fromaSellingmortgagethe7th tee NationalWould fix CCCFA mess? PAGE 22 My Biz: ToumadjAli PAGE 28 toHowget found online PAGE 30 TMM 04 | 2022 | www.tmmonline.nz
Nearly 40% of kiwis turned d own for a home loan don’t know there’s an alternative.1 Help your clients with real life options from Pepper Money Real life loans for real life people.0800adviser.peppermoney.co.nz945658 Find out more 1Pepper Money (2019). Taking the local pulse: Understanding New Zealand home loan applicants. A research report. String Theory Research. New Zealand. 2019. Important Information: All applications are subject to Pepper Money credit assessment and suitability criteria. Terms, conditions, fees and charges apply. Credit provided by Pepper New Zealand Limited (NZBN 9429031065153), trading as Pepper Money.
Features 14 HOUSING
Columns
www.tmmonline.nz 2216
A deepening property slump.
12
Tax exemption discriminates against ordinary landlords. REGULATION
Up front
Editorial – it’s time to prepare for the future. NEWS
09
03
28
Paul Watkins provides you with a guide on how to ensure potential clients are seeing you online.
10 PROPERTY NEWS
Meet head of Prosper Group Ali Toumadj. AND MARKETING
32 INSURANCE
Is all this adviser regulation too much for advisers to cope with? COMMENTARY
Squirrel zigs into Wellington, Indecisions stalls licencing, Having a locum good for business. PEOPLE
How much trauma should you recommend to customers? Steve Wright offers some answers.
Financial law changes could be an election issue
TMM asks what would National really do if it wins the next election?
30 SALES
MY BUSINESS
ContentsSellingamortgagefromtheseventhtee
Erick Frykberg explores how technology will impact on mortgage advisers.
04 EDITORIAL
06
All the latest people appointments.
H
ere at TMM we are excited to be putting together our annual mortgage adviser conference, after a couple of years of Covidenforced delays.
Back by popular demand is independent economist Tony Alexander and Corelogic head of research Nick Goodall to discuss what is happening in the housing market.
TMM is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www. goodreturns.co.nz and ASSET magazine.
Any reproduction without prior written permission is strictly prohibited.
TMM 04 | 2022UP04FRONT | EDITORIAL Head office and Advertising 1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: philip@tmmonline.nz Publisher Philip Macalister Staff writers Eric Frykberg, Sally Lindsay Contributors Steve Wright, Paul Watkins Design Samantha Garnier Subscriptions Jing Tao P: 07 349 1920 E: ISSNISSNsubscriptions@tarawera.co.nz1176-2063(Print)2537-799X(Online)
I won’t give too much away here, but I can assure you it is a fantastic session.
There are a limited number of tickets and I encourage you to head to tmmonline.nz to secure your seat.
By the time you read this the Financial Markets Authority “unofficial” deadline for applying for a full licence will be close orThepassed.regulator has been saying if you don’t have your application in before the end of September there is no guarantee it will be processed by the deadline of March next year.
As for the lending market we get feedback that it is interesting times and clearly volumes have slowed down significantly.
Potentially the whole shape of mortgage advice may change someone what.
TMM welcomes opinions from all readers on its editorial. If you would like to comment on articles, columns, or regularly appearing pieces in TMM, or on other issues, please send your comments to: editor@tmmonline.nz
Moved offices?
tarawera.co.nz/coa
Philip PublisherMacalister
No licence. No business.
Details of other sessions can be found on the conference pages at tmmonline.nz
It seems there are still many advisers out there who have not lodged their application. Whether that means people who planned to have their own Financial Advice Provider licence are now looking at joining another group is going to be fascinating.
Our inspirational session: From Lemons to Lemonade is one you won’t want to miss.
It’s time!conference
Also, we have a session where a number of advisers discuss their different business models.
We look forward to seeing you at the Better Business conference in Auckland at the end of October.
Having a bit of a breather is probably not a bad thing after the frantic past couple of years. It is a time where advisers can spend more time on their business and prepare for regulation include completing level five papers.
This year’s event will be at the Novotel Auckland Airport on Thursday October 27 so out-of-town advisers can fly in, flyOneout.of the themes of the conference is looking at the future or mortgage advice. We will be releasing and discussing the results of our latest adviser survey.
Make sure you don't miss an issue by changing your address. Go to:
All contents of TMM are copyright Tarawera Publishing Ltd.
The PropertyResidentialInvestor
The Credit Impaired
“I’m on the road to recovery after some life events that set me back. I know I’m a good candidate for finance and I want to go with a reputable lender, but the banks won’t consider me.”
“I’m just as at home in Australia as I am in New Zealand. Whilst I live and work in Australia, I want to buy in New Zealand and take advantage of all the benefits that has to offer.”
The Self-employed
Made for Resimac
“I know the real value of an asset and I know a good investment opportunity when I see it. I’m not deterred by all the restrictions being imposed on me.” If one of these customers walks through your door, you can be confident that Resimac has a solution suitable for their unique needs.
05www.tmmonline.nz Resimac NZ Home Loans Limited. For our interest rate disclosure, rates and other information, visit resimac.co.nz. Visit www.resimac.co.nz to see how our range of Prime, Specialist, Full Doc and Alt Doc products could suit your customer.
“I run a successful business and have navigated all the recent challenges. I’ve come out stronger and now there are lots of opportunities I want to capitalise on.”
“We have good savings and a high household income, but the housing market is extremely competitive and the banks won’t lend us enough for the type of home we deserve."
The Suburban Aspirer
The International
A
UP FRONT | NEWS tmmonline.nz/news
Total turnover of the new entity is expected to be $2b to $2.5b annually.
The FMA says it cannot guarantee applications that arrive after September 30 will be processed in time for the March cut-off date next year.
“Yes, our advisers are less busy than they were six to 12 months ago, but there is still an opportunity to focus on growth in the Difficultbusiness.”economic conditions help businesses like Squirrel and The Loan Shop because they make getting good advice more essential than ever.
“At the same time, with our technology capability, we have got a remote, advisory team which we call Team Direct, which handles lending right across the country.”
Full licensing remains a slow progress for many mortgage advisers, and indecision about their futures is being blamed for widespread inaction by many.
Other suggested reasons for the delays have been regulation fatigue, or a full workload crowding out administrative
uckland-based Squirrel Mortgages, established by John Bolton, has merged with a Wellington firm to create a $2 billion business.
“If you look back a year, the three-month moving average volume of home sales
Two well-known advisers, Rupert Gough and Tony Vidler, think many older people in the industry advisers will use the new requirements as a cue to retire from the Butbusiness.many others are uncertain about whether to try for an independent licence or go under someone else's FAP.
Whatever the reason for the delays, the FMA has indicated it is seriously concerned about the problem and has intensified its efforts to reach the entire adviser community.
The combined business will operate under the Squirrel brand and have about 6% of the Cunningham,market.who was previously chief executive at The Co-operative Bank, recently replaced Bolton as Squirrel’s chief Image:executive.DavidCunningham
Otherprojects.brokers have suggested that people are put off by the financial costs of full compliance. Still others say this all adds to their workload but they receive no financial compensation.
was about 7500,” he said. “It is now down to about 5000, but there is still a huge base of activity going on. Compared with the last 10 years, volumes are not at terrible levels, there is always a strong underlying base of activity.
The merger happened at a time when economic conditions were poor. Inflation, supply chain disruption, rising interest rates and a faltering housing market might not have created a perfect storm but certainly constitute incessant drizzle.
ADVISERS ‘INDECISION’DUEAPPLICATIONSDELAYTO
And there is a problem for larger institutions as well, because the process can be complicated if they have many advisers under one FAP roof.
The merger gives the combined new body a total of 40 advisers, just under half the staff – the others do peer-to-peer lending as well as fund management and support operations.
The September 30 target date for applications to be with the Financial Markets Authority (FMA) is ticking closer, with hundreds of financial advice providers still not involved.
Cunningham, though, says years of hard work at Squirrel have created a capacity for change at an unlikely time.
“It gives us the flexibility to zig when others are zagging, When others are pulling their horns in, we have the opportunity to do the opposite.”
“One is to be on the ground in key markets, and the other one is to build digital and remote capability.
The merger with The Home Loan Shop gives Auckland-centric Squirrel a large foothold in Wellington, and expands its ability to expand into other parts of the country via online deals.
Cunningham also said the troubles of today had to be put in context.
Image: Rupert Gough
“There are two ways to build a nationwide presence,” Squirrel’s newly appointed chief executive David Cunningham says.
“Effectively, The Home Loan Shop merger is one piece of that, which is growing the physical footprint.
WELLINGTONZIGSSQUIRRELINTO
TMM Better 2022ConferenceBusinessticketGetANNUAL4THyourNOW Venue: Novotel Auckland Airport Find out tmmonline.nz/better-businessmore:
TMM 04 | 202208 We’re here to listen. We’d love to help. Avanti Finance is a Kiwi business so we understand Kiwi needs. As a non-bank, we offer a comprehensive range of lending solutions, including: long term and bridging first mortgages, caveat, vehicle and personal loans plus business loans.* TALK TO OUR AWARD WINNING TEAM TODAY, YOU’LL LOVE OUR COMMON SENSE APPROACH.GrahamClarke Central North Island 021 941 988 Paul Rolton Lower North Island 021 192 9709 Helen Mulligan Auckland/Northland 021 226 7191 Matthew Thomas Auckland 021 246 7365 Mark Nolan South Island 021 941 046 0800 33 33 20 I avantifinance.co.nz *Lending criteria, fees, terms and conditions apply tmmonline.nz/newsUP FRONT | NEWS
✚
But the locum business is still a work in progress for the mortgage industry.
plan (BCP) asd part of the FAP licensing regime, which is being administered by the Financial Markets Authority.
A
Having a locum ready to go could help establish the status of a BCP in the event of inquiries being undertaken by the TheseFMA.
Accordingreciprocation.tolawyers,
Financial Advice New Zealand is seeking to fix the problem by developing a register of peer-to-peer locums, to “help out a buddy in a jam” and expect
Such a person could assist in the case of a sudden illness, or even if a hardpressed adviser needs to take a longdeferred holiday.
inquiries are frequently undertaken by FMA inspectors, either in response to complaints or intel, or just as a kind of routine check to make sure proper records are being kept in advisers’ offices.
It falls far short of the system of medical locums. There is not a large pool of advisers available to pick up the reins of a business when needed.
In the worst case, a fully briefed and competent locum could handle a business if its owner dies and a spouse is unable to take over.
dvisers are being told they should work on getting a locum to call on to help out in a crisis.
They say it is not mandatory to have a locum available on call. But is it mandatory to have a business continuity
BUSINESS’‘GOODAHAVINGLOCUMFOR
having a locum could have legal value as well.
SHARE five years ago, the SHARE board asked me to grow the business and to prepare it for the upcoming licensing regime.
09www.tmmonline.nz UP FRONT • PEOPLE
It is not clear exactly what Dench will do now, but the statement from the company said he would continue his career in roles at director and executive level within the wider financial services sector. Dench will remain as CEO to help ease the transition to new management He will remain as a shareholder in the company.
FIRST TRUSTMORTGAGEMAKESTWO KEY APPOINTMENTS
Tauranga-based First Mortgage Trust (FMT) has made two key appointments to help expand its lending footprint.
“The full FAP licences are in place for what is now three businesses, and SHARE has trebled in size on a number of measures during that time.”
FMT chief executive Paul Bendall says Brown will have responsibility for overseeing and implementing the treasury strategy and will also be involved in our technology project that will provide an improved client experience.
Teresa Greenhill joined the Taranaki branch of Mike Pero earlier this year. Before becoming a mortgage adviser, she was a real estate agent for seven years.
First Mortgage Trust is reviewingconstantlytheNewZealandmarkettoensureitoptimisesinvestmentreturns.
“I believe that I can justifiably say that, together, we have achieved both of those goals.
MIKE PERO MORTGAGES HIRES MORE PEOPLE
No reason has been given for his departure. But in a statement, Dench said he had achieved his objectives at the “Whennetwork.Ijoined
James Annals has joined the team of mortgage advisers in Waikato. Annals stresses the personal approach in helping clients achieve their goals.
SHARE LOSES ITS BOSS
Vanesa Oliver is also new to the Mike Pero Auckland team. She has been working with a wide range of customers, from first home buyers to seasoned investors, as well as providing insurance solutions.
Gareth Brown has been appointed as the new head of treasury and has joined the non-bank lender's leadership team.
Brown has a background in financial markets and financial risk in the banking and accountancy Hesectors.hasalso run his own business providing advice on financial market and treasury matters as well as ESG concerns.
Matthew Laing as wholesale investment manager. Previously he was head of wholesales at Kiwi BendallInvest these appointments reflect FMT’s desire to expand its funding footprint on a national basis.
The chief executive of SHARE and Newpark, Tony Dench, has resigned after five years in the role.
SHARE chairman Richard Thomas said the board “are genuinely sad to see him go.”
Mike Pero Mortgages has been steadily increasing its team of advisers and one of the most recent to join the group is Jasmeet Grewal Grewal was originally a nurse, but likes her current career and sees it as a chance to help customers achieve their financial goals. She is based in Auckland.
✚ FIND OUT MORE tmmonline.nz
While most investors face the phase-out of interest deductibility, Housing Minister Megan Woods says upcoming tax legislation will give the exemption to new and existing buildto-rent developments in perpetuity.
TAX LANDLORDSAGAINST‘DISCRIMINATES’EXEMPTIONORDINARY
However, King says most rentals are provided by ordinary Kiwis who own one or two investment properties.
Government plan to allow build-to-rent developers to offset interest costs against their income to reduce their tax obligations discriminates against ‘mum and dad’ investors, says the Property Investors Federation.
TMM 04 | 2022010UP FRONT | PROPERTY NEWS
build-to-rent developers provide high quality rental housing so these tax benefits are going to benefit high income earning tenants rather than the vast majority of tenants as a Kingconsequence.”saysmosttenants cannot afford brand-new, high-end accommodation. “They want well maintained, warm, dry but ultimately goo- value rental Build-to-rentaccommodation.”isadifferent model of residential housing to that commonly seen in New Zealand’s current private rental market, says Woods.
“They mostly provide an excellent service to their tenants and new laws mean they must provide a warm, dry rental home. These private landlords operate with low overheads and low (often negative) margins that actually provide true value for tenants. These are the rental that should be supported, not large corporate
The federation has also suggested introducing a security-of-tenure model based on the German system and said this would provide long-term security for the majority of tenants, not just high-earning ones.
A
Woods says the tax exemption will encourage further development of this type of rental supply and enable the full potential of this sector.
She says it has the potential to increase the supply of quality rental housing at pace and scale. “Buildto-rent can also support housing
It will apply retrospectively from October 1, 2021. Owners of build-torent assets can claim interest costs relating to these assets for as long as the asset is held and operated as a build-to-rent development.
construction at times when securing buyers and finance for build-to-sell developments is more challenging, as it is now.
The developments must have at least 20 dwellings in one or more buildings, with a single owner of any common land or facilities. They can be held in one or more titles.
The proposed requirements for the new asset class include that tenants must be offered a fixed-term tenancy of at least 10 years, with the ability to give 56 days’ notice of termination. They do not have to accept this term.
“The build-to-rent sector can attract different forms of long-term investment such as from iwi or superannuation funds. This is critical to providing new general and market affordable supply.”
Thedevelopers.”federation’s published plan to fix the rental crisis includes stopping the phase-out of interest deductibility, removing ringfencing and the bright line test.
Property Investors Federation president Andrew King says it appears the Government has bowed to big business lobbying and changed the rules for large developers-turned“Woodslandlords.says
Image: Andrew King
The Commerce Commission says it’s too hard, costly and slow to get new building products approved for the New Zealand residential market.
It wants to improve the conditions of entry for competitors.
categories of products and competition at the supplier lever is limited to some key players.
BUILDINGRESIDENTIALSECTOR NOT EFFICIENT, COMMISSIONCOMMERCESAYS
The commission wants a Maori world view reflected, an examination to be made into removing impediments to substitution and an investigation into whether the barriers to certification and appraisal of building products could be Areduced.newregister has been established to share information about building products and consenting to help centralise the knowledge.
On rebates, the commission encouraged builders to invoice their clients at the true price they paid for the goods and be truthful about what they were paying.
The building companies have been defensive about these figures and Fletcher Building chief executive Ross Taylor told the commission materials were only a small part of overall house prices. ✚
In its draft report into the state of the building supplies market, the commission says regulatory systems are hampering competition and the market is not working as well as it could.
011www.tmmonline.nz
The commission says quantity-focused rebates, restrictive land covenants and exclusive leases are parts of the sector not working well.
This would include new compliance pathways for a broader range of key building supplies because, it says, there are too few competing suppliers for many
and its Gib product, which has about a 94% market share, is likely a result of its level of service, the quality of Gib and comparative prices, regulatory barriers for competitors to come into the market and - until recently - import duties on Theplasterboard.Productivity Commission estimated New Zealanders pay between 20% to 30% more for building materials than those in Australia. Prices rose 16% in the last three months of last year and a further 12% rise is being predicted for the second half of this year.
M AK E I T S I M PL E , FAS T W E’L L TA K E A D I FFICU LT DE A L AN D ST RA IG H T F OR W A R D N O N- B AN K MO RT G A G E L EN D IN G 07 839 2999 | info@basecorp.co.nz www.basecorp.co.nz Get in touch now for simple, smar t residential mor tgage solutions. At Basecorp, our brokers know us for our dependability with straightforward and We offer: • Competitive, fair rates • Most approvals within two days of loan application • Strong industry knowledge, experience and relationships developed from over 25 years in the business TaylorRossImage:
It found loyalty to Winstone Wallboards
TMM 04 | 2022012UPFRONT | REGULATION
Instead, FMA staff would contact the adviser being inspected in advance, to arrange a time for a visit that suits both parties, and to say what sort of information was being sought.
The inspection teams would also try to avoid disrupting daily work at the office and would aim to give the inspected firm its verdict within 10 working days.
“The last thing we want to do is arrive on site and ask to look at something that is not there or is not ready,” Hewes said.
The general manager of The Lending People, Andrew Scott, has qualified sympathy for the FMA.
He said its aim was education of advisers, not punishment.
However, it should be noted that the FMA was still extremely powerful, second only to the IRD in the state arsenal.
‘We encouragingarepeopletotrytogetstartednow’
In any case, its job is to enforce the law, not make the law, and is doing so in as fair a way as possible.
Scott said he expected 99% of financial advice providers would eventually be inspected and sheer practicality would lead them to expect much tougher treatment before long.
Anita Frazer
A senior executive, Michael Hewes, put it this way: “The FMA does not turn up at anyone's door and demand to be seen. Our legislation does not enable that, we do not have that sort of remit or power.”
“There are only so many auditors and there are a lot of advisers out there,” he said.“So the workload will dictate that they become a little bit more hard-nosed,
Take inspections of brokerages for example. This is no Orwellian knock on the door by Big Brother – it is wherever possible a collaborative effort, according to FMA staff.
T
“The new director of the FMA, Samantha Barrass, is on record as saying the way to change the market is not to come in with a big stick, but to offer guidance,” he said.
BY ERIC FRYKBERG
he regulation drum is beating on, to the dismay of some mortgage advisers who look set to quit the business in protest.
But if that is the view of the inspectors, what about the inspected?
“But I am pretty sure that within a short period of time the gloves will come off.”
Regulatory change has been flooding the advice sector over the past year. But is it all too much for some advisers to cope with?
But the main enforcement body, the Financial Markets Authority (FMA), insists it is not to blame for advisers feeling they are being throttled by red tape.While conceding that its job has been made harder by too many Government crackdowns all at once, the FMA insists it is not the bad guy and wants to help, not hinder, honest brokers.
drumRegulationbeatson
“It's like, 'the horse has bolted so let's nail a couple of planks back on the side of the“Thisbarn'.was badly thought-out legislation, pushed through by people who did not understand the industry.”
The Government always argued all this legislation was needed to stop predatory lending. The finance industry, though, argued it threw out a large number of babies with a limited quantum of bathwater. ✚
013www.tmmonline.nz
So the FMA is developing codes of conduct which it is sending out to financial institutions, telling them what they need to do.
The FMA proposals specifically prohibit sales incentives such as overseas trips for meeting volume targets, which the Government thinks encourage brokers to put pressure on vulnerable people.
Nevertheless, advisers have not emerged unscathed from COFI. They will still have to comply, to an extent.
“We are not there to make it hard for you, we are there to make it work for you,” Frazer“Informationsaid. is (on the website) to show you how to complete your application and to explain what we are asking for and why we are asking it.”
“You will have to stop doing what you areButdoing.”theFMA is not just threatening the sin bin for advisers who drag the chain. It is trying hard to make sure it does not come to that. And it is working to revive the programme and make full licensing as easy as possible.
This happened after the government accepted arguments that COFI could needlessly duplicate the FAP programme.
Frazer said an eight-step plan had been put in place to tell people what to do. In addition, from August 9, people would be able to call in at special workshops.
And financial institutions must have a system in place to enforce these rules on itsTheintermediaries.finalregulatory load weighing down the hapless broker is the CCCFA. This proved so onerous the Government was forced into a partial backtrack less than two months after the law came into effect.
rather than softly softly, rather than, ‘we are all doing a pile of social work here’.”
If advisers are working with a bank, then their customers would expect them to share that bank's standards of behaviour, and so would the bank itself.
Inspections are not the only source of potential conflict between advisers and the FMA. Another is the move towards full FAP licensing, which has become a faltering process badly in need of resuscitation.AsatJuly18, only 36% of financial advice providers had either gained, or applied for a full licence, despite the fact that time is running out.
One initial reform by the Government removed the notorious measures of cups of latte that had been added to would-be borrowers’ outgoings, on the condition that hard economic data was already available.Asecond reform removed savings and investments from the daily list of expenses, after the Government accepted that investment differed from consumption.Butfewbrokers think these changes will come anywhere near what is needed to allow responsible advisers and perfectly solvent borrowers to carry on business as usual.Atthis stage a second tranche of reform has been worked on by the Government.
“We are encouraging people to try to get started [with licence applications] now,” another FMA official, Anita Frazer, told“Don'tadvisers.leave it til December, January or February ….... because you may not be licensed by March 17.
But Tony Vidler thinks it is all too little too“Thelate.damage has been done. You have had months of banks being draconian ….. and that has turned off a lot of people in the housing market.
“A far larger proportion are still trying to figure out which way they want to go,” he“Theysaid. are asking themselves, do they want to go for their own licence or do they want to be an authorised body under someone else's licence.”
Tony Vidler of Strictly Business refused to cast blame on the FMA. He says the regulator has been proactive in getting advisers across the line.
This led the FMA to deliver a blast on the referee's whistle and fidget nervously with the supply of yellow cards.
He said the problem was not the FMA, but advisers themselves. They had known this was coming for a long time, but perhaps 15% to 20% had done nothing about it.
“We will have people who will walk through every question on the application form live with you.”
The third big instance of government rule-making is the Financial Markets (Conduct of Institutions) Amendment Act (COFI). This puts conduct rules on to banks, non-bank lenders and insurance companies. The law came close to applying similar principles to intermediaries such as mortgage advisers, but staged a last-minute detour.
So what do advisers think about this?
The obligations include things like acting ethically and transparently, and not applying unfair pressure on customers.
They say if a financial institution outsources a system or process, it must be satisfied that the provider can perform the service to the standard required of the lender itself.
“We have seen brokers struggling to put any business on the books.... you change a clause or three of the law, but the damage has been done.
The total value of residential real estate across the country fell to $1.69 trillion, down from $1.73 trillion at the end of last year, with mortgages secured against 20% of that value.
One of the few exceptions is Christchurch, which had had almost 40% annual growth by the later months of last year, but is now seeing only relatively moderate declines of 3.4% for theMeanwhile,quarter.
The median residential property price for New Zealand, excluding Auckland, increased 4.5% annually from $688,999 in July 2021 to $720,000 in July 2022.
esidential sales dropped last month to their lowest level for any July since 2010.
West Coast led the annual falls, with a drop in sales of 54.9%, from 51 to 23. Auckland’s were down 48.7% year-onyear, from 2767 to 1419. Northland’s dropped 44%, from 243 to 136 and Waikato’s 43.5%, from 742 last year toGisborne419. had the highest month-onmonth bump upwards, with turnover up 57.7% on June, followed by Hawke’s Bay increasing 39.4%.
QV says that the region should continue to buck the trend: “With the complete removal of all border restrictions at the end of last month, the obvious benefactor will be the tourist capital of the country.”
Staggering drop in housing market annual growth
QV data for the three months to July also shows any recent gains disappearing.
This is the first drop in the overall annual median price since July 2011 and has wiped out all capital gains over the past 12 months.
TMM 04 | 2022014FEATURES | HOUSING COMMENTARY
Image: Kelvin Davidson
Queenstown-Lakes District remains an outlier as the only one of the 16 major centres QV monitors that has had positive growth over the past three months, albeit only just at 0.2%.
BY SALLY LINDSAY
Sales have been declining since July 2021, while at the same time properties listed for sale have risen 107.8% yearon-year.
R
There was a month-on-month drop of 2.7% from $740,000.
Prices have also continued dropping from their November peak and last month the national median selling price slipped to $810,000 from $850,000 in June, a 4.7% month-on-month drop.
The average house value across the country has dropped below $1 million to $989,790 for the first time since September last year, according to QV’s House Price Index.
Month-on-month,shows.turnover dropped 4%, or 3.5% when seasonally adjusted.
The number of sales nationwide was down 36% to 4678, from 7391 a year earlier, Real Estate Institute (REINZ) data
In the Auckland region, the average value now sits at $1,410,163, falling 5.5%
Continued price drops
From 30% annual growth at the turn of the year, the housing market has plummeted to just 4% growth and that is only half the Wellingtonstory.cityis leading the charge, where in real terms, the average home value has dropped by more than $130,000 in only a quarter, based on QV’s data.
over the three-month period, or $131,005 since the beginning of the year.
$40 billion value wiped off housing market in six months
The national median price has now dropped $110,143 since it peaked at $920,143 in November last year.
It is not just confined to the city –suburban areas such as the Hutt Valley and Porirua have also seen values drop between 7% to 9% over the past three months. Across the city the average value is down almost 11% over the quarter.Nationally, the average home dropped in value by 4.9% over three months to the end of July, or $74,000 since the beginning of the year.
‘“There are multiple reasons contributing to a slowdown in values, these include more listings, a shift in pricing power towards buyers, a tighter mortgage lending environment, and sharply higher interest rates,” he says.’
propertyDeepeningslump
Kelvin Davidson
At the same time, build costs have skyrocketed. Property research firm Core Logic's latest Cordell Construction Cost Index (CCCI) has risen 7.7% over the past year - the swiftest rise in a decade.
Auckland, South Auckland and Franklin all offered average weekly rents under $600 per week.
The Reserve Bank’s official cash rate has risen 50bps and now sits at 3%.
• HOUSE PRICES
For a typical three-bedroom Auckland rental home, the average weekly rent had reached $628.17, up 3.46% or about $21.01 per week compared a year ago.
• BUILDING CONSENTS
“At the same time, property owners have been working to accommodate new levels of compliance and higher operating costs, including rising interest rates and the removal of tax deductibility. “Allofthese have put pressure on rental pricing, although the recent increases have been quite measured compared to the 5% to 6% peaks we’ve seen in the past.”
CoreLogic’s latest Property Market and Economic Update shows the sharp postCovid upswing in values has now given way to a firm correction, and the falls already seen to date have been spread across most geographical areas and price brackets.CoreLogic’s chief property economist Kelvin Davidson says it’s possible the national average property value will ultimately drop by 10% to 15% by the middle of next year, “which broadly suggests we’re potentially halfway through this correction in both duration and“Therescale”.are multiple reasons contributing to a slowdown in values, these include more listings, a shift in pricing power towards buyers, a tighter mortgage lending environment, and sharply higher interest rates,” he says.
When compared to a year ago, the increase is 3.27%, or $19.70 more per week, data from 16,000 properties managed by Barfoot & Thompson shows.Barfoot & Thompson director Kiri Barfoot says the figures are consistent with the trend observed over recent quarters, in which rents typically rise by about 3% year-on-year, but she notes there are a wide range of factors at play.
OCR•
The last time building consents fell three months in a row was between November 2016 and January 2017.
Over the past year, 50,500 new dwellings have been consented.
Rental prices inch up; property sales slump to new low
By size, four-bedroom homes attracted the most price growth at 3.76% a year,
“This weaker phase for the property market will continue into next year,” he says.
INTERESTDOWNRATES
• MORTGAGE APPROVALS
In June consents for new houses fell 2.3% after falling 0.5% in May. In the year to the end of June 50,736 consents were issued, up 14% from the year ended June 2021. The new consents were for 1834 stand-alone houses, 1751 townhouses, flats, and units and 289 apartments.
Fewer than 15,000 mortgages were issued in June – a record low for a June month. The average-sized mortgage fell from a record high of $408,000 in May to $405,000. New mortgage lending dropped to $6.055 billion from $6.8b in May and $8.5b in June last year.
Ranchhod says with shortages of materials and labour resulting in widespread delays, planned work is taking longer to complete. Combined, those conditions don’t point to a sharp fall in building activity in the near term, but he says a peak in the construction cycle is fast approaching, if it’s not already here.
015www.tmmonline.nz
More than 18% of company failures in the past year were building companies going under mainly because of labour and material shortages and increasing costs. Since the start of this year, 92 construction companies have been put in liquidation. ✚
What’s driving house prices?
while one and two-bedroom homes attracted the least.
Meanwhile sales by Barfoot & Thompson during July were the lowest for that month in 22 years, with just 611 propertiesManagingsold.director Peter Thompson says prices and sales are out of sequence, as vendors and buyers establish where the market is priced.
Across the country the REINZ median price declined 1.8% to $810,000 in July, a drop of $110,143 since it peaked at $920,143 in November last year. This is the first drop in the overall annual median price since July 2011 and has wiped out all capital gains over the past 12 months.
Investors borrowed $1.054b,down from $1.2b in May and $1.4b in June last year.
IMMIGRATIONUP
The flow of migrants is in positive territory for the first time since early 2020 when the pandemic hit New Zealand. The latest migration figures show a net gain of 1090 nonNew Zealand citizens in the June quarter.
Auckland’s average weekly rent rose by $6.12 (or 1%) to $622.44 per week for the quarter ending June.
Fletcher Building says at that level, consents are running 20% to 30% ahead of the industry’s capacity to build. The ideal capacity for building is 35,000 houses a Westpacyear.senior economist Satish
The smaller banks have dropped rates and now don’t have six-month and oneyear rates over 5%. The Co-operative Bank’s six-month rate is 4.99% and one-year rate 4.89%, Heartland Bank’s one-year rate is 4.79%, TSB’s six-month rate is at 4.89% and one-year rate 4.85% and SBS’s six month rate is 4.95% and one-year rate 4.89%.
Building market crash predicted
ANZ chief economist Sharon Zollner says the outlook for house-building has hit a brick wall and data suggests building consents may have a lot further to fall June’syet.drop in consents was the third monthly decline in a row on a seasonally adjusted basis. The June figures were just over 11.5% lower than March.
“The big change has been in the financial incentives for developers. House prices are falling, and prospective buyers are increasingly hesitant about purchasing homes off the plans,” he says.
“The market has been catching-up off the back of frozen and slower-moving rents in 2020 and early 2021.
Central Auckland properties –dominated by apartments - were the cheapest in the quarter at an average of $511.90 per week in June, while homes in the eastern suburbs were the most expensive at an average $702.17 per week.West
A “truly spectacular” crash to fresh lows is being predicted for the construction industry by ANZ as building consents sank 2.3% on a monthly basis in June compared to just 0.5% in May.
First-home buyers were lent $1.109b, down from $1.2b in May and owneroccupiers borrowed $3.8b, down $4.3b on May.
TMM 04 | 2022016
LEAD | THE FUTURE
Selling a mortgage from the 7th
BY ERIC FRYKBERG
Or will commercial reality, to say nothing of Government rule-making, keep them tied to their desk for longer than they planned, while cyber solutions that could ease their plight sit idle?
today. Heartland Bank Limited’s responsible lending criteria, fees and charges apply. For more information visit heartland.co.nz or call our friendly dedicated team today on 0800 488 740 . No paymentsregularrequired No negative guaranteeequityFlexibleoptionsdrawdownYou continue to own your home Since 2004, Heartland Reverse Mortgages has helped over 20,000 Kiwis free up equity, age in place and fund their dream retirement.
Nor would they miss out on watching the kids' mid-week swimming sports, or other milestone events in their lives, and feel they practically personify the Harry Chapin song: A child was born the other day / He learnt to walk while I was away.
017www.tmmonline.nz
According to a computer veteran and startup facilitator, Dave Moskovitz, the technology to do all this has been developing for about 30 years, and was accelerated by the Covid lockdowns.
He says one reason is that people in this country are still tied to traditional ways of doing things.
At present, the answer to that question seems to be the latter option, though optimists are hopeful that things could change.Theidealised version of the future throws out Monday to Friday drudgery for good. No longer would people work through a fine Wednesday and cram their “leisure” into a rainy weekend.
The gains from properly using financial technology would be augmented by the loss of obvious disadvantages in current systems.Andthere is more. Having fully integrated systems in the fintech space
Moskovitz is pessimistic about developments like these happening in NewDespiteZealand.this, flexibility of a sort is spreading in the mortgage industry. Advisers have grown used to working from home by choice, not necessity, and will leap at the chance to get out of the office and talk to a client in a cafe if they can.
“It is not just a case of working Monday to Friday, the rest of the world is operating on a 24/7 basis,” he says.
A broker might even enjoy a mid-week game of golf, knowing that computers are quietly humming in the office, laying the groundwork for a deal.
Yet these young people are often single and unencumbered and have disposable income which is available to be spent, so their business is well worth having.
Moskovitz says systems that smooth over all these issues are ready to be used.
A
“Having to wait around until a bank is open might involve putting yourself in some danger if there is a pandemic, it might involve some inconvenience, and it is Incarbon-insensitive.”otherwords,says Moskovitz, current methods of doing business are timeconsuming and wasteful and involve unnecessary hazards.
re mortgage advisers on the brink of a brave new world in which technology quietly works out property deals in the background while they enjoy a proper work-life balance?
But New Zealand is lagging behind in proper implementation of streamlined solutions that are already available.
The idea of putting in a request and waiting until an overworked mortgage adviser trudges into the office on Monday morning before they get an answer is anathema.
Being stuck in rush-hour traffic would become a thing of the past, and deals could be made in a cafe, not the office. The costs of bricks and mortar to a business would diminish, and under-used commercial buildings could become apartments.
Help your clients take the stress out of retirement with a Heartland Reverse Mortgage
“Other countries like Britain, for example, have open banking regulations that require banks to make their data available to other parties, so you are seeing a lot of new financial services being offered online.”
would not just help mortgage industry professionals.Theywould also be good for customers, especially the need-it-now generation, who can sometimes snap if they have to wait five seconds for a page to load on their screens.
This development was called LIXI and was quite significant, according to Scott.
The New Zealand Bankers Association is holding back from commenting on
However, as anyone in the finance industry knows, the trend towards
But these reforms could still pan out better than feared and National is planning to reverse the changes if
“It will have a huge impact on speed.”
“The second-tier lenders have the ability and the desire to interact digitally …. with brokers,” he said.
streamlining was slowed down, halted and then thrown into reverse in some respects by a wave of Government regulation.Thechief offender was the Credit Contracts and Consumer Finance Act (CCCFA), which smothered advisers and their clients in hours of expensive paperwork. Moreover, it blocked credit to solvent people, and forced them to redesign and resubmit applications that might clear the previous hurdle, at a cost in time and money.
Mortgage adviser and manager Andrew Scott has worked in the business for more than two decades.
In other words, work that could have been streamlined, was needlessly duplicated.Twolimited reforms to these rules have been approved and more are under consideration.Thefirstset of reforms were condemned by many in the industry as being completely inadequate, while the second set has still raised hackles.
“They have put in place some parameters by which financial institutions, lenders and insurance companies can easily transfer data between each other.
LEAD | THE FUTURE
This will avert the need for reformating applications to different institutions, but at this stage, will not be fully utilised until open banking is more accepted.
Andrew Scott
‘We have got smart decisioning engines that operate behind the scenes to assist with automation decision-making.’of
He says there is a steady growth in systems that by themselves do not constitute a revolution, but collectively, add up to a lot.
“They know it is secure, it is in a standard format, it won't get corrupted and is easily interpreted.
not even initiating the process, still less completingMeanwhile,it. there is another problem with cyber streamlining that has nothing to do with the Government. Moskovitz says the big banks are dragging their feet on implementing the new technology and Andrew Scott agrees.
“There are some significant emerging technologies in financial services,” he“Yousays.have got the introduction of biometrics …. which goes a long way to satisfying anti-money laundering requirements.“Wehavegot smart decisioning engines that operate behind the scenes to assist with automation of decisionmaking.“Andwe have now finally got a common data transfer standard in the financial services industry.”
Technology is getting better too, not as fast as it could, but it is happening.
“Now the retail banks are nowhere near that. First, they don't want to deal with individual advisers one-on-one, and second, they don't have the technological capability to do so. So in five years’ time, the predominant source of mortgage funding in New Zealand will be from nonbank
“Basically,lenders.retail banks will buckle under the weight of their own bricksand-mortar infrastructure and their own legacy systems. So the industry is in for a huge shakeup.”
Approved applicants only. Lending criteria apply. Fees and charges payable. Liberty Financial Limited. At Liberty, we celebrate individuals. From first home buyers to investors, self-employed or credit impaired borrowers, our solutions are flexible to suit the needs of more customers. So, don’t be puzzled by a unique scenario – talk to Liberty for finance that fits. Call your Liberty BDM today. 0800 003 391 libfin.co.nz/broker Looking for the right fit? Solve the puzzle with Liberty.
‘I think the human element is still required …. the roboadvice will be part of the future, but it will have to be overseen by an actual person who will deal with the client directly.’
He says that is because mortgage advisers have a broad mandate.
“Our job is to educate our clients as to what they are getting themselves into just as much as doing the lending, and getting the approvals sorted.”
Glen McLeod
“If I had technology that could do all the work for me and I would just give advice, that would be wonderful,,” McLeod says.
The association also says it surveyed bank customers and found there is a lot of reluctance about too many changes that might require sharing of financial data among third parties, as happens in AtBritain.thetime of writing, the Government is planning to announce new policies in thisMeanwhile,regard. Glen McLeod of Edge Mortgages, thinks a lot of new technology will come, but cannot be implemented right now, because the current rules mean it would automatically reject many loan applicants.“Ithinkthe human element is still required …. the roboadvice will be part of the future, but it will have to be overseen by an actual person who will deal with the client directly.”
“But the reality is that there is a lot of work that goes in even when you do collect the information using technology. You have still got to work through things.
“Call me old school, but I think the human being still has a place because there is more to this job than just putting the numbers together.” ✚
Dave Moskovitz
‘It is not just a case of working Monday to Friday, the rest of the world is operating on a 24/7 basis’
TMM 04 | 2022020
LEAD | THE FUTURE
McLeod says the trend of recent Government action has been to make sure people got better advice rather than taking it away.
021www.tmmonline.nz JOIN US TODAY 0508 4 ASTUTE www.astutefinancial.co.nz/be-astute We offer industry leading support for you and your business to grow. A cloud-based custom CRM for both Finance & Insurance. Ongoing compliance and training. Mentoring program for new Advisers. Referral arrangements available. Diversify your business with multiple income streams. Access to the Astute FAP and supporting information. Now’s the time to take your business to the next level! WHY CHOOSE ASTUTE?
BY ERIC FRYKBERG
Image: Andrew Bayly
TMM 04 | 2022022SECOND LEAD
Financial law changes could be an election issue
The next election is more than a year away and it is far from clear that the rules the mortgage industry condemns as heavy-handed will feature prominently in the campaign.
But Bayly sounds more confident of progress over the CCCFA, which was conceived as a control mechanism for predatory lenders but came into force fully grown and ready to grapple with lenders of all stripes.
“Obviously, the cost of living and increasing interest rates are the sort of thing that will affect voters.
“So that has already forced something of a backdown from the Government.”
But is it unclear what if anything National will do about these two laws at the next election, or afterwards, if it wins.
Before long, solvent and even affluent
It says this has created a perplexing and confusing set of rules that have made it hard for many financial professionals to do their job.
CoFI imposed a code of conduct on financial institutions such as banks and aswithalreadyisolatedsystemicwasnew.lawMPscompanies.insuranceNationalcondemnedthisasaddingnothingTheysaidtherenoevidenceofabuse,andincidentswerebeingdealtbymeasuressuchthelawagainstfraud.CoFIwas“asolutionlooking for a problem”, MP Simon Watts said in Parliament as the law was being passed.
Bayly is sceptical that these reforms will have much impact.
Several weeks later, National’s commerce spokesman Andrew Bayly said the party remained sceptical about CoFI and worried about the whole way financial legislation is organised.
One of the problems with CoFI is its technical nature, which is not fully understood by voters or even all politicians.Thismakes it unlikely to occupy a high position in party thinking, or maybe any position at all.
borrowers were being declined loans they previously counted on, and were even being chastised for putting too many cups of coffee or glasses of wine on their debit card.
“The publicly announced changes to the CCCFA have not resulted in any meaningful change,” he said.
He thinks the CCCFA might be an exception.“Thatlaw has been in the headlines, whether it was because of a cautious approach by the banks or whether it was because of a perverse outcome of the legislation.“Sothatis something that has gained some traction, because of its impact on first-home buyers, in particular.
Bayly pledged to take personal action on these matters. But there is a question
“But if the CCCFA is still causing problems at the election, that is something that National could point to and say there is a problem with red tape and waste making life harder for everydayMeanwhileKiwis.”Thomas pointed to another scenario that might transpire – quiet reform, rather than election tubthumping.“Thisisthe sort of thing that can go on in the background and is dealt with by a new minister after the election, but quite probably would not figure very much in the national psyche.” ✚
The National Party remains critical of the Financial Markets (Conduct of Institutions) Amendment Bill, which it condemned in parliament as wasteful and unnecessary.
“There is no reason to think Bayly is not being serious there, this is his wheelhouse, this is the sort of thing he likes to get stuck into.”
“I have certainly flagged it as an issue, so it is an issue that we will be looking at....to make sure we have the right (regulatory) architecture in place.”
mark over how much support there will be for strong measures within the party as a Benwhole.Thomas, a former National Party strategist, who now works as an independent political commentator thinks there is a real problem for political parties that campaign on technical issues and in fact they hardly ever do it.
They were even having their credit status downgraded for saving or investing too much. The subsequent clamour forced the Government to review the law less than two months after it came into effect and agree to reform in two successive waves.
H
Andrew Bayly
It is also deeply sceptical of reforms being implemented by the Government to the Credit Contracts and Consumer Finance Act (CCCFA), arguing they will bring little real change.
“If the (second stage of changes) do not focus on high-cost lenders and stop imposing unnecessary regulations on regulated financial institutions then we will continue to oppose that legislation.”
Of the two pieces of legislation, the CCCFA is thought far more likely to make the cut, because it has hit too many people in the pocket. The CoFI law, by contrast, is seen as too technical to influence many voters.
023www.tmmonline.nz
“If I were the minister I would definitely say yes, but I may not be the minister,” Bayly said.
‘If the CCCFA is still causing problems at the election, that is something that National could point to and say there is a problem with red tape and waste making life harder for everyday Kiwis.’
opes that politics might cut through the red tape that is throttling the lending industry remain deeply uncertain.
It is far too early for election manifestowriting, and both laws are expected to be overshadowed by other more visceral issues, such as the cost of living.
At this stage, Bayly is beating the CoFI drum, but without any certainty of success.TheCCCFA presents similar issues for National. It is too soon for the election manifesto and faces similar competition for party time and attention.
But it was one thing for Bayly to battle on this subject, another for the party as a whole to take it to heart.
So will the National Party fight CoFI and other laws at the next election or afterwards?
It says the Government has passed too many separate laws, including COFI, FSLA and the CCCFA, and they all have too many overlapping enforcement agents, raning from the Commerce Commission to the Ministry of Business, Innovation and Employment and the Financial Markets Authority.
Thomas says it is ironic how little media coverage the law got as it was going through parliament, and that is precisely because it was seen as a bit too technical for the media and for the opposition.Hesaideven later, questions about CoFI and the CCCFA could fail to compete for attention among National memberspartyandthe wider public, when issues like the cost of living were getting people far more agitated.Thomas argued that issues like CoFI and the CCCFA would normally be of great concern to National.“Interms of cutting red tape, that is core National Party business,” he said.
The result? Many are limiting their savings potential or putting their first home deposit at risk. I'd say that most clients advisers meet and talk with would fall into one of these categories.
0.2%80%84%15%1.5%
TMM 04 | 2022024KiwiSaver Changing lives in a few minutes.
Most Kiwis don't realise how easy doing a KiwiSaver review can be and leave their plan ticking over on settings that aren't right for their needs.
Rupert Carlyon, Founder and Managing Director, koura
To give that some more context, here are some findings from a sample of 2,000 KiwiSaver reviews completed this year using our publicly available online advice tool. It shows a concerning mismatch between what Kiwis told us about their current KiwiSaver account settings at the time and what we would recommend for their needs and profile.
www.kourawealth.co.nz
buyers should have been in a conservative fund type, but just 36% were – meaning the majority were exposed to far too much risk for their deposit goals.
Didn’t know what type of fund they were in – an obvious and concerning issue. It suggests they hadn't made an active choice and that many (if not most) were likely invested too conservatively, limiting their savings
Of those saving for retirement should have been in a growth or aggressive fund, based on their goals and risk profile, but only 53% were. Once again, that's a lost savings opportunity and a costly mistake that a KiwiSaver review can rectify.
A big call? No. Here's why asking the KiwiSaver question is so crucial - for Kiwis and advisers.
Asking the question "Have you reviewed your KiwiSaver plan" might well be one of the fastest ways advisers can add value to a client's financial life.
Koura Wealth Limited (koura) is the issuer and manager of the koura KiwiSaver Scheme. The PDS is available on the website
Ofpotential.first-home
on average compared to their current fund: with koura, they would have saved on average $30 in fees per year. The more Kiwis pay in fees, the harder their KiwiSaver plan has to work to deliver the retirement they want.
Higher returns (on average, $314 p.a.): that’s what those saving for retirement would have achieved over the past two years had they been invested with a koura portfolio in the recommended asset allocation. The better returns are primarily due to investors being in sets of funds that are too conservative for their objectives and risk
Lowertolerance.fees
Protecting that hardearned home loan deposit.
025www.tmmonline.nz
Typically, our recommendation for first home buyers is to be in a conservative fund until the keys are safely in their hands - and then adjust their KiwiSaver profile for the long term. But as our sample data shows, most are exposed to too much risk for their short-term goal.
Helping clients understand how easy, fast, and accessible a KiwiSaver review can be is a great place to start. With koura, for example, it takes five minutes, all online. It's fast, but using our digital advice tools, it's also comprehensive. It evaluates their risk profile and needs, makes fund and portfolio recommendations, and provides a comparison with their current KiwiSaver plan.
How it works All advice is delivered by the koura digital advice tool
For a first home buyer, adviser intervention with the simple question - "Have you reviewed your KiwiSaver plan?" - could be the difference between accessing the deposit they need when they need it or delaying their homeownership plans.
Find out how to be a kōura Facilitator here.
Facilitator Model For mortgage and insurance advisers
Clients can — either with you or in their own time — answer a few questions about risk and objectives, and in five minutes or less, the koura digital advice tool will:
With rising interest rates and high property prices, budding first home buyers have a lot to contend with. And when using their KiwiSaver savings for a first-home deposit, there’s no room for unnecessary risk – especially in times of market volatility.
1 Provide a recommendation on the portfolio of koura funds that is best for them, and
"I am an investor"
The advice is delivered by the koura digital advice tool and all responsibility and compliance associated with the advice is borne by koura (providing the process has been followed in line with the training provided).
Five minutes. It’s a tiny amount of time that could make an enormous difference to life in retirement, or buying the first home.
2 Provide advice on what their koura KiwiSaver plan will give them and compare their current KiwiSaver fund with their existing fund.
Not enough time. Where would I start? Retirement is ages away... There are many 'reasons' why the KiwiSaver review gets knocked off the personal-admin list. But as our sample data shows, on the whole, there's a real need for Kiwis to shift their mindset from "I have a KiwiSaver plan somewhere" to "I am an investor" and to review their plan and settings regularly.
Today the Link Financial Group unifies the Mortgage and Insurance Link Consumer facing brands, the Advice Link CRM and the FG Link Fire & General Business all under one Roof providing a home to 200 plus Adviser businesses across all aspects of financial services. Roughly 40% of our Advisers operate under the Mortgage and/or Insurance Link brands and 60% operate under their own brands; +- 70% of our advisers businesses operate under the Link Financial Group FAP Licence as Authorised Bodies whilst 30% of our advisers businesses are operating under our own licences.
The Mortgage Link journey began +- 33 years ago as a small group of advisers operating under the Mortgage Link brand essentially as a co-operative and as one of the original New Zealand Mortgage Aggregator businesses. The business is very well accustomed to maintaining great relationships with our lender partners and developing new relationships for the benefit of our adviser businesses, hence the fact that Link Financial Group has Head Group Agreements with most NZ Lenders and Insurers.
The same principle applies to our fees. We have options ranging from Fee only with no commission splits through to low fees and higher commission splits.
Setting out to build our own CRM, Advice Link in 2016 seemed like a crazy idea at the time but today we are proud to say that we have created a leading Mortgage and Insurance CRM used by our advisers to run their businesses and to seamlessly incorporate the changing regulatory requirements into their business processes. Advice Link was built first and foremost as a compliant advice process with emphasis on record keeping, auditing & File reviews in mind. The CRM has evolved very quickly to become a complete tool for advisers to run their businesses whilst remaining compliant. Advisers cannot afford to spend countless hours doing admin and as such the system provides advisers the ability to outsource administration duties allowing them to focus on advising clients.
With a strong focus on business growth, we have very successfully helped our advisers to grow their own advice businesses through adviser growth, acquisition or broadening the scope of their businesses by adding insurance and/ or referring Fire & General.
We have also become very proficient in the area of succession planning having now helped numerous adviser business exit gracefully from the business through providing win-win succession solutions.
The financial services landscape has changed significantly over the last few years and in line with that the way that advisers run their own advice businesses. In turn Aggregator/Dealer Groups have had to adjust and adapt new models to accommodate the different options the new regulatory landscape affords advisers. Link Financial Group believes that advisers should be able to choose the model best suited to their own business and as such we offer a broad range of models to suit almost any advisory business. We continue to evolve as a company and have already made significant changes to the way we are able to support advisers in our network on a national basis.
We believe support and choice go hand in hand. With over 30 years of experience supporting Kiwi adviser businesses, we pride ourselves on delivering a world-class service with a dedicated head office team that are here to assist and guide you.
Since 2016 we`ve been really busy…
In the next 6 months we have a number of additional exciting new developments on the horizon. Look out for the launch of our White Label offering Link Money followed by the Launch of Invest Link (Our In-House Investment offering) which will provide advisers with the ability to refer KiwiSaver and Investment clients to our in-house investment specialist building further enhancing their ability to earn a passive income.
In the words of Tom Hopkins, “You are your greatest asset” Let us help you to unlock your true potential by giving you back more time to focus on what`s important to you.
Josh Bronkhorst, CEO,
Our Administration Service has been well received by our Advisers. In today’s labour market it is not easy to find flexible administrators to provide the 5, 10 or 15 hours per week admin service some smaller advice businesses require. Our Admin Service makes it possible for our advisers to outsource admin duties to Head Office based administrators. Admin is charged on an hourly basis making it possible for advisers to have the admin support they need on a pay-as-you-use basis.The sister companies of Mortgage Link, Insurance Link (our Insurance Dealer Group business) and FG Link (our In-House Fire & General Insurance Business) have in the last 5 years established great relationships in the Life & Health Insurance and Fire & General space and now provide a solid foundation to our advisers to either do Life & Health insurance themselves or to refer to a specialist in the group. FG Link provides the opportunity for our advisers to refer clients in need of Fire & General to our in-house specialists, building up a passive income whilst maintaining control and client confidentiality.
Link Financial Group Limited Link Financial Group was awarded its Full FAP Licence early in April 2022 The evolution of the Mortgage Link Branded Aggregation business to Link Financial Group Limited Financial Services Aggregation Group WWW.INSURANCELINK.CO.NZ Ι WWW.MORTGAGELINK.CO.NZ Ι WWW.LFG.CO.NZ
To remain competitive in this industry we offer a number of key differentiators.
Your One-Stop Aggregation/Dealer Group business and “Your Link to a better advice business”.
LFG is all about providing adviser businesses with choice. Whether you need an Aggregator, Insurance Partner, a CRM, a Fire and General Insurance partner, administration support or support to secure your own FAP Licence; LFG has the solution. Whether you want to operate under our FAP or your own, use our brand or your own or simply use the CRM.
Link Financial Group (LFG)
027www.tmmonline.nz FA P We provide our Authorised Bodies with FAP resources, audits & file reviews and much more CR M Market leading CRM with Mortgage & Insurance workflow management and automated record keeping, making compliance easy. BRAN D Use your own brand or use the Mortgage & Insurance Link brand/s. PRICIN G Competitive pricing options to suit everyone. SUCCESSIO N PLANNIN G Multiple options available if/when you decide to exit from the industry. GROU P P I SCHEM E Quality wording with very competitive pricing PASSIV E INCOM E Build a passive income through Fire & General and Investment referrals in-house COMPLIANC E Operate under your own FAP licence with in-house compliance support to help you apply for your licence. Supporting Advisers for over 30 years your LINK to a better advice business! Call us today to discuss your options 0800 466 784 JOSH BRONKHORST P: 021 835 506 E: josh@lfg.co.nz KELLY BROUGH E: kelly@lfg.co.nz P: 027 373 2864 adviceinvest www.lfg.co.nz
TMM 04 | 2022028UPFRONT | MY BUSINESS
I studied law at university and met my New Zealand wife in the UK just after I graduated. So, I went with her to New Zealand for 12 months just to see what it was like, and I needed to get a job, so I ended up in banking and finance, with the BNZ and Sovereign.
Can you explain how important is your role as adviser in this business?
If it wasn't for the banks, we would not have a job. When they drop the ball, or
What is the biggest fish you have ever caught?
li Toumadj is director and manager of the Prosper Group, which handles mortgages, insurance, investments and KiwiSaver. He has been working in the financial sector in New Zealand since 1996. He is married with two daughters, aged 20 and 18, and lives in Auckland.
It is the fact that the staff are not consistent, anyone who is worth their salt either gets promoted or leaves to become a broker. The number of times the bank has offered a borrower x and we can give them y, or the banks have said they can't help them at all and we have managed to get them into a home is just so satisfying.
A
Helping to create financial security
Once I decided to stay in New Zealand, I realised I would need to do another year of study (to practise law) and the job at the bank was going really well. I had got a couple of promotions, so I thought I did not really want to go back to studying and take a massive pay cut, so I stayed in banking and finance.
What is the worst thing about your business?
What is your favourite film and what sort of music do you like?
How did you get into this industry?
You have now worked in the insurance and mortgage sectors for many years, what is the most satisfying thing about it?
It is all the additional work that is required around compliance. It is probably taking us four times as long as it used to, to get a loan together. There are many reasons for this. The problem is the Financial Services Legislation Amendment Act (FSLAA), it is the CCCFA, it is the requirements that the banks have put on us, everything is really onerous. I have got two people to go through bank statements line by line to identify anything the banks might ask us about. There is no point in submitting an application to the bank without doing that because they will just send it straight back to us.
about it, we have just got to do the best work we can.
I think so, I think I would do the same thing. It is such a challenging but rewarding industry to be in. It is really down to how much time and effort you are willing to apply. The reality is that if you do a good job, you get repeat business, it is really that simple, do a good job and you get more business, you can’t beat that.
My favourite film of all time would be Scarface, with Al Pacino, and as for music, I am pretty relaxed, I listen to everything, every genre. ✚
If you had your life all over again, would you do the same thing?
Do you have a favourite pastime?
It is just the way it is, you just have to get on with it. There is nothing we can do
029www.tmmonline.nz
just provide a poor service, that is an opportunity for us. Over the past 12 or 24 months we have had a number of clients come to us and say “the bank has said no, can you help us?”. We don't do anything differently, we just sit down with them, work through the process and provide a solution.
How do you feel about that?
What is your working day like?
BY ERIC FRYKBERG
It is really phone calls, emails and client meetings and processing work, so yeah. It is worth it, helping others create financial security underpins everything that I do.
It is the clients, it is meeting different people and being able to provide solutions for them. When you can help someone get into their first home and help them realise their dreams, nothing beats it. It doesn’t matter if it's just a small top-up to help clients do their renovations or fund them for a new property, it is very satisfying.
When I am not in the office, I like to go fishing, in the Hauraki Gulf, or in Coromandel. It is the only time I really go to relax. We go out by boat and we try to get a good catch of snapper, which we take home and cook.
We have caught some monster fish, I once got a bass, which was I think about 30 kilos.
Why does this happen when the bank ultimately provides the money anyway?
TMM 04 | 2022030
Google and YouTube are the two most-used search engines (yes, YouTube is a search engine).
BY PAUL WATKINS
D
Now you know what you need to do, this is how to do it.
First, put yourself in the role of a prospect and search on Google. Choose a browser you do not currently use, such as Opera or Edge so your own browser
Now if one of your pages has the headline, “First-home buyer grants” then you will show up higher in the search rankings.Andlogically the page on your website that has that headline contains lots of useful text and/or videos about home loan grants or options.
Keyword research showed that the five most popular search phrases for
Here’s how to ensure that people searching for your services find you online.
COLUMNS | SALES & MARKETING
While you have your main pages –Home, Services, Contact and so on, the others are often called “landing pages”, as they are the pages you land on once you click a Wheneverlink.you run an online ad, be it on social media, LinkedIn or Google, make sure it is linked to a relevant page on your Matchsite.the headlines on each page to those that people are searching for.
Where do prospects land?
And once you have researched this, it is what happens next where you can makeThinkgains.ofit this way. Your client base can be segmented into clusters, cohorts, types or groups, whatever you prefer to callEachthem.cohort will have a specific reason for contacting you. For example, you may have groups of first-home buyers, those aged 45-plus wanting to tradeup, others who are looking to renovate, business loan-seekers, some wanting to consolidate debt, and so on.
Similarly, I might search for “mortgages for first-home buyers” or “how do I buy my first home?” or “help buying my first home”.
I’ll keep going with the example of first-home buyers to illustrate my point.
Be careful here not to use jargon, go with the words people search for.
o you know what the people you want to connect with are searching for?
first-home buyers (at the time of writing, so constantly check), were “First-home buyer grant”; “Kainga Ora first-home loan”; “Easiest bank to get a home loan”; and two involving named trading banks.
Equally, for each market segment you want, research what is being searched and make a page or a blog post with that headline and relevant content.
Perhaps you have up to six or eight distinct groups. The number is not the issue.The challenge is offering a solution to their “problem”. If I am looking to renovate, I might search for “mortgages for renovations (then the name of my city)”.Google entries that have the right headlines that meet this search will show up first.
With luck, it takes them to a dedicated page on your website. I had a conversation recently about this with an adviser. Most website hosts will let you have up to 100 pages, some, even more, depending on your host provider plan.
There will be a range of ways to search for such information, which is the first step.When they search and then click on the desired headline that shows up, where does this take them?
I won’t get into search jargon but talk to a search engine optimisation (SEO) expert, who will explain meta titles and meta descriptions, which are how Google matches searches to pages. But for now, these are the basics steps.
Search for words and phrases that prospects in each of your chosen target groups might search for.
The second is to get an agency to do it forThereyou. are quite a few out there and their charges vary a lot, so interview two or three before committing.
Taking out ads on Google will raise your search rankings (at a cost), but before you pursue this, make sure that these ads land on the right pages.
If I want to finance renovations, I don’t care that you can do “mortgages for all types of client, including investment properties, renovations, commercial and first-home buyers” (the real headline on one broker’s webpage).
I only want to know that you have skills in financing renovations.
‘Whenever you run an online ad, be it on social media, LinkedIn or Google, make sure it is linked to a relevant pageon your site.’
The third option is to allocate the task
There is a famous saying; “If you’re selling to everyone, you’re selling to no one” – remember this when you write the text for your website pages and blob entries. ✚
031www.tmmonline.nz
So now when prospects search for those phrases, your relevant website page and/or blog post will appear and when clicked on will take a person to a page that specifically addresses their problem.Youwill probably have gathered by now that while this is not hard, it is time-consuming. There are three ways to do this in practice, the first being to do it yourself in a nominated regular, non-negotiable timeslot, for example, Friday mornings between 8:00 am and 10:30 am.
history doesn’t cloud the results.
You can also invest in a keyword tool –there are lots of options (Google it) and they are not expensive.
Now write down 20 or so phrases that give the results in the search of competitors or lenders. If they are search results that you would love to be among, then you are on the right path with your choice of search phrases.
These phrases are now your headlines for relevant landing pages on your website and blog posts.
As mentioned already, most web hosting companies allow you to host up to 100 pages at no extra charge, so use them. Make each one specific to the information prospects are seeking.
Now, under each of these desired search phrases, write five ideas for blog entries.These would be variations on the theme of the phrase. For example, if one of your search phrases is “First-home buyer grant” then five topics under that one could be, “Financial help for your first home”; “Using KiwiSaver to get your first home”; “Government grants for first-home buyers”; “Ways to get the 5% deposit for your first home,” and “Why
A blog post can be a video and transcribed text or just text that meets these topics. And one or two solid paragraphs are a good length.
Paul Watkins is a marketing adviser to the financial services industry.
to a competent team member, who is willing the learn the required skills.
using a broker is way less stressful than going direct to a bank for your first-home loan”.Ifyou have 20 search phrases that bring up competitors’ pages, then five topics in each of the 20 themes mean you now have 100 blog entries.
See how Google suggests phrases in the drop-down as you type. This is an indication of what is being searched for.
Perhaps now we have three separate trauma risks identified, each allowing more accurate quantification and likely to be more easily understood by clients.
Here, for example, the numbers might reveal risks ranging from say $50,000 to $100,000 or even $200,00 or higher, depending on the trauma event suffered.
It’s possible that any difficulty with identifying the right levels of trauma insurance is because we are fundamentally misunderstanding the financial risk that suffering a trauma condition might bring.
The media is not short of examples of people doing it very tough financially, in particular due to cancer.
Trauma recommendationinsurance–arewedoingitcorrectly?
How can one risk sensibly involve financial implications with such a large variance?Isn’titmore logical to split trauma risk up into separate risks based on financial consequences for the client?
TMM 04 | 2022032COLUMNS | INSURANCE
Irecommending?”don’trecallever getting the same question about life insurance or income protection.
The end result is clients end up with what they can afford - usually much less than what they actually need - an insurance product that leaves them both under-insured (because they don’t have enough of it) and over-insured (because it will overpay benefits for low financial impact trauma conditions they don’t need expensive insurance for).
I recall one well publicised case of
particularly when the traditional trauma product available is completely unaffordable for almost everyone at such high sums insured.
For a long time, trauma financial risk has been seen as one risk and there has been only one product option to protect againstViewingit. trauma risk as one risk creates difficulties because the range of potential financial consequences caused by a trauma condition is vast. It ranges from nil to many hundreds of thousands of dollars, potentially even seven figures.
a 41-year-old Kiwi with advanced cancer who needed more than $1 million to access targeted immunotherapy treatment only available in USA.
A financial risk so unidentifiable becomes difficult to advise on,
Of course, no one knows what severity of trauma event might strike. Even if
Cancer can strike anyone, regardless of income level or net wealth, so arguably all of us could face a seven-figure bill if we suffer a severe trauma condition.
I
It seems to me we can quite easily identify the financial risk of severe trauma conditions.
Surely we can do better for our clients? I think a possible solution is to stop seeing trauma risk as one risk.
BY STEVE WRIGHT
Trauma risk of lesser severity may be partly dependent on age, income levels, net wealth and other insurance products held, like private medical insurance and income protection. Without these, the financial cost of lost income and private medical expenses must be included in the trauma risk calculation.
’m often asked: “How much trauma cover should I be
Perhaps the $50,000 and $200,000 events are different trauma risks again, to be further separated.
So why do I get this question so often and what is an appropriate answer? Are traditional comprehensive trauma products still fit for purpose? And has that purpose changed?
Fortunately, trauma insurance product design has advanced significantly in the last decade. In the New Zealand market we now have several different types of trauma cover products, designed to do different things.
033www.tmmonline.nzwww.tmmonline.nz Unambiguously Committed to Independent Advisers
Finding the right combination of trauma cover in the right amounts to efficiently protect against less severe and the most severe trauma events, requires advisers to understand the various trauma cover options very well, but this is what makes you and your advice invaluable to clients.
A good example might be a cancer detected early, while still of relatively minor financial impact, but which, over time, progresses, spreading to become a severe trauma event five to 10 years later.
In the next edition of TMM, I’ll explore the risks multiple separate trauma conditions might bring. I think this is a different trauma risk to the one considered here, which is about having enough cover to properly protect against a severe trauma event. ✚
The big financial risk and possibly more likely scenario than multiple separate trauma conditions, comes with trauma conditions that are either immediately very severe, or that becomes progressively very severe over time.
Some products are designed to make insuring severe trauma conditions more affordable, exactly what we need.
We are no longer restricted to one, comprehensive but unaffordable option.
As diligent risk advisers we must recommend covering all the risks we can’t take ourselves, especially the very bigOfones.course, separating trauma risk into multiple separate risks is of limited practical use if you still can’t afford to insure against them.
suffering a trauma event of less severe magnitude is more likely than suffering a severe trauma, it does not remove the risk that the trauma event you suffer could be severe.
Various options exist for advisers to separately cover the different trauma risks based on severity along the lines I’ve identified above and insure each risk separately.
To protect against severe trauma conditions, we need products that address the affordability of severe trauma financial risk.
In the end your client might still not be able to afford seven-figure severe trauma cover. Maybe they can only afford to cover 50% of that need, but this is still a vastly better outcome than is likely if we continue using only the same traditional comprehensive but unaffordable, trauma products.Sometrauma products are designed to pay benefits for multiple separate traumaTheseevents.areasolution to a different need - the need for cover against multiple separate trauma conditions. But they are not an affordable solution for the high levels of cover needed to protect against severe trauma risk.
Steve Wright is the general manager product at Partners Life.
‘Isn’t it more logical to split trauma risk up into separate risks based on consequencesfinancialfortheclient?’
This requires products that pay big sums at an affordable price, not products that pay smaller sums potentially twice or three times.
03 MORTGAGE ADVISER WINS
The Reserve Bank has made its third consecutive 50 basis point official cash rate increase. Here's what the bank said.
08 SECOND TRANCHE OF CCCFA REFORM DUE OUT OF THE END OF THIS MONTH
06 FAP PROGRAMME INCHES FORWARD
Squirrel is to merge with the Wellington-based mortgage brokerage, The Home Loan Shop.
Ι tmmonline.nz/newsletter-signup
The TOP 10 stories
The FAP licensing programme is inching forward but is still making slow progress.
09 ADVISER LAUNCHES DIGITAL HOME LOAN SERVICE
The second stage of proposed changes to the Credit Contracts and Consumer Finance Act (CCCFA) is still being examined by the Minister of Commerce and Consumer Affairs, David Clark.
tmmonline.nz
The Government has unveiled a second tranche of proposed changes to the Credit Contracts and Consumer Finance Act (CCCFA).
Sign up to the TMM email newsletter.
On the day that the changes to the Credit Contracts and Consumer Finance Act (CCCFA) come into effect, some unexpected dissent has emerged.
‘NO-LOAN-NO-FEE’ DISPUTE
02 THE REASON WHY ADVISERS ARE DELAYING FAP APPLICATIONS
TMM 04 | 2022034
A mortgage adviser who sent a bill for a loan that did not go ahead has won a disputed case for payment.
04 SECOND TRANCHE OF CCCFA CHANGES ANNOUNCED
05 NEW CCCFA RULES COULD LEAD TO FICTITIOUS BUDGETS
Tella, a New Zealand fintech, has launched a new digital mortgage application service.
10 HIGH INFLATION BRINGS NEW CHALLENGES FOR HOME-BUYERS
Mortgage advisers think higher inflation will bring more pressure for everyone in the homebuying business. One bank is picking a 4% OCR this year.
A lot has happened in the market since the last edition of the magazine. Here are the most-read industry stories from tmmonline.
07 WHY THE RBNZ HIKED THE OCR - AGAIN
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.
Concern is growing that many advisers have not started the process towards full licensing and will not be able to continue in business. Eric Frykberg looks at why advisers are taking their time.
01 BIG MERGER IN MORTGAGE MARKET
streams? Give your bottom line a bump with better™ Partner with better™ for leading vehicle and personal finance for new and existing clients. We’ve settled over half a billion in loans and helped thousands of Kiwis. With our team of 20+ expert business managers, you and your clients are in good hands with better™. Sharp interest rates | Smart tech and processes | Seamless support Register with better™ before 10 November 2022 for your chance to win an Air New Zealand Mystery Break for two. Simply quote MYSTERY when you contact the team on 0800 666 061. Better business and a break? That’s better™
0800 666 061 better.co.nz/advisers
Looking for new revenue
