Where to for mortgage advisers?
Pivot will be the key word for the mortgage industry this year.
Monday, March 16th 2026, 10:24AM 
4 Comments
by Sally Lindsay
As trail commissions are removed by Westpac and ASB and rumours another bank will do the same, leaving just one bank paying trail, the dynamics of running a mortgage advice business are changing.
Mortgage businesses now have little of value to sell. “Nobody is going to buy a mortgage advice business customer lists – the value of trail books have limited to near zero value from a credibility perspective,” David Cunningham, Squirrel Mortgages chief executive says.
AdviceHQ founder and director David Green The New Zealand market is definitely changing and advice business models will have to change with it.
Major banks are changing their model by pushing mortgage advisers to just a distribution channel rather than having relationship banking.
He says it is mainly the established mortgage advice businesses will need to change their business model.
“The way the model was set up for the banking industry was essentially for advisers to fill the gaps the banks have left when they pulled back from relationship banking. That is part of why clients come to advisers but it seems the banks are trying to commoditise the advice process, which is completely different to the way the Financial Markets Authority (FMA) views it. It is not what the regulator wants and there is a bit of a challenge there for it.”
For Cunningham the business 20% is about the mortgage process and 80% is the advice side. He says the proposition of mortgage advice is stronger than ever and those that build a model around that will thrive, although it will be difficult.
“Banks only sell products, they don’t give life advice, which is what a lot of customers want – when to buy, how to bid, what insurance do they need, will they be able to buy an investment property in five or 10 years’ time. Banks just can’t do that. They have made noises about wanting to stem the flow of customers to advisers and perhaps they’ll stem that increase. We know they are trying to beef up their terms internally.”
Cunningham says the challenge for advice businesses is how do they keep good advisers, because they can set up their own business or work for the bigger firms who are trying a different culture from the banking oligopoly.
“It is interesting that in Australia all the banks pay trail and it is going the other way here. It’s a cheaper model and the oligopolistic behaviour of the banks in New Zealand is transparent in the sense if one zigs, the others zigs. To be fair, though, the commission model doesn’t change the adviser’s independent advice.”
Pivot needed
Green believes many mortgage advice businesses are thinking they will have to pivot and introduce KiwiSaver and/or insurance. That may not be sustainable, particularly in the short-term.
“If we are going to be losing money because trail is being ditched by banks and we still have to clothe and feed our families and pay bills, we need to do things differently.”
He says one option is for mortgage advisers to charge for some of the services they offer, although it will be difficult because they have always been free.
“Banks are the product providers and then they are also competitors offering services and that makes the proposition difficult. And they have a margin to pay for offices and staff, whereas advisers don’t have a margin. That’s where banks can run their cost model differently to what we can.”
Investigation warranted
Cunningham says last year’s “ludicrous” 1.5% cashback offers by the main banks are a scourge because they are a reward at the expense of the existing customer. Fixed rates are probably 10-20 basis points higher than they would otherwise be for existing customers. “It’s a tax on anyone that doesn’t change or can’t change banks to try and get a cashback.
It’s classic legalised anti-competitive behaviour.
He says if banks used fixed interest rates as the competitive tool everybody can get it.
Cunningham argues the FMA under its fair treatment principles under CoFI should be investigating this behaviour. He says when reading the regulations that behaviour could be interpreted quite easily as banks not treating their customers fairly.
It is exactly the same behaviour on floating rate and the 20% charged to customers who don’t pay off their credit card balance every month.
“The lens of fairness from the FMA needs a wake-up call. It talks about fair treatment, but it needs to be from a product design and pricing perspective.”
He says the FMA should be doing an investigation off its own bat as it set up the CoFI principles. It is the regulator’s obligation to consider whether the way bank products are designed and priced is fair trade for customers.
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Comments from our readers
These clawbacks, currently 100% at 14 months and 50% at 28 months, have been deemed by the Commerce Commission to hinder those clients changing lenders seeking a better deal on their home loan.
Westpac told advisers last year their remuneration model was changing to better align with customer outcomes and regulatory expectations. Why then have they not also changed their clawback policy on adviser commissions? As someone else has pointed out above our head groups are no longer our advocates as they have done nothing to confront Westpac about this. Isn’t the whole point of the aggregator model to fight for your members?
I don’t know about other advisers but aside from existing Westpac customers who need to rely on the first home loan scheme to secure a first home it’s increasing hard nowadays to recommend Westpac to anybody else. Westpac’s extra repayment policy is useless, they are frequently uncompetitive with interest rates for existing customers and yet they appear incapable of understanding why they don’t rank as number 1 or 2 currently on advisers list as a good bank for customers to have their home loan with.
I think the above will be even more the case after midway through this year. As somebody said to me at a conference a few weeks back, what possible incentive do mortgage advisers have to keep their customers with Westpac from the 2nd of June?
Well said. It's the 27th of March 2026 today so it's now been 391 days since ANZ was the first bank to reduce clawback periods for mortgage adviser commissions following the directive issued by the Commerce Commission. Westpac's delay now in following ANZ the other banks clearly illustrates how little they value the mortgage adviser channel. And regarding the size of Westpac's current home loan book and the 2nd of June which is fast approaching now....
tick tock, tick tock, tick tock.
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I mention the elephant in the room i.e. the introduction of bank rate cards for mortgage advisers but advisers having no current ability to guarantee/hold these interest rates for their customers. This means they don’t now have time to make an informed financial decision. By comparison, all front-line lenders at the banks apparently quoting from the same rate card can guarantee these rates are held for 1-2 business days minimum. This applies to both new loans and those loans been refixed, although the banks are now obviously pushing customers to refix online which is another subject for a different day.
There is an work-around available to the above however that such a discrepancy exists today looks like an attempt by banks to discourage customers from using the adviser channel which I am sure if the Commerce Commission got involved now would constitute a clear breach of consumer law. That we work in an “advice orientated” industry which instead seems to be working against customers who choose to use a mortgage adviser is absolutely appalling.
All the regulatory changes that have been introduced in the last few years essentially count for nothing if banks can be allowed to get away with the above. The FMA as a taxpayer funded government agency appears incapable or unwilling to enforce a law change introduced by Parliament. This pretty much sums up the current state of the Wellington public service which the Public Service Commissioner has previously said is no longer fit for purpose saying it needs to be overhauled.
Where you might ask are the supposed advocates for the mortgage adviser industry on the above aka the aggregators and associations? You guessed it. Missing in action again… What a surprise.