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Kepa's fees changes for mortgage advisers worrying move

The former head of Kepa Home Loans, Heather Royle, has criticised the group's planned fee increases to its mortgage advisers and changes it is making to its membership agreement.

Thursday, June 16th 2016, 2:24PM 3 Comments

Kepa chief executive Jeff Page emailed the group's mortgage adviser members last Friday telling them their monthly membership fees would be increasing if they didn't refer their risk business to the group.

"Over the last couple of months, we have reviewed the monthly subscription amounts that Kepa Home Loans Advisers are paying to Kepa to administer the Home Loans aggregation business. We have decided that if a member of Kepa Home Loans is not placing their risk business and or risk referrals through Kepa either directly or via a Kepa Risk member, then the monthly subscription will increase to $800.00 per month, plus GST. This change to the monthly subscription will take effect from the 1st August this year".

That is an increase from $250.00 per month, plus gst for a single adviser and for each additional mortgage adviser within a firm Kepa charge $150.00 per month, plus gst. It compares to $500 per month, plus gst, per adviser for NZFSG.
However, the former head of Kepa's Home Loan business, Heather Royle says the increase is more than it appears.

She says a mortgage adviser with one sub-adviser would see their membership fees increase from $400 per month, plus gst to $1600 a month, plus gst - a 400% increase!

For a mortgage-only adviser, who is not registered for gst, they will end up paying $920 a month ($800 plus GST).

She says one of the biggest issues appears to be that Kepa is attempting to change its terms of agreement with mortgage adviser members without consulting them. She says all advisers need to be aware of their contractual relationships, no matter which group they belong to.

Royle says one of the things she noticed whilst at Kepa was that the mortgage adviser membership agreement gave mortgage advisers the right to put insurance business wherever they wanted. In other words Kepa can't force its mortgage adviser members to refer risk business to Kepa, unless of course they change their agreements.

"If they are allowed to do this they are being allowed to break the contract," she says.

Good Returns approached Page, however he chose to make no comment on the changes.

One wonders whether this arbitrary change by Kepa to their mortgage adviser membership costs and contracts will unsettle Kepa Risk Advisers, who provide their main revenue.

David Whyte, who was the former chief executive of Ginger Group before it became part of Kepa, said advisers would decide whether the new fee was worthwhile.

"They are either going to see the value and continue to deal as they are or they are going to go the other way - time will tell. Some advisers might feel hard done by but it is a pretty competitive business. If it's not an earner for hem ad they lose it they haven't really lost anything."

Former TNP boss Darren Pratley, now director of The Home Loan Group, said it was important for mortgage brokers to find a solution that offered them the best support they could find.

"It is vitally important for the mortgage industry to keep adopting insurance as part of its service. Having a good insurance offering as part of what you offer is important from the perspective of supporting the idea that you always have to act in the best interest of their clients. Making sure mortgage brokers have a solution that fits their business is really important."

Tags: Jeff Page Kepa

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Comments from our readers

On 21 June 2016 at 11:39 am Donald said:
There seems to be a lot of negative publicity stemming from this group and its CEO over the past 12 months which must be unsettling for the risk advisers who make up the majority of the membership.

However just as for Kepa's mortgage advisers they will make up their minds as to the value of their association knowing there is another significant group that only seems to attract positive press.
On 23 June 2016 at 2:51 pm Mellow said:
As a Kepa member I think this is a smart move and it was Heather Royle's suggestion to raise fees for non Kepa insurance referrers when she was there !
On 27 June 2016 at 4:28 pm Comprehensive Planner said:
While not being a member of Kepa, or any other aggregating group, I struggle to see the benefit that Mortgage advisers would receive that could justify such and increase in monthly fees.

This also seems to look very much like conflicted decision making on the part of Kepa, surely they should be happy to have the mortgage advisers they do paying the fees they are and risk loosing many with this sort of increase.

We are all in business and it is imperative to determine if any spending is providing a return greater then the cost and I simply cant see that this would be. No doubt the mortgage advisers involved will make this decision on a sound business basis and leave Kepa to keep the vast amounts of product provider over-riders they currently benefit from.

There are some really interesting articles coming out of Australia at present around the value provided, or otherwise, by aggregators.

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