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NZHL says NZ should keep commission-based payment

Kiwibank sister company NZHL is warning against switching from commissions to fee-for-service for mortgage advisers, saying that would deter consumers from seeking advice.

Thursday, June 20th 2024, 9:35AM 2 Comments

In a further submission to the Commerce Commission's market study of competition in personal banking services following last month's conference, NZHL chief executive Kip Hanna called for NZ sticking with commissions.

“It's our view that changing the remuneration structure from a supplier commission-based model to a fee-for-service model would provide a deterrent for New Zealanders able to access qualified financial advice,” the submission said.

“NZ's financial literacy is low and limiting access to qualified advisers would exacerbate the gap, creating further vulnerability for a large percentage of the population,” Hanna said.

Currently, the lenders pay mortgage advisers a percentage of each loan they originate.

An NZHL spokeswoman says: “We're supportive of the current commission model … moving to a full fee-based model would limit people's access.”

While consumers do actually pay whichever structure is employed, requiring borrowers to pay advisers up front “could be quite challenging,” she says.

And some people wouldn't understand the long-term benefit of receiving such advice if they had to pay for it up front.

“It’s important to note borrowers pay the same interest rate, regardless of whether they go direct to a lender or through an adviser,” she says.

It is particularly important at the moment, when the economy is depressed, that New Zealanders understand their financial position and how t take control of their finances, she says.

“A lot of people haven't had the technical side of their home loan explained to them or their options for paying back the loan.”

NZHL's main proposition to consumers is that it helps them to either repay their loans faster or to achieve their specific goals by showing them alternative ways of repaying loans.

Currently, NZHL advisers sell either Kiwibank or NZHL mortgages.

Hanna said in his submission that “while we have approached multiple lenders about the opportunity to create a product suited to NZHL's managed home loan offering, as yet there has been no further appetite to do so.”

The spokeswoman says the NZHL proposition requires a home loan product tailored to its requirements, not just a standard mortgage product.

Both Kiwibank and ASB have developed a product “to reduce debt faster or to support financial freedom,” she says.

“It does require an exclusive development of a home loan.”

NZHLhas also owned a majority stake in Link Financial Group since November 2022.

Hanna said if NZHL's offering is not suitable for a particular customer, they are referred to LFG whose advisers have access to a wide range of lenders.

Tags: NZHL

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Comments from our readers

On 20 June 2024 at 12:15 pm Amused said:
Sorry I’m struggling to understand how mortgage advisers get renumerated has any relevance to the Commerce Commission's market study of competition in personal banking services. Why are submissions even needing to be made on this subject?

Mortgage advisers by their definition are a competitive force for good for consumers seeking home loan finance from a bank/lender. The clear advocacy role that advisers offer consumers is backed up by the fact that 60%? of Kiwis now routinely engage a mortgage adviser when securing a home loan. This illustrates that consumers clearly see value in what the mortgage adviser industry as a whole offers and to stick a cherry on top we are also 99 percent of the time a free service to customers been paid by the lenders. How many other industries offer such a great service to the consumer? Certainly, not the real estate industry or the legal profession. That’s for damn sure.

Sadly, once again the Commerce Commission has demonstrated that as a taxpayer funded organisation it doesn’t actually understand the latest industry it has been charged with reviewing. Only Wellington bureaucrats been as isolated from the economic reality of business in New Zealand as they are could possibly think it was somehow relevant to look at how mortgage advisers get renumerated for their time. Mortgage advisers are one of the best examples of a profession operating in New Zealand today that clearly aids consumers in them getting a good deal. The Commerce Commission though seems incapable of understanding this fact. Those people saying that we should be patient with Commerce Commission officials on them understanding our industry and the role advisers play in adding competition respectfully need to think again. This is just not good enough sorry.

If the Commerce Commission had any understanding of what the banking industry and financial services as a whole actually needs to improve competition, they would realise that overregulation is the single biggest obstacle now to more lenders & insurers entering the New Zealand market. It looks like consumers will have to wait until the new Ministry of Regulation is formed before they can have a taxpayer funded Government organisation competent enough to assist in more competition been introduced in respect to home loan and insurance products.
On 20 June 2024 at 3:43 pm valkyrie6 said:
Resimac gone!

Instead of focusing on how mortgage advisers get renumerated the Commerce Commission should be uncovering why lenders are now leaving the NZ market… The less lenders there are the less competition there is. The NZ consumer loses.

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 ▼7.45 ▼7.09 ▼6.95
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.85 ▼6.49 ▼6.35
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 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
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 7.74 7.35 6.99
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 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
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
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 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

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