broker channel and will no longer guarantee mortgage rate offers during their five day validity period.
06 CCCFA AND FINANCIAL ADVISER REFORMS NOT WELL IMPLEMENTED; BANKERS ASSOCIATION The Bankers Association has given more examples of how difficult it can be to comply with government regulation.
07 FMA SETS CUT OFF DATE FOR FAP LICENCING Advisers and financial advice companies looking to transition to a full licence have been given firm cut off dates by the Financial Markets Authority.
08 ANZ CHANGES ITS CALL ON OCR HIKES ANZ has changed its forecasts for the OCR adding in to additional hikes and expecting the cash rate to hit 2%.
09 MORTGAGE RATES EXPECTED TO BE AT 4% PLUS WITHIN A YEAR ASB economists expect mortgage interest rates to be at just over 4% in a year.
10 MORTGAGE ADVISERS IN LINE FOR HOLIDAY RELIEF Mortgage advisers could be in line for some relief when they have a holiday or need to go on medical leave.
TMM Online also has all the latest mortgage rates and changes. www.tmmonline.nz
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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 by signing up to the TMM email newsletter.
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