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Adviser hits out at commission disclosure proposals

Hamish Patel of Mortgagesonline.co.nz, has warned that proposals to make advisers disclose commission could “skew things towards lenders” and leave the industry on an uneven playing field.

Friday, June 15th 2018, 6:00AM 2 Comments

by Dan Dunkley

The Auckland-based adviser has responded to a discussion document released by the Ministry of Business, Innovation & Employment as part of work to develop regulations within new financial advice laws.

MBIE has proposed that advisers make information about the fees they charge, such as commission, publicly available. MBIE has previously said “consumers will benefit from being aware of these commissions and incentives".

In his response, seen by TMM, Patel said he feared the proposals would not be “fair” for advisers. He said the move would favour lenders providing direct mortgages, as they would not be forced to disclose their own fee structures, thus appearing cheaper to the customer.

Patel’s response was made in a personal capacity and not on behalf of the Financial Advice NZ lending advisory committee, of which he is a member.

Patel said: “A broker like me under the new regime may disclose that to obtain a 4.5% on a home loan it will cost the bank .65% in commissions. The client could go to the bank direct and it would seem that the home loan would cost 4.5%, with no mention of [the] associated costs. Under both scenarios, the cost to the client is 4.5%.”

He added the disclosure proposals would favour New Zealand’s big banks: “If disclosure is only required for one channel say, advisers, this may skew things towards the lenders and banks who are able to pay higher salaries but do not rely heavily on pay per performance.”

Patel said he was in favour of disclosure regarding “the variance in commissions from different lenders”, as well as advisers. He added: “Perhaps there is a simple way to do this by explaining the percentage difference in the first 2-year period. This is important as some lenders pay less upfront and pay higher ongoing commission.”

Patel urged MBIE to consider whether the proposals would be “fair” on advisers: “The consumer should be able to compare the costs of various channels in a fair way. There should not be the appearance that one channel is more expensive when the end cost to the consumer is the same.”

Tags: MoBIE registered financial advisers regulation

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Comments from our readers

On 15 June 2018 at 11:23 am bruce@nzfsg.co.nz said:
I think advisers that are worried about disclosing commission payments are over thinking it. They may not be aware but BNZ already discloses what commission they are paying us in their loan documents. This has also been going on in Australia since the beginning of brokers and they hold 50% market share.
On 18 June 2018 at 11:49 am Davet said:
As an AFA I have been required to disclose commissions on my Insurance sales since 2010 and I have never had a client raise concerns. They know we get paid and the reaction is more one of surprise when they learn we have to confirm this to them!

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Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.79 4.99 5.35
ANZ Special - 4.29 4.49 4.85
ASB Bank 5.80 4.69 4.89 5.19
ASB Bank Special - 4.29 4.49 4.79
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.29 4.49 4.85
BNZ - Std, FlyBuys 5.90 4.89 5.05 5.49
BNZ - TotalMoney 5.90 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.15 5.45 5.50 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 5.00 5.20 -
Housing NZ Corp 5.79 4.79 5.05 5.29
HSBC Premier 5.89 4.19 4.29 4.89
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.80 4.59 4.69 5.09
Kiwibank 5.80 4.69 4.89 5.35
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.19 4.39 4.85
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.94 5.30
RESIMAC Special 5.00 - 4.75 -
SBS Bank 5.89 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 4.19 4.49 4.85
Sovereign 5.90 4.69 4.89 5.19
Sovereign Special - 4.29 4.49 4.79
The Co-operative Bank - Owner Occ 5.75 4.39 4.49 4.85
The Co-operative Bank - Standard 5.75 4.89 4.99 5.35
TSB Bank 5.80 ▼4.74 ▼4.99 ▼5.35
TSB Special - ▼4.24 ▼4.49 ▼4.85
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.99 5.05 5.44
Westpac - Offset 5.95 - - -
Westpac Special - 4.29 4.49 4.85
Median 5.87 4.69 4.89 5.19

Last updated: 10 July 2018 9:29am

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