ComCom accused of being out of touch with the reality of mortgage advice
TMMO readers responded scathingly to accusations by the Commerce Commission that mortgage advisers are at risk of being “unduly influenced” by the commissions the banks pay them for placing mortgages.
Monday, March 25th 2024, 8:01AM 
3 Comments
by Jenny Ruth
One adviser said that ComCom chair John Small's comments was yet another example of those at the legislative and compliance level having “absolutely no idea of reality.”
A number of readers objected to Small continuing to talk about mortgage brokers because legislation now deems them to be financial advisers and they are required to have passed Level 5 of the New Zealand Certificate in Financial Services before they can operate.
"Small should be made to go on a friggin Level 5 advice course so he knows what he's talking about next time someone from the media gives him a call".
Commission chair John Small told journalists that while he didn't think brokers are ignoring customers' needs, he is concerned about inadequate disclosure of the conflicts of interest they face.
“We know that any given broker will work through an aggregator platform and will have access to some banks but not all banks. I'm not sure if you went to a mortgage broker that they would tell you that,” Small said.
“From the broker's point of view, they will get different amounts of money from different banks. I'm not sure when you go to a mortgage broker that they would declare that to you,” he said.
The ComCom is recommending that the Financial Markets Authority, the financial markets conduct regulator, should monitor this sort of disclosure more closely and that it should issue guidelines for brokers.
A number of advisers said legislation already mandates that they disclose commissions and the banks they can work with but that there is very little difference between lenders in how much commission they pay.
“The banks we can work with are disclosed in our disclosure statement,” one said. “The fees we receive from each bank are clearly stated in our disclosure statement which is provided at the beginning of the advice process.”
Another said the majority of mortgage advisers “operate with integrity and are focused on the needs of their customers first.”
A number of advisers were less than complimentary about Small: “Someone small is trying to act big,” said one, while another said Small had been caught napping, “nay caught sleeping,” and had revealed his ignorance of how advisers operate.
A number also took issue with ComCom's call for Kiwibank to be provided with more capital so that it could act as a “maverick” disruptor of the major banks.
Small, as a government employee, was “biased” towards the government-owned bank, said one adviser while another said the fact that Kiwibank needs more capital showed “the government's experiment owning a bank hasn't worked.”
| « Non-banks, banks welcome different aspects of ComCom draft report | Advisers have consumers best interest: Finsure » |
Special Offers
Comments from our readers
New regulation imposed by the FMA over the last 4 years created a licensing structure, (licensed Financial Advice Provider) basically no adviser can give financial advice without
a. having a FAP license or
b. being under someone else’s FAP license.
Sounds simple? No not really.
Lenders in NZ will not deal with individual Mortgage advisers directly and will only deal with “Dealer Groups “ ( essential middle- men) of which advisers are forced to belong to get access to loan products, the dealer groups or(now called Master FAPs) control what lenders and lending produces advisers have assess too and the lenders control what commissions are being paid via these groups /Master FAP’s.
These Master FAP” s/groups have a monopoly over what membership fees they charge advisers and basically if these fees are not paid the adviser cannot access the lenders.
Now a Dealer group or “Master FAP” are no more than glorified pay clerks, a middleman to collect commissions and pay them on to advisers.
Banks of course love this as its easier for them to pay all commissions to one dealer group and have them sort any claw backs for them. (yes, that’s right commission can be clawed back up to 27 months after loan settles).
But this gives dealers groups absolute control over membership fees, regulation training costs, their own internal lending and insurance product deals they negotiate behind closed doors and clip the ticket on all of it!
Monopoly? Maybe.
But it gets worse, because mortgage advisers are forced to operate under a Master FAP (even if the adviser has their own FAP license) they are also forced to comply with the Master FAP regulation requirements and then again for their own FAP regulation requirements, essentially being regulated twice.
This is over regulation in its craziest form Mr Small and will be the cause of many advisers leaving the industry all together so the consumers access to independent financial advice diminishes and more are force to go direct to one bank and get advice, if anything the ( in the respect of fair outcomes ,and championing for freedom of choice for consumers ) ComCom should be investigating Dealer groups /Master FAPS instead of promoting fund raising for its favorite one bank .
So, if approximately 50% to 60% of borrowers are now engaging a mortgage adviser for their home loan, doesn’t it follow that it’s these borrowers who are predominately the beneficiaries of the discounted interest rates being offered by the banks? Borrowers who deal directly with a bank are far less likely to receive a discount on their home loan rate (especially variable rates) whereas a bank that receives a home loan application via a mortgage adviser has to offer that borrower discounted rates as they know the adviser is aware of what’s available in the market in terms of current discounting. The presence of the mortgage adviser forces the lender to be competitive with the adviser being the borrower’s advocate in respect to the interest rate offered. This might explain why mortgage advisers are such a popular option now for so many New Zealanders. Even if the commerce commission can’t grasp the important advocacy role that mortgage advisers play the consumer clearly does.
Once again, the commerce commission demonstrates a failure to understand the industry that they have been charged with reviewing. ComCom chair John Small's comments about mortgage advisers just illustrate that being a numpty doesn’t preclude one from being appointed to a high paying role in the public service. It’s painfully obvious now to most New Zealanders that Wellington’s bureaucracy is overstaffed, inefficient and frankly incompetent.
Sign In to add your comment
|
|
Printable version |
|
Email to a friend |
