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Rise in complaints about mortgage advisers ‘nothing to be concerned about’

Despite a rise in the number of complaints about mortgage and financial advisers over the year to June, Financial Advice New Zealand chief executive Katrina Shanks says they would have come off an extremely low base considering the number of advisers in the industry.

Wednesday, July 12th 2023, 11:01AM 4 Comments

by Sally Lindsay

A recent analysis of mis-selling/misleading information and misrepresentation complaints by the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) shows a small rise but still low numbers overall.

Complaints, specifically about mortgage advisers, which rose from three last year to four this year, mainly relate to fees and charges, IFSO strategic partnerships manager Andrew Gunn, says.  

“In some of the cases the information in documents sent by mortgage brokers to clients isn’t sufficiently clear.

“Clawback fees are a big issue – where a mortgage or financial adviser hasn’t provided sufficient information about charging a clawback fee if the client decides to break their mortgage.”

Shanks says she is not concerned about the rise in complaints.

As mortgage loan repayments have risen and some advisers are starting to charge fees, clients have started pushing back.

“It has certainly been a journey for advisers. We know they are getting much better at articulating the position of clawbacks.

“Obviously in the mortgage world, people are more sensitive to prices and changes. Some mortgage holders under pressure may need to break the terms of their mortgages for a number of reasons, so clawbacks become more relevant.”

She says advisers are getting much better at communicating clawbacks. “The bar has been raised through the new regulations in terms of the requirements for their reporting. And because of that, I think advisers have started being more particular about what they're recording, how they're recording it, and the way they handle disclosure,” Shanks says.

The change in any regime, she says, puts a spotlight on these issues and on the forms of compliance.

Advisers, she says, just need to understand how they communicate to their clients and how effective that is. Key information about fees, including how a clawback fee is calculated and when it is triggered, should be clearly documented and explained.

“The legislation says that a client needs to understand what is being put in front of them. Some will do that in simple, clear English and it'll be easy for the client to understand, and others might have slightly more complex business models that aren’t very clear.

“The key is that the client understands what the fees are and what a clawback is. As long as that's clear, in simple English, it will work.”

AdviceHQ director David Green says a mortgage is a major decision and it is important people get advice from somebody who has their interests at heart.

He says this is particularly important now that the major Australian-owned banks have cut relationship services in favour of digital banking.

“It has taken the human element out of lending. Mortgage advisers retain the customer relationship and simplify one of the biggest decisions most people will ever make in plain language.”

When it comes to general financial advice, Shanks says New Zealand is an immature market. Compared to other countries, New Zealanders have been reluctant to seek independent financial advice. She says it will improve as advisers build public confidence and trust and understand how to articulate the value of their service.

Tags: Mortgage Advisers

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Comments from our readers

On 12 July 2023 at 1:51 pm Good Hamish said:
Every complaint is to be learned from, but a 50% increase is relative - how many is that? If its ten more during a time when interest rates are increasing, it might not be a blemish on the industry
On 12 July 2023 at 4:42 pm Jonny Good Guy said:
this woke world is just idiotic 3 Complaints to now 4 !!!!!!!!!!!!!!!!!!
How is that News
a big rise in Numbers !!!!!

A recent analysis of mis-selling/misleading information and misrepresentation complaints by the Insurance and Financial Services Ombudsman (IFSO) show a big rise in numbers.
On 13 July 2023 at 9:50 am Amused said:
A more appropriate title for this article would have been “2nd largest dispute resolution scheme in the country has seen only four complaints lodged against its members who are mortgage advisers over the year to June".

“Complaints, specifically about mortgage advisers, which rose from three last year to four this year, mainly relate to fees and charges, IFSO strategic partnerships manager Andrew Gunn, says.”

Based on the clear lack of complaints against mortgage advisers why is the cost of PI insurance for mortgage advisers not reducing? Clearly these complaints above are not related to the advice been provided to clients.

With the financial services industry now licensed never has the New Zealand consumer been as well safeguarded as they are now when it comes to them accessing financial advice. The mortgage adviser industry though is being told by aggregators and PI insurers that the likelihood of a PI claim has actually increased. I recently met with several colleagues for a luncheon, and we all agreed that when it comes to the current premiums been levied to mortgage advisers for us to hold PI insurance something clearly stinks…..

The new adviser PI scheme Quadrant PI was recently quoted as saying “Quadrant PI agree that the advisory risk in NZ is generally mis-priced and miscalculated”. Yeah no kidding!

On 13 July 2023 at 3:47 pm valkyrie6 said:
Two things here.
One
Mortgage advisers should not be charging customers a fee for claw backs, period.
If advisers want banks to stop paying commissions, then keep on charging fees.
If you know or suspect up front that a new mortgage deal is going to be repaid within the banks claw back period then don’t do the deal, let the bank do it, it’s not good business and trying to charge customers claw back fees or any fee is negative and just gives all mortgage advisers a bad rep.
Also, regardless of what you get a customer to sign regarding paying fees it’s not legally binding and customers do not have to pay them, ever.
If you take one customer to small claims or a complaints tribunal to try and recoup fees, they tell 20 others not to use your services, we get paid commissions from lenders and should not be double dipping charging customers fees on top.
If the 4 complaints relating to mortgage advisers were all about claw back fees, then in theory no complaints at all if not charging fees.?
Secondly
PI cover for pure mortgage advisers that don’t handle investments or cash, are not an AML reporting entity and only give advice on retail products only , why why why are PI cover premiums jumping 20% to 30 % Pa , I can remember PI cover @ $ 500 pa, now its $ 3,500 to $ 4,500 per advisers ,some of these are 20 year vets with no claims and no complaints , the whole thing just feels like a big scam with adviser held to ransom by greedy groups.
Overseas owned dealer groups are clipping the ticket on these PI cover group schemes that default to over insure the adviser so the premiums are larger, they are not disclosing commission splits to their customers (members paying the premiums) why not? I want to see who gets paid what? what commission sharing is going here between the dealer group the Insurer and the broker that gets given the group scheme who clearly must be a mate of the group CEO.
total disclosure please.

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