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Kickbacks to agents shouldn't happen, but do

Relationships between mortgage advisers and real estate agents are being questioned by Consumer NZ, which is concerned about financial kickbacks.

Wednesday, October 11th 2017, 1:25PM 1 Comment

by Miriam Bell

The consumer lobby group has released a report on advisers and it suggests some agents are referring clients to brokers who they routinely work with for their own financial gain.

It also notes the growing trend for adviser groups to be aligned with real estate agencies – as Harcourts is with Mortgage Express and Ray Whites is with Loan Market – means the ties between them are growing closer.

“Industry insiders say the walls aren’t always as solid as they should be,” according to the report.

“It’s not unheard of for an adviser to be pressured by an agent to get information on how much the purchaser can afford to pay for a property.”

Ray White’s head of agency operations, Graeme Fraser, said this shouldn’t happen as agents and advisers have obligations to keep information confidential.

“It should never be shared unless the buyer has agreed to it, but I’m not going to put my hand on my heart and say it might not.”

When it comes to kickbacks for referrals, Loan Market CEO Brian Greer said some advisers might pay agents for referrals.

“By and large it doesn’t happen, but I’d be lying to you if I said it didn’t.”

Mortgage Supply Company director David Windler said that agents shouldn’t be referring consumers to advisers for money.

“They should be referring consumers to advisers because of the better quality deals that we can negotiate and the value add that they bring to the lending process.

“We don’t want a consumer to think that what is being provided by advisers is being diluted by financial gain.”

If any referral kickbacks do get paid they should be fully disclosed, he added.

While the Consumer NZ report said the number of people who used an adviser due to a referral from an agent was double the number five years ago, most (50%) of adviser referrals came from family or friends.

Windler said that, in his experience, the vast majority of referrals were from satisfied clients.

“I would say that this year that would amount to about 70% of our referrals.”

For Real Estate Institute chief executive Bindi Norwell, the reason agencies are moving closer to advisers is the desire to provide a “one-stop shop” for consumers.

The institute’s expectation is that agents tell the buyer when they have a financial relationship with a adviser, she said.

“Agents should disclose any relationship that generates financial reward as well as any financial benefits they receive outside of their usual commission.”

However, Consumer NZ believes the rules governing the industry aren’t clear cut and have yet to be tested in court.


Tags: Disclosure Mortgage Advisers Mortgage Express Mortgage Supply mortgages NZFSG

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Comments from our readers

On 19 October 2017 at 11:10 am Bikedude said:
Gee Consumer, is that a problem affecting thousands or is this a rumour you have heard. Here is another rumour. King Country residents are getting ripped off by lines companies. Perhaps that's something of importance that should be examined as opposed to a theoretical problem that Im not aware is a widespread occurrence, and happening here, and I work in the industry.

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AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
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China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 ▼2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.00 3.13 3.02

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