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BNZ outlines stance on new regulatory regime

BNZ will only deal with groups who hold a FAP licence under the new regulatory regime, becoming the first bank to formally outline its stance on the subject.

Thursday, September 19th 2019, 9:35AM 9 Comments

The lender has contacted dealer groups over the past few weeks to formalise its position on the new regime, which comes into effect over the next year. It says it will only continue relationships with groups who hold a financial advice provider (FAP) licence.

A BNZ spokesman told TMM Online the bank has taken the decision to provide the best outcomes for its customers and end users. 

"With the change of regulation effective from next year, anyone giving regulated financial advice to retail customers will need to be engaged by a licensed financial advice provider. We have decided to only hold contractual relationships with aggregators who have obtained a FAP licence because we believe this will deliver the best outcomes for our customers.

"It means they can trust that the organisation they are dealing with has quality policies, processes and systems in place to help safeguard them as they work through the home buying process," the spokesman said.

BNZ is the first bank to clarify how it will treat groups' regulatory designations under the new regime. One dealer group contacted by TMM said they were still unclear whether BNZ wanted groups to take on full liability and auditing and compliance responsibilities for their members as a FAP.

Some groups are still uncertain over whether they will be able to obtain a full FAP licence under the new regime. Some groups have privately questioned whether groups will meet the legal definition of a FAP, and have sought legal advice on the topic, sources said. 



Tags: BNZ FAP regulation

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Comments from our readers

On 19 September 2019 at 1:34 pm Doggy said:
Clearly I must have missed something. Are BNZ saying that dealer groups now provide advice to my customers? I never knew that.
On 19 September 2019 at 2:36 pm diago52 said:
Lets hope others don't follow,, is it about limiting liability for the C.E.O and their Directors? Best practice or cost savings as it certainly isn't about better customer outcomes.
On 20 September 2019 at 8:47 am Amused said:
Has anyone told the BNZ that as far as mortgage advisers and the banks are concerned going forward the term "aggregators" "head groups" and "dealer groups" will mean absolutely nothing to the Financial Markets Authority under a licensed financial advice regime? As we already know any mortgage adviser who gives advice to their customers will need to belong to a Financial Advice Provider (FAP) And just to be crystal clear a FAP can be either a one or two person business or a couple of hundred advisers. There is no minimum size to a FAP. If the FMA determine you are fit to hold your own licence as a FAP that’s it. Indeed the smaller the FAP the lot easier it will be in theory for the ongoing auditing/monitoring requirements.

What BNZ appear to be saying to the industry with this statement above is that they don’t want the supposed administration hassle now of having to deal with potentially hundreds of FAPs. Instead they just want to keep the status quo in place i.e. the current 15 odd dealer groups/aggregators running the show and calling the shots. Suits the BNZ and more importantly it suits the existing groups and their businesses with no loss of revenue for them. The last thing the current dealer groups want is mortgage advisers going out under their own FAP and dealing “direct” with the banks and smaller lenders. Without stating the obvious the groups above all else want their override payments from the insurers to continue uninterrupted. The less members the groups have operating under their licence who write insurance the less override they will receive from the insurers each month.

The trouble for BNZ is that making a statement like this puts them now directly at odds with the insurance companies and their own stance around licensing going forward. For BNZ and the rest of the banks potentially to dictate to mortgage advisers whether or not they can become their own FAP or remain stuck instead belonging to a dealer group’s licence to hold accreditation is deeply troubling. What was the point of introducing licensing to the financial services industry if providers like BNZ themselves make up the rules? I have heard the FMA say they are leaving it up to the “market” whether the banks elect to deal directly with mortgage advisers individually who have their own licence (FAP) but that completely defeats the purpose of licensing. You simply cannot have the insurance companies taking one stance and the banks another. This makes the FMA look at best disinterested and at worst negligent in its duties as the regulatory body charged with policing the industry.

BNZ in their statement above also seem to imply that mortgage advisers cannot operate effectively without their dealer groups own systems & processes in place to guide them through the home buying process. Funny - I never knew that I was so wholly dependent now on my dealer group to be able to give my customers good advice when it comes to securing them finance towards a property. This statement sounds suspiciously like something a dealer group would say to a bank to encourage it not to deal directly with individual mortgage advisers with elect to have their own licence (FAP). It is going to be very interesting indeed for this industry and the banks to see Part 1 Standard 5 of the new Code of Conduct for advisers applied to current dealer groups cloud based CRM systems. In particular those groups who are owned now by overseas owners. I hope all mortgage advisers are currently telling their customers where their personal and financial information is been held and which third parties are in receipt of it…

To summarise a FAP is a FAP is a FAP. It is the new licensed entity under which all advisers must operate going forward to give advice to their clients. If the commercial realities of licensing doesn’t suit providers like BNZ for the business model THEY want when dealing with mortgage advisers then I’m sorry but that’s just too bad.
On 20 September 2019 at 10:21 am said:
BNZ has previously elected to not have a mortgage broking relationship back in the early 2000s in favour of getting clients to deal direct with the bank. They changed that a few years ago and are now back using brokers.
Over the last couple of years the mortgage broking industry has seen a massive increase in customers using the MB channel. From 10% of all residential home loans provided to 40% sometimes 50%.

Consumers are waking up to the benefits of using experienced knowledgable advisers rather than dealing with high stressed bank direct staff, in a high churn Job. Customers like having a relationship with an adviser who can work with them over the long term. Direct...the people change every couple of years.

It will be interesting to see if other banks follow suit. ASB have always said they support the independent adviser channel, and frankly I get quick decisions from our local team here and great help and assistance when running deals past them. Time will tell on what the other banks do.

Groups having a fap are going to have massive compliance costs which is going to increase cost to each adviser.
Independent advisers can have compliance audits through Strategi for around 2000+ for a year to maintain compliance...compared to numbers I'm hearing from some Groups with monthly costs of 1000+ per month per adviser.

It's going to be hard for a new adviser to enter the industry with such costs....and also hard for gaps to want to take on the cost, risk and liability of a new adviser who takes ages to get up to speed. This is just a massive can of worms. No wonder there are heaps of advisers leaving the industry. Probably playing into direct channel hands.
On 20 September 2019 at 12:22 pm valkyrie6 said:
Best outcomes for BNZ customers?
Hang on a minute, so currently BNZ make it compulsory for its customers when dealing with certain dealer groups advisers to use the dealer groups cloud based CRM systems to submit their mortgage applications where customers have all their personal banking /income/ property information loaded.


a. One group is owned by oversea real estate agents in Australia where their cloud-based CRM is based, why would BNZ make this compulsory for their customers to submit all there personal banking information ?

b. Under the basics of the New Zealand privacy act BNZ customers should be told where their person information is being data mined, are all advisers under this group confirming this to their customers? I don’t think so.

c. To the FMA, Isn’t regulation supposed to protect the consumer /customers from basic breaches (privacy being one) .

d. How many NZ /BNZ customers have not be told that their personal banking information has been loading on cloud based CRM owned by an Australian real estate company? and if they did know how many customers would be comfortable using that adviser that was under a FAP of that Australian owned group?

e. Regulation is designed to protect the customer/consumer, if all advisers are forced or pushed to operate under group FAPs (that are mainly owned by overseas companies) because it’s all in the “to hard basket “ how does that make it better for the NZ consumer FMA ?
On 20 September 2019 at 5:23 pm KeithAK said:
BNZ, you need to talk to the FMA as they are clear want me and my Mortgage business to have a License,
The broker business has helped you out since you decided to come back and it took time to get our trust back after the way you treated us last time.
I trust whoever made this amazing decision within the bank comes in on Monday and admits it was a bad dream
If you Understand the FMA and Govt stance that "good outcome for the customer" please tell me how you think the decision achieves that?
I look forward to seeing how you explain this to the FMA
Happy Friday
On 23 September 2019 at 10:11 pm JPHale said:
Not sure what the BNZ is smoking, but it's blowing smoke on self-interest.

The easy answer is oversight regulation of advice, yet we have little firm guidance on this from the regulator, and that applies to all disciplines too.

So if BNZ requires the current aggregators to be FAPs, how does that work for the rest? Self interested much?

The rules on FA’s belonging to multiple FAP’s are still cloudy, which means the logical outcome is BNZ also expects aggregators to also provide specialist advice systems in the other disciplines too. Life risk, health, general risk, Kiwisaver, investment advice, and investment planning? What about DIMS and derivatives licensing, these too?

There is another wrinkle in this plan, what about the insurance and dispute resolution too? Multiple FAPs would have to have commonalities with liability insurance and dispute resolution services too, unlikely.

BNZ is way off base with this approach, and the regulator should be stepping in to intervene with this stance, as it limits consumer access to financial services advice, contrary to the intent of the new laws.

Sure a company can choose not to work with another, quite another story when one acts to dictate how another will operate when it impinges on the good operation of the market. That's called anti-competitive/trust and something that is illegal under our trading laws.
On 24 September 2019 at 5:56 pm seandnz said:
I think if the BNZ read the definition of a FAP they may realise that no groups meet the definition and they may have to work with hundreds of individual advisers LOL!
On 25 September 2019 at 1:02 pm said:
BNZ is clearly biting the hand that feeds it.

And woe betide any other bank that follows suit.

Is the bank saying that it will no longer allow us to do what is best for our (their) clients? I thought that would be right against the intentions of the new Act (and our responsibilities under the Code).
Am I now expected to tell my BNZ clients that I can no longer deal with them, so if they want good advice they are now out of luck? From my previous (and very current) experience with the BNZ, they certainly won’t get good advice from the BNZ!

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