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Mortgage advisers aim to “educate” ComCom and want it to apologise

The mortgage advisory industry is putting in a concerted effort to educate the Commerce Commission that it's views of their role and motivations is plain wrong.

Friday, April 12th 2024, 9:05AM 7 Comments

Sarah Curtis of Sarah Curtis Mortgages & Insurance has managed to elicit an apology on LinkedIn from ComCom chair John Small for accusing mortgage advisers of being “unduly influenced” by the commissions they are paid by lenders.

The Finance and Mortgage Advisers Association of New Zealand (FAMNZ), is also demanding a public apology from Small after meeting with the ComCom.

When releasing its draft report on competition in banking services on March 21, ComCom's Small told journalists that while he didn't think brokers are ignoring customers' needs, he is concerned about inadequate disclosure of the conflicts of interest they face.

“We know that any given broker will work through an aggregator platform and will have access to some banks but not all banks. I'm not sure if you went to a mortgage broker that they would tell you that,” Small said.

“From the broker's point of view, they will get different amounts of money from different banks. I'm not sure when you go to a mortgage broker that they would declare that to you,” he said.

Curtis immediately took to LinkedIn: “What a total & complete load of bull,” she wrote

The ComCom had displayed “ a complete lack of understanding” about what advisers actually do.

“There are so many holes in this report that it's not even excusable and there needs to be some accountability around the narrative that we advisors are what is wrong with the industry,” Curtis wrote.

“This is incredibly damaging to the strong reputations and relationships we build,” she said, adding that it was obvious that Small “has absolutely no idea what is going on in our industry.”

Small responded to Curtis on LinkedIn: “I unreservedly apologise for all errors of fact and interpretation in our report and in my verbal comments.”

He added that he looked forward to engaging with her and other mortgage advisors directly “so that our final report on competition in personal banking services reflects a fully informed view of the mortgage advisor sector.”

FAMNZ country manager Leigh Hodgetts says her meeting with ComCom was “beneficial” but that its report “lacked understanding of how mortgage advisers operate and contained a lot of assumptions.”

Hodgetts says the problems with the report reflect ComCom's lack of engagement with advisers as well as with the Financial Markets Authority.

FAMNZ has only just opened its membership to NZ mortgage advisers, but is keen to work with ComCom “to rectify the relationship and build trust.”

FAMNZ is the newly established arm of the Australian organisation which aims to build membership of NZ advisers.

TMMO has tried without success to elicit a response to ComCom's draft report since it was published on March 21 from Financial Advice NZ, which is supposed to represent mortgage advisers in NZ, but nothing has been forthcoming to date.

Tags: commerce commission

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Comments from our readers

On 12 April 2024 at 10:44 am dcwhyte said:
Can't have tried very hard to contact FANZ - according to my sources, Nick Hakes has organised a group of aggregators to meet with ComCom and discuss the report.
On 12 April 2024 at 12:55 pm Amused said:
@ dcwhyte

Wonderful. FANZ have organised a group of class 2 FAP licence holders who currently hold a monopoly over mortgage advisers’ access to the lenders to speak to the Commerce Commission on our behalf. I am sure that no agendas are going to be pursued at this particular discussion.

The sooner mortgage advisers who hold their own FAP licence can deal directly with the lenders without having to also belong to another FAP (aggregator) the sooner costs for these adviser businesses can be reduced. Insurance advisers with their own FAP licence can already deal directly with the life insurers so it’s about time now that the Commerce Commission told the banks to honour their earlier statements made about licensing and them dealing directly with those mortgage advisers who have their own FAP licence. What was the point of licencing again if mortgage advisers with their own FAP licence are now been treated like authorised bodies by the lenders?

Getting the Commerce Commission to understand the above discrepancy which now exists within the mortgage adviser industry will require someone else speaking on our behalf who currently doesn’t have a financial agenda in seeing the status quo continue. Perhaps new player FAMNZ if they want to really demonstrate that they represent mortgage advisers in NZ can be our advocate for this long overdue change now to the industry.

On 13 April 2024 at 2:18 pm Good Hamish said:
Hello, I'm serving as the Chair of the member advisory committee for Financial Advice NZ. I just wanted to add that there is representation from the small end of town. The meetings I have had with CEO have been alongside smaller advice businesses. Which is representative of the membership.

Feel free to contact me directly if you would like anymore info. But those that know me, know that I have been engaging with the small end of town. The new CEO Nick has been always available to engage with.

He is new to the role but to me seems to have a fresh approach which will invigorate the conversation around the high quality of value we provide for the community.
On 13 April 2024 at 5:50 pm JeffQV said:
@ Amused.
Hmm, speaking purely as a Class 2 licence holder who is deeply involved in the conversation with Comcom I'd like to add a couple of points.

I can't think of anything worse than trying to accommodate each Lenders interpretation of the regulations as so shudder at the costs both in time and money if the Aggregation model did not exist. I'm sure the lenders are more than happy to have the Aggregator confirm compliance is being adhered to rather than police 2000 Advisers. Who would pay for that?

My Aggregator charges me a flat fee with no clip of my income and for that fee I get the following.

Market leading CRM which transformed the way I work

Ongoing compliance support with regular 'checks' to make sure all in order

Access on ongoing training programs

PD days

A conference or two to meet and greet other Advisers

Opportunity to assist other Advisers with their more challenging deals

I'm very happy with this arrangement.

Looking at the Comcom conversation we need to educate them as to how we work, why the current remuneration model actually works really well and that, at the end of the day, the consumer has the ultimate say. The fact is consumers are engaging with Advisers in ever increasing numbers and if the claims made by Comcom, in their draft, were even remotetly accurate, this would not be the case.

There is a huge lack of knowledge and understanding on their part and we will seek to address this. I see this as an opportunity for the industry to shape the views and policy decisions of Comcom going forward to the benefit of all.

The fact that the chair of Comcom apologised and requested dialog is a great start.

The conversation will continue.

On 17 April 2024 at 8:40 am Andy the adviser said:
Amused - Well put.

JeffQV - I appreciate your comments, and they are quite relevant for a class 2 licence. But many of us on a class 1 licence are heavily penalised. Having to pay 2 FMA levies (one for us, and one for a fictitious FAP entity) smacks of ignorant bureaucracy. Further, aggregation costs of $600-1000 a month are untenable when you have other industry and business costs.

Five years ago, advisers got most of the commission they received - this was used to cover business costs and wages.

However, in the current regime the percentage of commission we actually receive has been split between us, industry compliance costs, aggregators and ticket clippers. Yet the amount of commission paid out by banks has not changed.

Regarding the need for aggregators - yes, I see a purpose, but not a need. If you look at the old Sovereign Home Loans model (now AIA, run through ASB), this is VERY successful, and has introduced many good advisers into the industry.

If we want to promote the Financial Advice Industry as a good career, we need to reduce the joining costs. The initial costs (education and licencing and bureaucracy) are high enough. The monthly aggregator, affiliation, licence, DRSP costs, PI insurance then have to be covered. It would not be unreasonable to advise any new comers that they need a capital base of at least $100k before they consider joining. That is just to cover the first years fees, office expenses and some sort of income. Further, a large number of advisers have left the industry, leaving huge gaps in industry knowledge and skill.

Therefore, I put it to you - the intention of the current legislation to "Get better, more reliable financial advice to New Zealanders" has failed miserably.

The legislation is Not fit for Purpose. We are not getting what we are paying for. Neither are New Zealanders. Meanwhile, the foreign banks are rolling in the money, relying on advisers to cover operating and admin costs.

They are laughing all the way to the... well, bank!
On 18 April 2024 at 9:04 am valkyrie6 said:
Andy the adviser: best comment I have seen this month, I 110% agree, banks have a monopoly over what commissions are paid, aggregators (master FAP's) have a monopoly over aggregation fees, commissions and training costs (as they are surely clipping the ticket on these) , FMA has a monopoly over regulation, getting the picture?
Poor old customers just want independent non bias nonaffiliated professional arm's length advice by a human being, but the greedy income clippers are ruining it for everyone.
On 18 April 2024 at 9:20 am Amused said:
Well said Andy.

It will be interesting to see new player FAMNZ's stance on mortgage advisers with a FAP licence being able to deal directly with the lenders without also having to belong to an aggregator. Many mortgage advisers who hold their own FAP licence have been dealing with the same lenders now for over 20+ years. Having a third party still in the mix who essentially just passes along our commission has become obsolete. As you say correcty it's just another cost been worn by advisers now that they shouldnt have to wear.

This arrangement where the adviser deals directly with the provider themselves is working perfectly fine in the insurance industry. An added benefit been that the adviser gets the life insurer's override commission payment instead of the aggregator which the insurers now recognise under licencing needs to be paid to the person who is giving the advice to the client. Hence the term now being used by the life insurers i.e. FAPO.

What is working well for insurance advisers should also now be applied to mortgage advisers who operate under their own FAP licence.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
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BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.29 6.59
SBS Bank Special - 7.14 6.69 5.99
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
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TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
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Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.21 7.29 6.65

Last updated: 20 May 2024 10:01am

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