Home loan market takes a new turn
Don't tell the banks, but some very competitive loan products are now being sold through financial advisers and other financial networks.
Monday, April 19th 1999, 12:00AM
by Paul McBeth
Don't tell the banks, but some very competitive loan products are now being sold through financial advisers, mortgage brokers, accountants and even real estate agents.
In the last couple of months, companies such as Equitable Group and Cairns Lockie have juiced up the market by providing financial planners with an extra weapon in their armoury: a bunch of residential mortgage products they say are simple to sell, flexible (with up to four different loan types under one facility) and keenly priced (honeymoon or low start loans kick off below 5% and floating rates are under 6%).
The move comes when banks are homing in on some of the financial planning industry's traditional targets, providing a much broader range of financial services and investment advice to some customer groups. Good Returns' own readership survey, carried out earlier this year, found that many financial planners saw the banks as the biggest threat to their business.
Neil Rundle, a partner in Auckland-based Liberty Financial Solutions, says it's important "not to leave gaps in the financial planning process".
"It can become a defensive issue, so (your clients ) don't just wander off to another bank." Also, he says that suitable, non-bank mortgage products are increasingly available and appeal to customers because they can be cheaper and better suit their needs (although most banks now offer credit-line type mortgage products, Rundle says "there are often still fishhooks in them").
"It's definitely a growing area, although at this stage it's only a small portion of our direct business. We're not actively going out looking for mortgage clients: we deal mainly in the self-employed market and right at the time they need to redraw, that's the time they haven't got a good set of accounts.
"We come at it from the point of view that if it's appropriate for a client to have more flexible financial arrangements, we offer that as part of the process."
Three months ago, Equitable Group launched a new residential mortgage product which is being distributed through financial planners and mortgage brokers. Group General Manager Philip Markwick won't give figures, but says the response has been very good and the distribution network is growing daily.
"For financial planners, as they lose options through the focus of the banks (onto their traditional customer base) this is another form of supplementing their income," Markwick says.
" In the past, a number of them would have simply passed on any mortgage loans to a broker.
"You'd be stupid to say you're taking on the banks, but it is one form of balancing things. And borrowers are increasingly changing their attitudes so that they are no longer being loyal to the bank.
"A mortgage is a rate and fee driven commodity, and that's where financial planners and mortgage brokers come in. A one-stop shop: that's where the pendulum is swinging."
Markwick says Equitable are "loan rangers", managing the relationship with borrowers while the actual funds come from AMS (NZ), a subsidiary of large offshore bank ABM Amro. AMS also provides funds for mortgage bankers Cairns Lockie and a couple of other New Zealand entities.
William Cairns of Cairns Lockie says his firm's mortgages are referred by financial planners, insurance agents, accountants, real estate agents and brokers. At the moment, he says 70 per cent of business comes through sources such as these and the rest is direct.
"We are particularly keen on (doing business through) financial planners and insurance agents: our view is that we are the only mortgage lender that is complementary to them as we don't sell financial planning or insurance products.
"There's a real problem if a financial planner refers someone to a bank, as they don't themselves offer banking products."
"I think financial planners will become more involved in the mortgage market precisely because it is complementary to their services."
However, not everyone in the industry is convinced. Craig Wylie of Financial Fitness: "At this stage, we've chosen not to get involved in that area and just focus on what we already do."
And Alan Lawton, NZ Financial Planning: "the financial planner should be a person's GP and have access to specialists in different areas, such as business insurance, accounting, lawyers…mortgages fit into that.
"We have had, for some years, a very good working relationship with a mortgage broking company. They have the contacts."