TMM Banking Special: What banks are saying about advisers 05/2023

TMM 05 | 2023 | www.tmmonline.nz

BANKING SPECIAL: WHAT BANKS ARE SAYING ABOUT ADVISERS WHO IS WINNING THE BATTLE FOR BUSINESS

TIPS TO IMPROVE DISPUTES DISCLOSURES

HOW TO BE SUPERSPECIFIC ABOUT WHO YOU WANT TO ATTRACT

FROM INTENATIONAL SALES MANAGER TO LOCAL MORTGAGE ADVISER

FEATURES - SPONSORED CONTENT

How credit policy can help you build your clients a bridge over tough times. Challenges refinancing or first home buying? Pepper Money policy might be

Steady tightening of credit availability alongside ongoing inflation has translated to significant economic contraction for Kiwi householders. For some, staying afloat on a rising mortgage rate is increasingly challenging, for others the dream of ever purchasing a home can seem to be drifting further out of reach. There may be an answer.

TMM 04 05 | 2023

Pepper Money has developed a range of policies that together can act to create a bridge to help your customers in this challenging time. The flexible thinking behind the options is what makes the nonPepper Money’s Country Head Campbell Smith explained: “There’s been a lot of focus on – and while we agree with industry peers, that some borrowers could be assessed on a lower rate – it can’t be the only way to support them. That’s why we’ve been developing a range of policies that can work together to provide our customers with the options they need to manage in this challenging environment,” Smith said. “In times of uncertainty, borrowers need some financial stability and surety to help them navigate these market conditions, and not get locked out of home ownership. There is no one answer. A number of policy levers are required to deliver the solution. By providing options on things like length of term or by capping repayments we can help advisors build these customers the bridges they need to get achieve their financial objectives..” The Pepper Money view on this market is that for some people in certain situations, what they need is a temporary solution, providing support until the environment stabilises, or until their circumstances improve. That position that is certainly true to the Pepper Money values and mission to help their customers succeed. As Smith says, “We take a flexible and balanced approach to policy in order to give customers the help they need to stabilise, or to even be included.” Talk to your BDM about finding a solution for your client. We make it easy. Our Pepper Product Selector* can give you an indicative response

in under five minutes and we have an accessible credit team who are always ready to workshop any scenarios. How Pepper Money helped Sheridan^ leave her past behind After a divorce, Sheridan, a single parent, was close to giving up hope of ever owning her own home. She had a bit of history getting in the way. Having had full on health issues for a long period a few years back, she went through significant financial behind on her bills she ended up going through a no-asset procedure (NAP). She had since been discharged but it was still a problem. As well as credit history issues, Sheridan had a low deposit and the house she was looking at needed some work upfront. It was a tricky situation. She so badly wanted to buy a home for her and her young daughters. Ironically the loan amount Sheridan was looking for would mean paying less than renting – but when she took the idea to her bank it was a flat no. Sheridan went to other lending establishments for help, but they all turned her down. She was on the point of giving up completely when a Financial Advisor she’d been recommended said he wanted to contact Pepper Money on her behalf. He said that Pepper Money was the sort of lender who specialised in complex situations and that they would find a way to help if they could. The Financial Advisor workshopped the scenario with the Pepper Money team and eventually a solution was able to be found. Working with policy options on credit history issues, gifted funds from family and a pragmatic approach to the loan term, her home loan dream suddenly became real. An application was successfully submitted and approved. Sheridan and her girls had found their new home. It was an outcome the whole team celebrated! If the bank says no – always give it the Pepper Money non-bank test.

Important to know: All applications to us are subject to us completing responsible lending checks and considering the borrower’s individual circumstances. Credit assessment, eligibility criteria, lending limits, terms, conditions, fees and charges apply. The information in this article is a guide. It’s not intended to imply any recommendation about any financial product(s) or constitute tax advice. For more information about our products, please refer to our online product guide, or talk to your BDM. Of course, if your client requires financial or tax advice they should consult a licensed financial or tax adviser. *Pepper Product Selector is a great tool for quick responses. But please note that terms and conditions apply not a formal approval for a loan and financial commitments must not be entered into based on that indicative response. It’s not a suggestion or recommendation of any particular loan product. It’s a guide only based on the basic information provided and the credit history information obtained for the primary applicant. The actual interest rate and approval will depend on the applicant’s circumstances and their information verified during the loan application assessment after a formal application has been submitted. The final interest rate may be more or less than the rate provided in the more applicants, the circumstances our decision regarding any formal loan application. This case study is not a testimonial and is provided for educational purposes only. It is not a substitute for professional advice. Outcomes will vary depending on individual circumstances. ^Name has been changed for privacy. © Pepper New Zealand Limited NZBN 9429031065153 | NZ Company Number 341 www.tmmonline.nz

Sourcing non-bank finance for your prime clients? If the rates are double digits, there may be a better fit. Keen to know more? Contact the property lending specialists at Resimac.

TMM 05 | 2023

Contents UP FRONT 06

EDITORIAL Be careful what you wish for with a new Government

NEWS Big plans for growth at both LFG and Vega

PEOPLE Financial Advice NZ looks for new CEO; Jack Patel gets a new gig and Gold Band Finance expands big time.

PROPERTY NEWS Property manager costs to soar, Successful property investors share same traits, what is the best property tax structure.

REGULATION Tips on how to improve disclosure of your complaints process.

LEAD

BANKING SPECIAL In this issue of TMM we examine what banks are saying about advisers to the Commerce Commission and we also dig into the stats to see who is winning the battle for business.

FEATURES MY BUSINESS

FROM GLOBAL SALESMAN TO MORTGAGEADVICE AUTHOR Deepesh Chaudhary started his career as an international sales manager and mobile mortgage manager and now is specialising in small business loans – even having written the book about it.

HOUSING COMMENTARY Is the housing market emerging from the doldrums?

COLUMNS 30

SALES AND MARKETING It’s no longer enough to know why potential clients should choose you. Be super-specific about who you want to attract – and then tailor separate advertising campaigns to match their precise motivations.

OPINION - SUPPORTING ADVISERS FOR GROWTH

28 www.tmmonline.nz

UP FRONT

EDITORIAL

BE CAREFUL WHAT YOU WISH FOR

suspect the financial services sector got what it wanted in this year’s election. A change of government. But I wonder if it’s going to be as good and plain sailing as many expect? The incoming administration has been flagged as the most conservative New Zealand has had in a lifetime. When you review all the promises made during the campaign – along with some speeches, we could be staring down the barrel of more significant change. This is something a regulationfatigued sector does not need right now. The list of changes proposed by the government-elect are significant and includes a repeal of the CoFI legislation, winding back the CCCFA changes and fiddling with KiwiSaver and NZ Superannuation. It’s not often in my career that I have seen an incoming government with such a big list of changes in our sector. But, before getting into the above list, the one which is potentially the most worrisome is a speech given to a Financial Services Council earlier this year. In that presentation National’s commerce spokesman, Andrew Bayly, who is likely about to become a cabinet minister, talked about re-engineering the financial services sector. The sector has just been through seismic changes including FSLAA, FMCA, CoFI just to name a few. We have attempted, unsuccessfully, to get Bayly to expand on his thoughts. Making changes to CCCFA will be welcomed, as long as they are sensible and focus on protecting the most at risk borrowers – such as those who are targeted by third or fourth tier lenders, loansharks, payday lenders, buy-nowpay-later services and the like. Not the ordinary New Zealanders who are after a home loan.

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CoFI is a whole different beast – I have argued that CoFI should remain. It’s not a view shared by readers as expressed by some of the comments made on our website. It’s unfortunate the FSC has failed to articulate a view on this proposal – after all its members are largely the ones impacted and it has self-styled itself as a lobby group. A general observation is that CoFI is welcomed, rather than warmly embraced, by banks, insurers etc. It’s hard to say whether this is window dressing for corporate branding purposes of a genuinely held position. Organisations preparing for CoFI have already invested an inordinate amount of time and money in preparation for the legislation. This has already seen reviews of products and services which have not been in the customers’ best interests, and this is borne out by the growing number of fines paid. Kiwibank is the latest to join this list. One area mortgage advisers may well rejoice about is property investment. While details are sketchy the new government has said the loss of interest deductibility will be reversed, either in phases or all at once; the Brightline Test will roll back to two years and it will bring back the 90day no-cause termination clause for renting. Don’t expect things to be quiet in our sector anytime soon.

Philip Macalister Publisher

Design Michelle Veysey

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TMM 05 | 2023

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Supporting advisers for growth BY KIP HANNA

ecently we hosted our annual conference in Auckland with the theme ‘Strong Together’. Why? The stronger we are together (as a group) with our processes, services, suppliers, partners and advisers, the better the service provided to our clients - and the more Kiwis we can help become financially free, independent and making better financial decisions. At NZHL, we pride ourselves on being a people-led and technologically enabled business. We provide extensive wraparound support to our advisers: from training to lead generation and branding; compliance and customer experience to business operations, technology support, business coaching and excellent team engagement and culture. These are real and tangible benefits an adviser would otherwise have to pay or source themselves - solid support systems free advisers up to focus on delivering better service to more clients. NZHL has a high-touch client proposition: our skilled advisers provide in-depth ongoing advisory services. When considering who to work with for their mortgages, homeowners tend to choose based on ease of process, brand reputation, recommendations, the availability of ongoing support and the ability to help with more than a mortgage. Our data shows our clients value personalised service and advice, transparency and consistent contact; clients have a higher satisfaction score with frequent interaction and reliable follow-through. We should consider what clients want from an adviser and an advisory brand. Higher client satisfaction scores enable a longer-term relationship and more loyal, financially educated clients – it drives recommendations and new business - while focusing on where the client needs support to expand their value and future growth opportunities. Unique technology The technology behind NZHL is DebtNav, our unique online tool that enables faster financial independence

‘TO SUSTAIN AND GROW THEIR BUSINESSES, ADVISERS NEED SUPPORT, WITH THE RIGHT SKILLS, TOOLS AND OPERATIONAL SERVICES’

and allows for informed decisionmaking, with the ability to monitor, plan and review. According to our latest Client Survey,* 80% of our clients feel in control of their financial well-being - no small feat given the current economic cycle. It means our proposition (financial freedom faster) is working, and reinforces why we have ambitious growth aspirations. As we scale, we can help more Kiwis into a better financial state; we are aligned and committed to delivering this. With ongoing economic uncertainty and increased requirements when applying for finance, homeowners are actively seeking personalised advice. They want coaching and personalised support; they want to talk to an adviser. Choosing a home loan is the most difficult (and important) financial decision many Kiwis will ever make. Imagine if all homeowners had access to someone who knows their local community and is ready to listen to their financial goals and help tailor a plan to get there. That is the NZHL promise: personalised service enabled by technology and backed by the New Zealand Government, with a mandate to support more informed, better financial choices. I recognise this may seem a stretch - advisers are under pressure with the market requiring more. To sustain and grow their businesses, advisers need support, with the right skills, tools and operational services.

I encourage all advisers to surround themselves with a solid support network that understands the challenges and the unique operating environment to deliver value-services that support success. About NZHL NZHL is a passionately Kiwi, passionately local, home loan and insurance network currently helping more than 50,000 New Zealanders collectively save millions of dollars in interest costs every year. Part of Kiwi Group Capital Ltd (KGC), which is 100% Government owned, NZHL operates with an independent board and 70 local business owners nationwide. NZHL believes in helping Kiwis achieve financial freedom faster and takes a structured, personalised approach to bring this to life. *NZHL Client Survey 2023

ABOUT NZHL NZHL is a passionately Kiwi, passionately local, home loan and insurance network currently helping more than 50,000 New Zealanders collectively save millions of dollars in interest costs every year. Part of Kiwi Group Capital Ltd (KGC), which is 100% Government owned, NZHL operates with an independent board and 70 local business owners nationwide. NZHL believes in helping Kiwis achieve financial freedom faster and takes a structured, personalised approach to bring this to life. ✚

Kip Hanna is the CEO at NZHL. www.tmmonline.nz

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TMM 05 | 2023

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UP FRONT

NEWS

Adviser firm whacked $133,000 over its advice An advisory firm has been ordered to pay a client $133,000 after poor advice.

inancial Services Complaints (FSCL) made the ruling after the client was unable to resolve the issue directly with

the firm. The warning follows a case of a woman who went to a financial adviser in August 2021 after her mother gave her $500,000 to buy her first home. She wanted advice about a mortgage. The adviser also arranged for a colleague to give her investment advice, which led to the client investing all of her money in a growth fund. A month later, she signed an agreement to buy a townhouse off the plans, which was due to be finished by October last year. In March last year the equities market and the woman’s fund balance was dropping, but she was advised

there would be a “turnaround” in her investments by October. That did not happen. By the time she cashed up her portfolio in November, she had suffered a $160,000 loss and had to borrow an extra $160,000 to buy the townhouse. In her complaint to FSCL the client alleged the adviser should not have told her to put all her money into a high risk investment. There was some dispute around what was said between the client and the advisers FSCL was critical of the advice process saying the “The SOA (statement of advice) seemed largely to be a pro forma computer-generated document. It didn’t discuss the client’s tolerance for risk. It recommended putting 100% of the funds in a 100% growth fund, but it didn’t have any warnings or explanations about the risks around doing that.” “Although the client and adviser spoke about the SOA afterwards,

the adviser didn’t make any notes of those discussions. The SOA also didn’t explain that the recommended timeframe for investing in a growth fund is usually a minimum of five to seven years,” the FSCL says in its decision. The firm has been held responsible for 80% of the client’s loss: $128,000. FSCL says the client is responsible for 20% of her loss because she had some prior limited experience of growth funds, and because she didn’t point out to the adviser the SOA didn’t include her house purchase – although these things were minor. It also considered the firm should pay $5,000 for inconvenience: a total of $133,000. The FSCL says it is important for advisers within a firm to share information with each other about a client’s needs. It is also important for an adviser to ask questions about the client’s intentions and wishes, and to give – and record – advice about risk and investment timeframes.

Prospa joins Lend Capital’s new lending marketplace launch New small business lending platform launches in New Zealand.

mall business lender Prospa is to partner with Lend Capital to bring its small business loans marketplace to New Zealand. Lend Capital launched in New Zealand this week with key non-bank lenders Prospa, Bizcap and Homesec. Lend Capital co-founder Shaun McGowan says Lend is coming to Kiwi entrepreneurs following the success of the marketplace in Australia.

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“In Australia, Lend has facilitated over 42,000 small businesses to access over $1.5 billion in working capital and we’re excited to bring our best-in-class technology to New Zealand. "Thanks to our unique data analysis and decision engine we can match clients with the right commercial products and ensure a better chance of approval,” McGowan says. Lend Capital offers small businesses access to a suite of non-bank lenders and aims to provide a seamless customer experience by reducing the stress and time usually associated with seeking a loan.

Prospa NZ managing director Adrienne Begbie says the partnership with Lend Capital shows its commitment to Kiwi SMEs by giving them more choice and better access to funding. “The Lend marketplace will give small business owners and brokers a simple way to find the right lender and products to suit their business needs and increase their chance of approval. They can get fast access to the funding they need so they can get back to focusing on what really matters running their business,” said Begbie. ✚

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UP FRONT

PEOPLE

People on the move Got a new appointment you would like to tell advisers about? Email details and a pic to editor@tarawera.co.nz

Financial Advice looking for new CEO

when she took on the role, things have changed and she is now a strong advocate for advice. “When I first started at Financial Advice NZ, I obtained a financial adviser for the first time, and this transformed both my financial behaviours and my financial wellbeing. “I truly believe quality advice transforms New Zealanders financial health, wealth, and wellbeing. “This belief has been my point of reference when delivering advocacy, promotion, and ensuring professional standards are maintained.”

Shanks says the mere fact Financial Advice NZ is still in existence five years after it was formed is an achievement. “It was always an unknown and we have an organisation which everyone can be proud of.” Another achievement she is proud of is the association’s lobbying around the CCCFA law changes. “It was such a poor piece of legislation and regulations. It proved that with a well-designed campaign you can influence change. Having advisers provide 300 stories of how their clients had been impacted within 48 hours certainly provide the fuel for the fire.” Shanks says she would have liked to do more around public awareness of the value of advice, however the distraction of Covid, along with the implementation of the new adviser regime and the changing business models, had hampered this goal. Shanks isn’t revealing where she is going, but says she has “recently been approached regarding a couple of other opportunities.”

Arrow Finance has extensive and broad experience in the lending sphere, he says. “Advisers love a new lending company and we’re not here to compete with the existing market, we’re here to provide additional options to the advisers.

In its first few months it has leant more than $15 million. “We do have imminent plans to expand into the peer-to-peer space, but we can only launch this once we tick all the boxes compliance-wise.” Arrow does only first registered mortgages and non-CCCFA loans. “Our expertise lies in furnishing funding that's backed by residential properties, designed for business or investment endeavours.”

Katrina Shanks has resigned as Financial Advice NZ chief executive. Shanks is one of the longest serving chief executives of an adviser association in New Zealand. She was appointed as the inaugural Financial Advice NZ chief executive in 2018, after stints as a National Party MP and CEO of the Funeral Directors Association. Her initial role was to bring three organisations - the Institute of Financial Advisers (IFA), Professional Advisers Association (PAA) and NZ Financial Advisers Association together into one body. While Shanks admits she didn’t know much about financial planning

Patel flies off to new start-up Business development manager Jack Patel has left Prospa to joined a new finance company – one which will predominately play only in the non-CCCFA space.

Gold Band on expansion plans Christchurch-based Gold Band Finance (GBF) has appointed three additional directors and opened a new South Island office. Massey University Professor of Banking Dr David Tripe joins the board, along with Mark Paget and former BDO partner and now a 012

TMM 05 | 2023

governance, advisory and consulting specialist, Stephen Tubbs. The trio brings a mix of academic, business and practical experience to the board. “These appointments are part of the ongoing moves by GBF to strengthen and grow the business on the back of its recently upgraded credit rating, increased profit, and growth in

reserves to fund expansion,” says chief executive Martin Brennan. The appointments coincided with those of experienced banker and equipment finance specialist Dave Sanders to manager West Coast (South Island) and Sean Trengrove to lead GBF in the Nelson/Blenheim region as part of GBF’s expansion strategy. ✚

UP FRONT

PEOPLE

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UP FRONT

PROPERTY NEWS

bill now before a Parliamentary select committee will significantly raise costs for property managers - through licensing and the auditing of trust accounts. Under the Residential Property Managers Bill, licensing costs alone could add about $3,000 a year for a sole trader. David Pearse, Residential Property Managers Association of NZ (RPRMA) chairman, is concerned the model could drive out boutique companies – those who have been providing the level of service the Government is looking for. It will make it more difficult for property managers to start their own business, he says. “They will need to apply for a licence after being in the industry for at least 18 months. They also will need to employ the services of a supervisory residential property manager to oversee the supervision of

property managers.” Trust accounts will not necessarily create the outcome expected, Pearse says. Cases where managers have stolen money have involved trust accounts of REINZ property managers, which were already supposedly audited. Regarding insurance, Pearse says property managers should already have public liability, professional indemnity and statutory liability insurance.

15 hours training ‘a joke’ Another issue that concerns the organisation is training. Pearse says suggestions from REINZ that 15 hours training will be sufficient to get a property manager’s licence is “a joke”. He says a Level 4 Certificate in Residential Property Management would be more appropriate. Post-election, the RPMA will be asking the Housing Minister to reconsider the bill, encouraging

DAVID PEARSE

Costs for property managers could soar under new bill

whoever gets the position to treat residential property managers like any other professional organisation or association – that is, with their own professional body. “This has been the case for lawyers, accountants and valuers. So, why not residential property managers?” The RPMA supports the Welsh model, where property managers and private landlords are both licensed.

ou can predict which property investors will be successful by looking at their habits and motivations, says Bayleys property management director Will Alexander. Alexander says one of the key traits he has observed over many years is that successful property investors keep their money in property. “They don’t extract it. If they do, they just buy more property.” Alexander’s team manages 10,000 residential rentals; he says the company is now the fourth biggest private landlord in New Zealand. He notes successful property investors have a clear ‘why’. “They know what the end goal is: why they are buying property? Is it for cash flow, is it for capital gains or is it for land banking? Or are they a default

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investor, where they have inherited an estate and never intended on being a landlord? We deal a lot with that.” Alexander says typically he sees success where investors who want cash flow buy in specific areas for that reason. Equally, if they are just after capital gains, they know that although on an annual basis a property’s cash flow may not be positive, that will be offset significantly by strong capital gains. “Another common trait is they hold, improve and upgrade what they have to a new version - and maintain the property over years.” There’s a lot of room for growth: at the industry’s best estimate, there are just over 600,000 properties in the rental pool, but only 410,000 bonds are lodged. Alexander says those figures

WILL ALEXANDER

Successful property investors share same traits

represent a massive gap in the market, particularly when 35% of the population rents. Just 58% of the country’s rentals are under property managers, while in Australia it is nearly 90%. “What is the difference? Regulation.”

What is the best property tax structure?

s the business of being a landlord becomes more onerous, investors often ask one question of accountant and property tax specialist Matthew Gilligan: what is the best property tax structure? He says it’s impossible to answer, as everybody’s individual circumstances are different. Outlining his view to a Bayleys Old vs New Property webinar, Gilligan detailed a couple of the common structures:

returns, presumably at 33% or 39%. And so a company for a new build… is going to be useful. “I would avoid rental partnerships. Companies are good. They're cheap to set up $1,000 and shares can be split between the two spouses. “A trust can also be formed where the shares go into the trust.”

1. For a salaried person, married or single, a rental company is often the best option.

To illustrate a common structure, he used the example of an engineering company making $1 million, or $720,000 after tax, with its shares in a trust. “The company doesn’t want to declare a dividend to the trust, because it will have to pay 11% top-up tax – the difference between the company tax at

“These days, investors want to park their income at 28% as opposed to exposing it to their personal tax

2. For self-employed people, there are better ways than that.

At Avanti Finance, we’re in the business of opportunities. Our wide range of solutions cover prime, near prime and alternative solutions, helping all kinds of New Zealanders find a path into home ownership.* *Lending criteria, terms, fees and conditions apply

28% and next year’s trust tax of 39%. “The company should just pay the $280,000 tax from its main earnings to the IRD. Then, if the trust owns a rental company, a corporate group can be formed, and money can be passed between the companies. “The rental company simply uses the $700,000 to pay down debt and keeps the 11% tax deferral. “Compound interest is being earned on that deferred tax. If a corporate group is not set up before taking the money out, tax will have to be paid on the overdrawn current account. That creates either Fringe Benefit Tax or tax issues on deemed interest on the overdrawn current account. This is how you avoid that issue.” Gilligan, of Gilligan Rowe & Associates, says all tax structures need to be tailored to individual circumstances. “They're pretty complex things and easy to get wrong.” ✚

Talk to us to get to the finish line Lower North Island

South Island

Paul Rolton 021 192 9709

Mark Nolan 021 941 046

Auckland/Northand

Central North Island

Helen Mulligan 021 226 7191

021 706 236

0800 33 33 20 | avantifinance.co.nz

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UP FRONT

HOUSING COMMENTARY

IS THE HOUSING MARKET EMERGING FROM THE DOLDRUMS? BY SALLY LINDSAY The rapidly falling house prices of the past 18 months seem to have turned but any recovery will be subdued. Real.estate.co.nz’s data shows house prices in all areas across the country rose above $500,000 for the first time ever. CoreLogic’s and Barfoot & Thompson’s figures show house prices flatlining, leading both agencies to predict the market is on the way to recovery, although sales and listings are still sluggish. Some of the country’s major banks’ economists have a rosy view of the market and are predicting sizeable rises next year. ANZ expects house prices to rise 3% by the end of the year before moderating next year, while Westpac is predicting an 8% rise next year and Kiwibank says 6%. Kiwibank chief economist Jarrod Kerr says spring will be the true litmus test for housing. “We’re expecting the buoyancy to continue, because the surge in migration is providing additional demand to an already tight market." The 100,000 additional migrants will need "at least" 40,000 houses – homes which haven’t yet been built.

Stablised pricetags CoreLogic’s latest House Price Index shows values across the country flat-lined in September, dropping by a rounded $20, probably ending the 18-month slump. Nationally, average values stabilised at $905,445, compared with $905,466 in August. The three-month change sits at -0.6%. From March 2022’s peak, the total fall has been 13.2%, although average values remain 24.3% higher than pre-Covid in March 2020. Around the main centres the wider Wellington area was flat in September, with Christchurch and Dunedin edging up by 0.2% apiece. The most notable main centre was Auckland, where values rose by 0.4% – the city’s first increase since March last year. The signs of a turning point for the main centres were not replicated in Tauranga and Hamilton, where values continued to fall by 1.2% and 1.5% respectively. Barfoot & Thompson, Auckland’s biggest residential agency, echoes CoreLogic’s take on house values. Its data shows the super city’s median sales price for September at $987,000 016

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remained constant and underlines the nosedive in the price cycle has likely run its course. It’s the second consecutive month the median price has increased and is 3.4% higher than July’s median price of $950,000, the lowest in nearly three years. The average sales price in September was $1,058,771, which was down 2.7% on that for August. Realestate.co.nz’s September askingprice figures also closely follow CoreLogic’s data on a lifeless market. It shows prices stayed flat in September at $871,400. In the main centres, Auckland was up 0.4%, Wellington, down 0.4% and Canterbury, down 1.6%. Compared to September last year, average asking prices were down 5.3% nationally and by varying degrees in most regions. Bucking the trend was the West Coast, where average asking prices rose by 21.2% year-on-year to an an all-time high of more than $500,000 for the first time since records began in 2007. The average asking price in the region last month was $515,183. The average asking price in Central Otago/Lakes also increased by 2.3% yearon-year.

Sales bouncing back While September sales look sluggish across the country, Barfoot & Thompson’s 825 sales were the second highest in the past 21 months. While down 6.1% on August’s figures, they were a third higher than in September last year. Properties valued at under $750,000 figured prominently, with 26.3% of all

sales being in this segment of the market, highlighting the growing prominence apartment and town house sales are playing in Auckland, and the vastly increased property options available to first-time buyers. Thompson says the change in emphasis away from stand-alone housing towards multiple properties on a single site has now reached the point where it is lowering the entry point for home ownership for a great number of people.

Consents falling rapidly A big drag on the housing market is the approaching end of the building boom. Stats NZ figures show the number of new homes consented in August was down 30.3% compared to August last year. Across the board, 3,170 new dwellings of all types were consented, compared to 4,547 in August last year. The biggest drop has been stand-alone houses, down 25.1% in the year to August compared to the previous 12 months, followed by townhouses and home units, down 12.2% - and apartments down 7.2%. The position for commercial building is not much better, with the value of work consented for retail premises in August down 5% compared to August last year, while consents for offices were down a whopping 59.5%, warehouses and storage building down 12.7% and factories and industrial buildings down 28.2%. The total value of all types of building work consented in August was $2.472 billion, down 23.2% compared to August last year. ✚

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UP FRONT

REGULATION

ADVISERS NEED TO IMPROVE DRS DISCLOSURES BY SALLY LINDSAY AND KERRY MEADOWS-BONNER

he importance of clear communication between customers and financial institutions has been highlighted by the Insurance & Financial Services Ombudsman (IFSO). The IFSO did a scan in November of 99 participants’ complaints processes on their websites and best practice – a third were financial advice provider (FAP) websites – to see if the Dispute Resolution Service (DRS) information was readily accessible by the public. It found half the FAP websites only listed these disclosures in a PDF document, accessible only via a footer menu link. The IFSO says while this is concerning, it is important to note its scheme’s perspective was best practice in complaints processes and public accessibility and not regulatory compliance per se. The regulations come through the CoFI legislation – full name the Financial Markets (Conduct of Institutions) Amendment Act 2022 – a brainchild of the Financial Markets Authority (FMA) and the Reserve Bank of New Zealand, in response to the need for greater consumer protection in the financial sector. It is a call for financial institutions to put the consumer first in their decisions and actions, a principle aptly termed the 'fair conduct principle'. ISFO strategic partnerships manager Andrew Gunn’s insights into the CoFI framework highlight the significance of this principle, particularly in the context of FAPs. He raises the question about whether

the only disclosure FAPs provide about dispute resolution processes is in a PDF statement tucked away in the footer menu – and whether that’s enough, even though it meets the requirements of the CoFI legislation. His answer? "Probably not." Gunn says FAPs have an obligation to make sure customers are aware of their rights to a free, fair and external dispute resolution process in the event they have a complaint against their adviser/product provider. It should also be clear what option is available to the customer if their adviser/product provider cannot resolve matters through the internal complaints process. From a regulatory perspective, FAPs have public disclosure requirements under regulation clause 3 FMC Regs 2014, specifically regarding website disclosures. Gunn’s perspective underscores the intention of the CoFI legislation: to ensure consumers have easy access to critical information. This includes details about dispute resolution service (DRS) processes, conflicts of interest, commission structures, and more. “If this information is hidden away in a hard-to-find document, it defeats the purpose of the legislation - which is to promote transparency and fairness,” Gunn says. To address this, he recommends IFSO participants have a dedicated complaints webpage. This simple yet effective solution will make it easier for consumers to find and understand the information they need. “It aligns with the spirit of the CoFI

‘[Advisers] may need to implement new complaints processes and make their disclosure information more accessible’ Andrew Gunn 018

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legislation, fostering a culture of openness and accountability.”

Time to revisit your comms? For FAPs, this interpretation of the CoFI framework implies a need to revisit their communication strategies, Gunn says. “They may need to implement new complaints processes and make their disclosure information more accessible.” This could involve creating dedicated webpages, simplifying language, or using more intuitive website designs: •

•

a complaints webpage can showcase how you assist your customers when things go wrong and demonstrate your organisation’s positive approach to sorting out customer issues quickly reduce information-overload for customers, using links in your complaints webpage – for example, links to your complaint policy, process, procedure, complaint form, contacts and help a well-written webpage on complaints indicates your business values customer feedback. Client testimonials can show your company deals with complaints quickly and learns from them. They can also demonstrate your commitment to client care and service improvement.

While a revamp of your complaints processes - and the communication around them - may seem like a daunting task, Gunn says it is a necessary step towards building trust and confidence with consumers. “In the long run, these changes will not only help FAPs comply with the CoFI legislation but also enhance their reputation as consumer-friendly institutions.” The CoFI legislation is more than

IFSO RECOMMENDATIONS Build a dedicated complaints webpage as the central place for customers to find complaint information and get help Provide details of your FSP’s complaint contact person and his/ her details

ANDREW GUNN

A top-navigation link to your complaints page is optimal; having only a bottom-navigation link to a Disclosure PDF is neither easy to find nor user-friendly

‘If information is hidden away in a hardto-find document, it defeats the purpose of the legislation - which is to promote transparency and fairness’ just a set of rules; it is a catalyst for change in the financial sector. As advisers navigate this new era of transparency, insights like these will be invaluable. Gunn says they are a reminder to

advisers and FAPs that at the heart of the CoFI legislation is the consumer. It is their responsibility, as financial institutions, to ensure clients’ needs are met with fairness and transparency. ✚

Check that the disputes resolution scheme (IFSO, FSCL etc) is mentioned as your DRS and include its contact details Consider complaints webpage titles like “When things go wrong”: this is customer-centric and welcomes expressions of dissatisfaction State your company’s complaints policy and customer promises Consider including an online complaints form as part of your complaints webpage Decide on the resources you provide for your customers – and in which languages Ask your customers to rate their website complaint experiences

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FEATURE

LEAD

Banks on advisers Jenny Ruth examines what the banks told the Commerce Commission about mortgage advisers suggests all home loan originations should come from advisers.

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f the Commerce Commission decides there's insufficient competition for personal banking services in New Zealand it could do worse than to recommend all mortgage origination should be outsourced to mortgage advisers. Arguably, this is going to happen anyway and such a recommendation, if implemented, would simply hasten the inevitable. Advisers in already originate more than half of all mortgages originated in New Zealand, up from about 30% or 35% a decade or so ago, while in Australia the figure is already 70%, up from 50% in about 2010. Banks are clearly bad at origination, or we wouldn't be seeing this trend, largely because they

continue to cull staff competent at originating mortgages. The situation is only going to get worse as the number of people qualified to give mortgage advice at the major banks continues to decline, and no bank adviser is likely to recommend another bank, even if there are better deals to be had. It is likely that those consumers who aren't already using advisers to navigate mortgage applications, particularly since the Credit Contracts and Consumer Finance Act (CCCFA) changes started coming into effect from December 2019, are the least savvy consumers who would benefit most from the advice. Given their rising importance, one astonishing aspect of the major banks'

submissions to ComCom's market study is the scant attention most of them gave to the role of advisers. Westpac's was by far the lightest, running to 18 pages and mentioning brokers only twice in consecutive sentences while the word adviser didn't appear at all. “The competitiveness of the home loan market is increased by the broker channel, which currently originates approximately [redacted]% of Westpac's home lending. Brokers can help customers get the best deal and increase competition in the market,” Westpac said in its submission. The redaction is particularly asinine since Westpac is already on record as saying that at March 31 this year, advisers had originated 51.1% of its

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FEATURE

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entire mortgage portfolio. While Westpac didn't say what proportion of new mortgages are now originated by advisers, it's safe to say it's likely to be well above half. Unlike the other three major banks, Westpac didn't engage an independent expert to provide a submission. ANZ used Melbourne-based firm Incenta to critique the ComCom's preliminary issues paper and provide its own analysis of the current state of competition, Bank of New Zealand engaged accounting firm Deloitte to look at the impact of regulation on competition, among other matters, while ASB used global consulting firm NERA to look at the role of equity funding and the risks Australian investors take on in investing in New Zealand banks. Given the highly politicised nature of ComCom's study, which was commissioned by the Labour government in the lead up to the general election, possibly Westpac didn't think it worthwhile treating ComCom's work seriously. Even Kiwibank, which is just 30% of Westpac's size by assets, managed to lob in a 19-page submission and it contained the word adviser twice and the word broker 15 times. The government-owned bank notes that any bank's reach with prospective customers “is increasingly about the number of brokers it partners with as more Kiwi choose their home loans with independent advisers,” Kiwibank's submission says. “We estimate that over half of new mortgages in New Zealand are now applied for via mortgage brokers.” Kiwibank goes on to discuss a number of advantages to customer of using an adviser, including that they

often provide other advice such as budgeting and how to navigate the CCCFA requirements. BNZ's 70-page submission contained the most references to brokers at 40 mentions, although that included two in the index, as well as using the word advisers five times. Incidentally, five of those mentions were actually about Kiwibank's continuing “to deepen its relationship with advisers.” Like Westpac, BNZ chose to play coy, redacting numbers about the role advisers play in its mortgage business, even though its Australian parent, National Australia Bank, provided data showing advisers accounted for 43.8% of BNZ's new mortgages in the six months ended March. BNZ talked about “the growing prominence of brokers,” their role in driving competition and said it expects “the role of brokers in the New Zealand mortgage lending sector will only increase further.” BNZ also talked about other competitors, such as Heartland Bank, which offers online only mortgages, and Squirrel, which both offers mortgage broking services and provides mortgages through its peer-to-peer lending platform. The BNZ submission pointed to a Good Returns story on Heartland forming an alliance in early 2022 with the largest mortgages aggregator, New Zealand Financial Services Group. ASB's 48-page submission, which mentioned brokers 22 times and used the word adviser once, also stressed the number of non-bank lenders in the market, such as Avanti Finance, Basecorp Finance, Bluestone, Hibernian, Liberty Financial, which owns Mike Pero Mortgages, Pepper

Money and Resimac. ASB quoted a media story which said such lenders had doubled their market share between 2020 and 2022 from 3% to 6%. It didn't mention that non-bank lenders had been approaching a market share above 10% in the mid-2000s but then fell away sharply as finance companies in New Zealand began collapsing like dominos and that the banks continue to dominate the mortgage market. Reserve Bank mortgage data captures only non-banks which take deposits from the public and it showed nonbanks accounted for just 1.5% of mortgage lending in August. ASB has never revealed data on the role of advisers in originating its mortgages and it stayed true to form in redacting the numbers from its submission, although it did note the number of mortgage advisers accredited with ASB has increased. However, since ASB has a long historical record of supporting brokers as part of its strategy of expanding out of its home market in Auckland, it's reasonable to assume that brokers originate more ASB loans than of any other bank. Its submission does note Kiwibank's growing market share, noting its mortgage book had grown by $1.1 billion, or 1.5 times the rate of market growth, in the year ended June. ASB also noted the impact of BNZ deciding to re-engage with mortgage advisers – this actually happened in May 2015, but the graphs in ASB's submission date from June 2018 to March this year. For 12 years before May 2015, BNZ had refused to deal with advisers at all, trying to make a virtue of its poor

‘We estimate that over half of new mortgages in New Zealand are now applied for via mortgage brokers.’ Kiwibank

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‘ANZ, ASB and Westpac have all lost market share over the period, while Kiwibank and BNZ (likely off the back of its re-engagement with mortgage advisers) have grown share’ ASB

traction with brokers until the loss of market share became to painful. “ANZ, ASB and Westpac have all lost market share over the period, while Kiwibank and BNZ (likely off the back of its re-engagement with mortgage advisers) have grown share,” ASB said. “Kiwibank has been expanding its adviser channels, offering significant cash contributions and, in 2022, launched a 'co-own' product as an alternative option to traditional home ownership in response to rising costs,”

it said. ASB also suggested that Kiwibank, being government-owned, “should have the lowest cost of funds of any of the main banks and it is continuing to grow its market share.” But it doesn't mention the capital advantages the big four banks have enjoyed since 2008 that have allowed them to operate with significantly less capital than Kiwibank and the other locally-owned banks. ANZ's submission made no bones

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about its dealings with advisers, noting that 57% of new lending came to it from advisers in the six months ended March, as well as acknowledging the role of advisers in helping consumers to switch banks. But its 46-page submission mentioned brokers just 14 times and advisers three times – it noted that brokers are more commonly known as advisers, reflecting changing regulatory settings that now require advisers to have a level five certificate in financial services. ✚

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JENNY CAMPBELL COUNTRY MANAGER FINSURE

FEATURE

SECOND LEAD

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What’s going on with the banks? Jenny Ruth digs into lending patterns and finds some surprising results: at some banks, lending volumes are up, at others they’re way down.

verybody knows the housing market has been in the doldrums since prices peaked in November 2021: the Real Estate Institute's house price index is down 17% from that pinnacle. Sales volumes have also been sharply lower, and so it should be no surprise that bank lending volumes on housing are also sharply lower. In the first seven months of this year, net new lending on housing by registered banks was $5.77 billion, down from $8.35 billion in the same seven months last year and compared with $19.93 billion between January 2021 and July of that year. Net new lending in July this year of $797 million compares with $2.63 billion in July 2021.

Startling swings But these totals belie some startling swings in home-loan activity by individual banks. The Reserve Bank's latest bank financial-strength dashboard showed ANZ Bank New Zealand, our largest bank, which says it has “over 1,000 home loan experts,” lent a whopping $1.19 billion in the June quarter of this

year but only $190.2 million in the March quarter. ANZ was also a sluggish lender in the December quarter last year, with net new housing lending of $242.7 million, and the September quarter was even leaner: just $174 million of net new housing lending. The June quarter last year was a heavier $896.9 million, but the June quarter this year was a 33% increase on that. In the year ended June, ANZ accounted for 15.9% of total net new lending on housing by banks, only about half its 30.26% market share at the end of June. Asked to explain these wild swings in volumes, ANZ says that “supporting our customers through the complex interest-rate environment has been a strong focus.” In that “complex” environment, ANZ's “special” one-year fixed mortgage rate has risen from about 2.5% in mid-2021 to 7.25% in early September, while the two-year fixed rate has gone from a little below 3% to 6.99%. “In May, we launched a new marketing campaign encouraging Kiwi homeowners to 'Make the Best

Call in Home Loans' supported by our new service offering – the ANZ Home Loan Check-In conversation,” the bank told TMM. The check-in “provides any Kiwi homeowner a free, no obligation, 15-minute conversation with an ANZ home loan coach”. More than 11,000 have taken up the offer. “The campaign activity and our new service offering has supported an uplift in new home loans and our existing customers are choosing to stay with ANZ,” the bank says. As well, the bank closed its Blueprint to Build offer to new loans from June 30, which resulted in a surge in customers wanting to build getting in before that cut-off point. A senior mortgage-advice industry operator, who did not wish to be named, says he's seen “quite a significant change of emphasis” from ANZ recently, and much stronger support of advisers.

All quiet on the ASB front At the same time that ANZ's lending surged, ASB Bank's home lending went very quiet. Its net new lending in the June quarter dropped to $130.2 www.tmmonline.nz

025

Do advisers hold the key? Squirrel chief executive David Cunningham was able to shed a bit more light on ASB's market behaviour, pointing out nearly 60% of housing lending is going through advisers now. He points to an article published in the Australian Financial Review quoting Matt Comyn, chief executive of ASB's parent bank, Commonwealth Bank of Australia, in which he complained about “unsustainable returns” from mortgage lending in New Zealand, saying “pricing conduct is difficult to reconcile.” Cunningham says: “ASB has signalled they want to protect margin. It never lasts; sooner or later every bank starts to worry about share again.” He notes that ANZ and Kiwibank are both getting a high proportion of deals from advisers at the moment. “They've invested heavily in their broker-processing teams, which deliver consistent turnaround times and decent pricing.” The data shows Kiwibank was a consistent lender through the year, 026

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$2.47 billion

$1.13 billion

$748.7 million

$1.19 billion

1 $233.7 million

$245.2 million

$130.2 million

$191.8 million

$822.1 million $91.9 million

1.95 billion

2 $1.37 billion

$1.8 billion

New lending on mortgages

$896.9 million

million, from $480.4 million in the March quarter and $642.5 million in the December quarter of last year. The net new lending this June quarter was less than a tenth of the $1.14 billion ASB lent in the June quarter last year. In the year ended June, ASB accounted for 17.22% of net new bank lending on home loans, well below its 21.57% market share at the end of June. ASB was its usual opaque self in explaining why it so suddenly turned down its lending spigot. “The figures you refer to can fluctuate depending on a number of factors, including the nature of the housing market, pricing credit servicing criteria and marketing campaigns,” ASB says. “There have been quarters where ASB performs well above overall market growth, as well as times when we're performing at or below overall market growth,” it says. Yes, ASB, we know, we've got the numbers. “We continue to support all customers with their home-ownership goals, including first-home buyers, and remain committed to working closely with our customers and broker network to provide exceptional service, a streamlined approach and quality credit and servicing criteria.”

$2.57 billion

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FEATURE

0 June Qtr 2022

June Qtr 2023

lending a net $1.13 billion on housing in the year ended June and accounting 9.9% of total new bank lending on housing compared with its market share at the end of June of 7.17%. BNZ is another bank punching above its weight, lending a net $2.56 billion on housing in the year ended June, or 22.7% of total bank lending on housing well above its 16.69% market share. But Cunningham says service from BNZ's adviser team is “variable” and that that's suppressing its adviser volumes. The other senior player in the industry TMM spoke to says BNZ was very aggressive earlier this year in promoting its 4.99% special fixed-fora-year mortgage, an offer only available through advisers. Cunningham thinks Westpac is, like ASB, wanting to protect its margins at the moment, and the figures certainly show Westpac has been much less active in the market this year. Its June quarter new lending on mortgages was $245.2 million, while the March quarter was slightly higher at $291.2 million. But both quarters were well below the December and September quarters of last year, when Westpac's new mortgage lending was more than $950 million in

Year ended June 2023

each of those quarters. Its June quarter of last year was $822.1 million. That robust level of lending last year meant Westpac accounted for 21.85% of net new housing lending by banks, compared with its market share at the end of June of 19.1%.

Recovering slowly Most commentators are now saying the housing market bottomed earlier this year and are predicting that activity and prices should start to recover, albeit slowly. Fear of over-paying has given way to fear of missing out on the current, comparatively low prices, says Cunningham, noting that as advisers, “we see this stuff in real time and we have a pipeline of deals.” Squirrel is on track to have a record August and a record September. People who can afford current mortgage rates no longer expect house prices to fall, and they also don't think mortgage rates are going to go higher. We're still a long way from the frenzied activity during the boom, and buyers currently have time to put in conditional offers. “It makes it easier for the buyer: at the moment, conditional offers are the norm.”✚

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UP FRONT

MY BUSINESS

From global salesman to mortgage-advice author Mortgage adviser Deepesh Chaudhary talks to TMM about how he ended up not just setting up a specialist business-loans company, but literally writing the book about it. BY SALLY LINDSAY

epesh Chaudhary’s migration from India to Auckland was no accident: he had always wanted to study and live in a western country. But the pathway to a new country – and eventually his own company specialising in loans to small businesses - began with a casual exchange in Christchurch in 2006. Chaudhary was the international sales manager for an India-based laminates company, and had flown downunder to appoint a local distributor. The two men got chatting about the best place to live – and Chaudhary was delighted to hear his counterpart declare that New Zealand was the best place on earth: I took his lead on that and came straight to Auckland to study at the Manukau Institute of Technology for a professional accounting diploma, while working part-time at a petrol station. The second reason I decided to move here was that in the late 1990s, my friends shifted to Australia to study. Back then it was considered a posh

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thing to go overseas and study. I always had it in my mind – go overseas study and settle in the western world - but, for some reason, my father never allowed me to go. Instead, he wanted to me to study for a degree in India. I was lucky to secure the international sales job. It broadened my horizons and led me here. I kept in touch with the Christchurch businessman. Initially, he was my lifeline, just in case anything didn't go the way it was planned.

Where did your studies lead you? My first full-time job was working with an accountant for two years, before joining money-exchange bureau Travelex after the BNZ lost the contract at Auckland Airport. I was one of few people who obtained an airport security card. When other businesses at the airport needed currency, I would be able to deliver it personally. I worked crazy hours during that time.

Why did you become a mortgage adviser? A mobile mortgage manager visited me and my wife at the weekend in 2011. For us, it was something strange: a company sending an adviser to our house. I was quite fascinated about the flexibility of the business because I have two daughters - I often dropped them off at school and picked them up, so this resonated with me. I was also interested in the financial intricacies of the job. Instead of choosing to find a job as a mobile mortgage manager, I decided I would start my own business at some stage. In 2014, I set up Auckland Financial Solutions. After two years of hard grind, I went through marriage separation because I was putting all my work into running and setting up the business. It was not easy and straightforward, but I did well through 2018-19. It took me a good few years to get a handle on the business, but even when

I was doing mortgage advising I was writing more insurance business to keep the company going.

Was obtaining bank accreditation difficult? Back in 2014, it was not difficult. It was an easy and straightforward process. I think now it is getting harder for people to be able to get mortgage accreditation unless a lender is on the panel of an aggregator they use. The reason is banks want to deal with people who have a lot of experience behind them – or at least they have a mentor. Either you have worked in a bank or you have a mentor. During this time, I always had a passion for helping small business owners, people who are self-employed, because I had felt the pain. When I set up my business I had no guidance, no coaching and I was on my own. While I had briefly worked for an accountant and then Travelex, I didn’t have any banking experience to be able to better serve customers.

How did you upskill? I joined Westpac as a business manager from 2020 to 2022. It was the greatest period of my life. I learned how small business operates and upskilled myself, giving me more confidence. I was able to help almost 1,000 small businesses, even though the bank did not have a specific portfolio for SMEs. And then when Covid settled down, I decided to come back again to the mortgage advising world with my resurrected company.

What do you enjoy most about the business? When a customer comes to me with a complex scenario they believe is not doable. Most customers have the same problem: not much clarity around their finances. But when you ask the right questions and you spend time with them, the picture becomes clearer. And then it's just a matter of presenting it to a lender. This is something I really enjoy.

I always had a passion for helping small business owners, people who are self-employed, because I had felt the pain’ Are you planning on expanding your business? Yes, I have had initial talks with a lender who is keen to work with me on building businessloan.co.nz., an online platform for owners of small businesses. They are the most underserved market, with little help on hand. What I have learned is that if borrowers have any sort of complexity in their loan application, it is sent from a branch to the central office. All the major New Zealand banks operate like this. The online platform will have a fiveto-fifteen-year business-loan calculator, because 50-70% of new borrowers have no idea what their repayments will look like. They tend to think the home mortgage calculator will give them an idea, but it completely distorts the real picture.

You’ve just written a book, what is it about? The title of the book is ‘How To Buy The Right Business The Right Way’. I was inspired to write a book because it takes about two years to buy a business – from when a customer starts thinking about it to the day they execute the deal. This is a long cycle. I see many people wishing they could start their own business, but don't know what to do, how to do it, which business is right for them and the process. There's nobody to handhold. There is no real resource available, especially from a funding point of view. There is where the book will be a good for helping people understand the numbers and their financial capacity. ✚ www.tmmonline.nz

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COLUMNS

SALES & MARKETING

ONE PERSON, ONE MESSAGE, ONE PROMISE It’s no longer enough to know why potential clients should choose you. Be super-specific about who you want to attract – and then tailor separate advertising campaigns to match their precise motivations. BY PAUL WATKINS

ho do you want more of as clients? Are they first-home buyers? Older couples refixing? Now drill down. What do you mean by first-home buyers? Perhaps it’s a married couple in their late twenties or a couple in their early thirties with two kids. Maybe it’s a second marriage where one partner has owned a house before. It could be a recent immigrant couple or Kiwis returning home from an extended time overseas. Do they want to buy in Albany, Upper Hutt or Te Kuiti? With advertising for all products and services ramping up like it’s on steroids, how on earth do you get any cut-through? You can’t open your phone without a barrage of advertising messages hitting you in the face. Social media is full of ads; electronic billboards are coming back into fashion; and traditional media such as radio and press are fighting to take back some of their lost ground.

A major department store offers half price on super-king-size beds. That’s a seriously good deal! However, you already have a great bed, or a super king would never fit in your bedroom.

‘Rather than sending out a single generic newsletter, which has dubious impact, divide your client database into various segments so the message can be more targeted’

How to get cut-through When putting a promotion together, use the concept of “ONE person, ONE message, ONE promise.” Let me explain - first in a general sense and then as it relates to you as an adviser. 030

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So, while you may have spotted and read the ad, the offer is irrelevant to you. Now imagine that you are consciously looking for a larger bed, perhaps due to the need for more space

as one of you is a restless sleeper. You spot an advert for super king beds at 20% off (assume both offers came with the same interest-free terms.) Clearly not as good an offer as the first one, but it is worked to say, “Do you or your partner need more space in bed due to being a restless sleeper?” This motivation to buy a larger bed matches your situation and motivation for needing one, so you buy it. It is no different for mortgages. In a previous article, I covered the “W4 Marketing Planning Tool”. The concept I am now discussing refines that even further. The first ‘W’ in that plan was to understand exactly WHO you are aiming your advert at, and then WHY they would choose you. This would apply to all promotions, be they social media ads, blog posts, podcasts, YouTube videos or whatever platform you have chosen. Be very, very specific. We are all unique and like to see ourselves that way. We do not want to be seen as just another sheep in the paddock, but as having specific needs and desires. The trend in advertising right now is to make it personalised to the individual, which fits how we think of ourselves. Now let’s apply the concept to

PAUL WATKINS

‘The trend in advertising right now is to make it personalised to the individual, which fits how we think of ourselves’

financial services. An example would be retirement planning. When under the age of 50, most think they have years to go, so don’t care about retirement, as ‘that’s for old people.’ When we hit that milestone birthday of 50, however, we see that we only have 15 years or so left to work it all out (this is a known psychological phenomenon). If you offer KiwiSaver and/or other long-term investment options, then isolate those for your client base who just turned 50 and hit them with an offer around retirement planning. You are hitting them at their most vulnerable and relevant point.

Not only is it a waste of her time to write and send them to me, but it has the opposite effect. I now see her as someone who doesn’t respect me as one of her clients; I am simply one of many. Another significant advantage of isolating specific targeted groups is that it offers a point of differentiation. Most brokers say, ‘We can arrange a mortgage for ANYONE!’ The problem here is that no one is ‘everyone’. Being specific in your target creates trust and credibility in your brand, as people see the ad as talking directly to them.

Maximise your database

How to personalise messaging

This example brings up the opportunity with your database. Rather than sending out a single generic newsletter, which has dubious impact, divide your client base into various segments so the message can be more targeted. I am on the mailing list of a mortgage and insurance broker whom I have known for some time. Her newsletters are mostly about insurance and KiwiSaver, reflecting her desire to grow the business beyond just mortgages. But at my ‘mature’ age, these offers are irrelevant to me, so I can’t remember the last one I took the time to read one.

In a practical sense, how do you start along this path of ONE person, ONE message, ONE promise? Start with your current client base. Spend time working out what their motivations were to have contacted you in the first place. As you go through the database, put them into categories. Don’t get too carried away; perhaps aim for about six. Look for characteristics among each group, such as age, gender, married/ single, occupation, lifestyle and other similar factors. This exercise will give you a good understanding of who you are able to attract as clients. Which ones do you want more of?

Pick just two target groups. What was their motivation? You now have the basis of your next two marketing campaigns. As you get to know each group, and their specific motivations, you can tailor and target social media campaigns towards them, which, upon a click, take them to specific landing pages on your website. Each campaign will be the start of journey or the first part of a funnel. I won’t go into marketing funnels, that’s a topic for another day, but know that creating them is easier if you know who and why.

Well worth the time I see objections here in the form of the time this would take, and yes, it will take time. However, it’s worth it, as your promotional activity will be more effective and have more impact. Marketing has taken a decided swing away from spend to labour input, so it can be cost-effective to outsource such processes if you do not have the time. The key here is rather than running one single campaign, run multiple campaigns, each one specific in terms of ONE person, ONE message, ONE promise. ✚ Paul Watkins is a marketing adviser to the financial services industry www.tmmonline.nz

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COLUMNS

INSURANCE

Breathing new life into life insurance advice BY HELENA HARBROW, PARTNERS LIFE GENERAL MANAGER PRODUCT DEVELOPMENT

ince Partners Life’s small beginnings in 2011, we’ve been committed to an ongoing mission: to help make a positive financial difference to New Zealanders. Right from the start, we realised that a significant portion of New Zealanders are underinsured. It’s a serious issue. And it’s one that we’ve been tackling head on. We’ve made it our business to explore how we could make a tangible difference with our product and service offering. As part of our restless nature, we challenge convention where it makes sense to do so. Now, as then, we continue to build highly effective insurance products, underwrite prudently, reward customers’ loyalty, and do the right thing at claims time. We have been fortunate to partner with a strong network of trusted and reputable advisers who champion independent financial advice and strengthen our customer value proposition. Thanks to our success, today we are the second-largest life and health insurer in New Zealand and we're recognised as the ‘best in market life and health insurer'. We live by our set of values. Ultimately what really matters to us 032

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is how well we help financially protect Kiwi families and businesses when they need it most. While we still see ourselves as a young business, in only 12 years we have enjoyed significant growth. This has meant that we have had to look closely at how the local domestic and international insurance landscape is evolving. The challenge is: how do we extend our strategic advantage

‘We are limited only by an internet connection’ while remaining true to our values? In 2022, we acquired a bank insurer that handed us an ongoing referral opportunity to service bank customers with life insurance needs. In addition, we have established an internal distribution team (ID Team). This is a new business unit within Partners Life, and works as a complementary advisory service to our

core, intermediated, adviser network. The ID Team comprises advisory, paraplanning, coaching, quality assurance, and adviser support expertise. We also have an outbound team function to ensure that our customers get the very best experience we can provide.

New referral fee concept At the same time, Partners Life is continuing to explore and fine tune our internal advice offering. We’re working alongside our Referral Partners and embedding our new ‘referral fee’ concept. This is a process in which remuneration relates only to quality advice, as opposed to an insurance sale or issuance of a policy. This means that all referred customers benefit from having an advice conversation based on their financial needs, regardless of whether they obtain insurance, or whether they even can do so due to their personal health, lifestyle or occupation. Our unswerving aim is to promote and educate more New Zealanders on the importance of understanding life and health insurance. Now’s a good time to dive into a little more detail. Let’s consider the advantages that our referral model

‘The challenge is: how do we extend our strategic advantage while remaining true to our values?’

generates, along with the insights we’ve been able to obtain over the past year. Firstly, our referred customers are provided with tailored insurance advice delivered by our ID Team. Those advice conversations are supported by our Partners Life EVINCE software. This remarkable solution was developed in-house to help people easily understand their own financial shortfalls and how health and life insurance can help mitigate their financial loss due to unforeseen future health events. EVINCE provides best-in-class advice through an engaging and compelling integrated video meeting experience. We believe that this approach benefits those who might prefer fewer personal one-on-one engagements (typical in this post-COVID era) or for those who want to explore their own research further before they commit to their financial protection plan. We are limited only by an internet connection! Coupling our referral model with the EVINCE platform gives us many key advantages. For instance, we’ve developed dynamic questions and expense defaults driven by data models. Fact-finding is now easier and relevant to users, because we are able to apply common, everyday scenarios to help explain and illustrate the financial

impact to a customer’s current and future lifestyle. We can share the effects with the customer, at an individual, group or family basis. Built-in smart-logic and affordability tools help customers scale up or down according to their budget requirements. Thanks to prompted questionnaires and automation, our process can also make reviewing a client’s insurance needs straight forward, effective and efficient.

The power of clear visuals Data has greater meaning and is more engaging when it is presented through clear visual graphic design. We believe it’s far more effective than displaying rows of numbers on a spreadsheet that can be too abstract for many customers, leading to misunderstanding and confusion. Our logical, scientific approach is helping educate our customers about life and health insurance, while busting a few myths and misconceptions on the way. Our advice process provides our customers with a free Risk Shortfall Assessment which outlines their financial risks. They also receive a Personal Insurance Plan that summarises their own customised insurance solution.

This means they can walk away with a sense of calm, knowing they can have the right insurance products for their needs. Our ID Team referral-model approach aims to bring consistency of service, advice, and delivery. That said, it is early days and we are continuously striving to improve best practice and customer engagement. We are firm believers that our intermediated adviser network continues to be the forefront of our customer proposition, and essential to our vision and purpose. However, Partners Life’s ID Team referral model has introduced definite synergies that we’ll continue to evolve for the benefit of our customers. As a compelling example of this approach, we have already shared our EVINCE advice platform for use as a customer tool for all of our adviser network. Partners Life is focused on getting the financial advice message to more customers. We’re doing this by discovering and developing innovative ways to improve New Zealanders’ financial literacy and help limit the underinsurance gap in our country. Now, many more people who have never received financial advice can have the opportunity to access it. ✚ www.tmmonline.nz

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