Volume 11, Issue 8, 2012 the new zealand

mortgageadvice for lenders and advisers mag

10 th BUMPER ISSUE

PLUS ANNIVERSARY

11 questions for all advisers

Interest rate forecasts BROKER GROUP SURVEY Where to for house prices? Contents

the new zealand

mortgageadvice for lenders and advisers mag

Broker Group Survey 14 There are changes ahead for our broker groups as they start offering much more than aggregation. We asked the country’s groups what sets them apart from the competition.

UPFRONT FEATURES COLUMNS 4 EDITORIAL 12 HOUSING COMMENTARY 20 SALES AND MARKETING 10 years young Will the records keep tumbling? Coping with a decade of change 6 DIARY 14 BROKER GROUP SURVEY 24 INTEREST RATES: Important events for your Global Uncertainties to continue calendar into 2013 28 OUR FIRST TURBULENT INSURANCE 7 PAA DECADE 26 Clawbacks: A hot topic Diversification helps clients and brokers 6-11 NEWS A round up of the latest New 32 LEGAL Zealand mortgage broking news Back to the future

2 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 3 EDITORIAL OPINION By Geoff Bawden Stronger together… or apart? This issue has a big focus on the numerous broker groups in the market. Prosper Group head Geoff Bawden questions whether advisers get beater value from big groups or smaller ones. There is a lot of talk coming out of negotiates one day as an exception pretty Why else would they fight so hard to 10 years young Australia at present about the future of much becomes the norm the next. retain members? aggregation and a divergence of views Sure, the industry has changed, with In recent times, and with the demise of around whether the number of groups alternative income streams now an the NZMBA, I have watched perceived will consolidate or grow. important component. third-party origination market share This issue of the NZ Mortgage Mag celebrates our 10th anniversary. When I think Some are of the opinion that aggregation drop from over 40% five years ago to about one of my kids turning 10, it’s not a big deal compared to some of the teenage MANAGING EDITOR But ultimately it comes down to how groups will struggle to provide value and its current level, which I suspect is more birthdays, such as 18 and 21. AND PUBLISHER: much of the income generated is passed Philip Macalister that only the larger operators will survive. over to the individual and it costs money likely to be about 25%, although no one But 10 years of publishing in the financial services industry feels like a big deal. Over the Others suggest that the larger groups to run a group efficiently and provide the seems to be keeping those statistics. decade we have witnessed a huge number of changes in the mortgage world. SENIOR WRITER: will have to continue to reinvent services that members demand. As an industry we have become totally For one, mortgage brokers are now, in our eyes, mortgage advisers. Susan Edmunds themselves in order to provide members I think that means there is a future for the focused on compliance and education, People often ask: how are things going? The standard answer, slightly tongue-in-cheek, with value for their dollar. That provides smaller players who choose to provide a and while I would certainly not deny the is that we’re still here. The global financial crisis and New Zealand’s own economic STAFF WRITER: opportunity for smaller groups to different, lower-cost value proposition. importance of these, we have squandered meltdown over recent years has been tough going for us and all of our readers, whether Benn Bathgate differentiate and grow. the best opportunity we have had in my For years I have argued the need for the you are in the advice end of the business or the manufacturing end. The interesting question is whether or lifetime to be promoting the benefits SUB EDITOR: industry to be more cohesive. Here at the NZ Mortgage Mag we saw a huge amount of our advertising revenue not consolidation benefits the individual of using third-party distribution and Susan Edmunds What in fact has happened is that with disappear overnight. Clients like home equity release schemes and non-bank lenders adviser and small business operator, the cementing our ongoing position as the emergence of groups in their current just disappeared. backbone of our industry. market leaders, not followers. CONTRIBUTORS: form, the industry has become even I suggest we now need to make some I provide some further thoughts on the past 10 years on pages 28 and 29 in this issue. Paul Watkins As broker groups grow, can they continue more fragmented. sweeping changes to the way third- This issue is also an important one as it includes our annual survey of the dealer groups. Jenny Campbell to provide value? If so, at what cost to There is a perception that the groups party distribution (both mortgage and We use the term dealer group in a reasonably generic way as it covers everything from Geoff Bawden the individual adviser who already has have ownership of mortgage distribution insurance) operates in this country franchise-based groups to aggregators. Jane Turner seen margins shrinking? and now provide diverse income if we want to guarantee long-term Steve Wright What is clear is that there is very little What is important is that pretty much all mortgage advisers belong to groups now, opportunities. sustainability. so the survey is an excellent annual snapshot of the make-up of mortgage distribution Ian Webb differentiation in remuneration for But it is the individuals within a group Now more than ever before it is time to outside the banks. Jonathan Flaws mortgage acquisition between groups. that hold the key and hold ownership, work cohesively to ensure that happens. One might negotiate some advantage but What is also pleasing this year is the positive outlook expressed by group heads and the without them the group has nothing The new-look PAA has to drive and co- GRAPHIC DESIGN: this is generally short-lived and what one increases in new business. All this augurs well for a good 2013. Mortimer Design & Print Ltd to offer. ordinate that. It’s traditional to thank a few people on big occasions. While not wanting to sound like a professional sports team it is important to thank and acknowledge those advertisers ADVERTISING SALES: which have supported us over the years. Freephone: 0800 345 675 Special mention goes to Sovereign, Allied Kiwi (and its predecessors) and Liberty [email protected] Financial. SUBSCRIPTIONS: These companies have been with us from day one and have barely skipped a beat, even Dianne Gordon through the GFC. They have ably demonstrated their support for mortgage advisers and Phone 0800 345 675 deserve your support. Also to the NZMBA and the PAA. The mag started with the NZMBA’s blessing (and there HEAD OFFICE: was another choice at the time). 61 - 63 Marguerita St, Rotorua Brad We have had a number people involved with the mag, but considering the amount of PO Box 2011, Rotorua MOWER Phone: 07-349 1920 time we have been publishing it there is one person I would like to single out and that is 021 744 050 Jenny Ruth. Fax: 07-349 1926 09 965 1969 [email protected] She has written for Tarawera Publishing for 11 years and is well-known to many in the mortgage industry. Recently she decided it was time for a change and she has The NZ Mortgage Mag is published moved on. by Tarawera Publishing Ltd (TPL) in conjunction with the Professional Advisers Now it’s time for a short holiday and we will be back into the second decade next year. Association. TPL also publishes online From all of us here at the NZ Mortgage Mag we wish you and your family a safe and money management magazine Good Returns www.goodreturns.co.nz and ASSET happy Christmas. magazine. All contents of The NZ Mortgage Mag are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.

The NZ Mortgage Mag welcomes opinions from all readers on its editorial. If you would like to comment on articles, columns, or regularly appearing pieces in The NZ Mortgage Mag, or on other issues, please send your comments to: editor@ mortgagerates.co.nz

Philip Macalister Publisher

4 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 5 NEWS By Susan Edmunds By Jenny Campbell ANZ forces responsibility on groups

ANZ is forcing dealer groups to take drawbacks of their structures. “The IMPORTANT DATES responsibility for the actions of all their reason to have an aggregator is to have adviser members, one aggregator says. buying power but banks capitalise on Jan 31 OCR announcement Clawbacks: that and say you have the buying power Ian Webb, PAA mortgage chair and Mar 14 Monetary Policy but you become liable for any and all managing director of mortgage adviser Statement group New Build, said he had had the activity of members.” Apr 24 OCR announcement contract from ANZ sitting on his desk for He said if a bank tried to claw back some time and was not sure whether he commission from an adviser who had Jun 13 Monetary Policy A hot topic would sign it. since left the industry, the aggregator Statement “It says that as an aggregator I become would now be responsible. Jul 25 OCR announcement legally responsible for everything and An ANZ spokesman said the agreements If it’s your policy to ask for compensation Sep 12 Monetary Policy anything they [advisers] do If an adviser in with mortgage brokers were designed to Statement when lenders claw back for commission, my aggregator group is deemed to have ensure they kept to standards of conduct Oct 31 OCR announcement done something wrong, I am liable.” and represented ANZ products accurately make that clear from the outset. But ANZ said the changes were just to and responsibly. Dec 12 Monetary Policy reflect new financial services regulations. “The changes have been made to ensure Statement Webb said the benefits of being in a these agreements reflect changes in the One of the important functions of encouraging clients to switch, and are timeframe is. If there is a sliding scale of group were being tested. “Sovereign was law and are consistent with the Financial a professional body is to be conduit offering significant financial inducements clawback dollar amounts over time, then audited by the FMA and it discovered that Advisers Act 2008, implemented in 2011.” between the consumer and members. to do so. note this as well. they were liable for all the advice of its Loan Market chief executive David Hart Send your appointments and Each day we receive calls and emails from Lenders’ policies of clawing back all It is also important to note that some members. Aggregators are no different.” said his organisation had not yet been events to: the general public. or part of an adviser’s commission if clawback situations are outside clients’ affected by any changes. He said advisers and aggregators would [email protected] We often get asked if a particular adviser a customer’s lending moves within a control, and are not all caused by interest have to weigh up the benefits and is “legitimate”, or to recommend a local particular timeframe were introduced to rate chasers. adviser, but many times we still act as a discourage churn behaviour from advisers. People sell homes or refinance for a variety referee if there is a minor complaint or These clawbacks from lenders have long of reasons. Marriage breakups and work dispute. been a controversial part of mortgage relocations can often force clients to alter Professional bodies largely moved out adviser/lender relationship. On one hand, their lending arrangements. Be aware of the dispute and discipline area when it is understandable that lenders wish to that that presenting financially stressed regulation came into force, as the external discourage churn, but it is hard to accept clients with a clawback bill is probably not disputes resolution providers became the when the same lenders encourage other the best way to build your professional agencies to mediate consumer complaints. customers to switch. networks, especially if the client wasn’t aware this could be charged. But as regulation is still relatively new, the If it is your policy to pass on clawbacks general public still often turn to us first, if from lenders to your clients, you do need We encourage all advisers to be they have concerns or a complaint about to be aware that the FMA have indicated completely open with clients about their an adviser. they are concerned about this practice, remuneration structures. It is important and have made a number of suggestions to the health and sustainability of your The number of queries and complaints to advisers: business models that we openly discuss coming through our office always how advisers are paid – irrespective of increases significantly with major moves in Fully disclose your clawback policy: whether you charge direct fees or not. interest rates or property values. You absolutely cannot hide this policy Discussing your remuneration with your Needless to say, we have recently been within the small print of your advice client upfront also helps to highlight the dealing with a few unhappy borrowers documents. You need to make sure your value of the advice – even if the advice is who feel they fixed their loans too early, clients are entirely aware of it. It would not paid for directly by the client. and a good number of surprised clients be good practice to highlight this section, who have been presented with a clawback and perhaps get them to sign or initial. We should not advertise our services as bill from an adviser – especially if the Quantify the dollar amounts: free. The general public does not expect advisers to work for free – they like to details of this clause were buried within a You will also need to be completely clear know that you are compensated by the stack of paperwork the client signed many how you quantify the amount of the lenders or product providers for your time months ago. clawback. It cannot be a sum that you and effort. While a lot of borrowers have been sitting decide arbitrarily – it must reflect your real on variable loans for some time now, loss. Clients also need to be aware of the Let’s not be embarrassed to show clients many of them are moving across to fixed dollar amounts involved. how valuable your advice is – as it is worth much more than just a commission! rates, and sometimes moving lenders Explain timeframes: without involving their adviser. If you have any questions or comments, Make it clear to your client that a time please contact the PAA office on 0800 275 This is understandable from a client’s frame will apply, and note what that point of view, as some lenders are actively 722, or email [email protected].

6 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 7 NEWS By Susan Edmunds NEWS By Susan Edmunds IN BRIEF

Bank profits HER schemes stirring not too big New bubble-bursting tools Home equity release products funded by using advisers to help distribute them. BNZ’s chief executive Andrew securitisation programmes aren’t likely Although Sentinel aren’t lending at the Thorburn has lashed out at the to be revived any time soon, but other moment it has two sets of rates. The rate way the latest round of bank The Reserve Bank is considering new tools to prick any fund options are developing which may Foundation clients, which has a margin financial results have been revitalise the market. cap of 4% above 90 days rate is 6.65%. reported. asset bubbles that develop in the future. Sentinel chief executive Vaughan Because of changes in the market new Thorburn said the reporting Underwood says although there is business has a margin cap of 5%. For of those figures had been talk that the securitization market is clients from 2010 onwards the rate is “misleading, lacking perspective The Reserve Bank Governor Graeme “They moderated but they didn’t come 5% annually. starting to pick up that is not the case 7.25% which is the same as ASB. SBS and straight-out wrong in places”. Wheeler is in discussions with Finance back very substantially.” “That could change if we see liquidity for HER providers. has a floating rate of 6.85% and rates of Minister Bill English and the Treasury He said, compared to disposable income, bubbles starting to build up. The outlook The main driver of the securitisation 7.05% and 7.40% for three and five year ...... about a suite of macro prudential tools house prices still looked expensive. The we have is for the OCR to remain stable market in Australia has been the terms respectively. that he wants to be able to implement Reserve Bank had been raising loan-to- for some period. We think the house government, which provided money to counteract asset price bubbles. value criteria in talks with bank chief price inflation threat we see will start to during the global financial crisis to keep RBNZ accused Creating the most headlines is the idea executives and boards. moderate.” non-bank lenders going. of bias of restrictions on lending-to-value Previously, central banks had taken a If it didn’t, Wheeler said the bank would However, Sentinel has been talking to ratios, which could put a stop to 95% hands-off approach to asset price booms. likely deploy one of its macro prudential other providers and hopes to secure some Reserve Bank Governor Graeme home loans. But he said that was misguided. “People tools before using the blunt tool of official new funding next year. Wheeler is massaging data to But other tools on the table include forgot the damage the bubble bursting cash rate hikes. make New Zealand banks look less Underwood says recently RBS sold its profitable, the Green Party says. counter-cyclical capital buffers, core can do.” “If we felt there was an asset price bubble Australian home loan book, including funding ratios and capital risk weighting. Wheeler said he was satisfied that the gathering momentum and threatening HER, to Macquarie and there were, Wheeler denied any bias. “The Wheeler said New Zealand had had some current house price inflation was not the to do damage we would look at macro reportedly a number of other parties Reserve Bank takes seriously of the most rapid house price appreciate start of a house price bubble, because prudential tools in the first instance.” interested in buying the business. its mandate from Parliament in the OECD between 2001 and 2007. nationally it was only running at about to supervise the New Zealand This, he says, is a good sign for the sector. banking system, and it does so Currently there are only two active players without favour. Australasian- in the HER market in New Zealand; ASB owned banks emerged in better Bank and SBS Bank. Both keep their shape from the global financial Vaughan Underwood offerings very low key and neither are crisis because of their more New Solutions, Upgrade, Flexibility, Results, Development, Training, Specialist Knowledge, conservative management, and our economies benefit from that Industry Experts, Support, Exceed, Higher, Achieve, Focus, Professionalism, New Solutions, strength. New Zealand’s strong TNP Home Loans can help… NZ market banking system helped see the Upgrade, Flexibility, Results, Development, Training, Specialist Knowledge, Industry Experts, country through the global ‘pretty darn healthy’ financial crisis.” Support, Exceed, Higher, Achieve, Focus, Professionalism,Discover New what Solutions, makes us different: Upgrade, Flexibility, Do you want to grow New Zealand banks’ cautious approach mortgages, where borrowers could ...... Results, Development, Training, Specialist Knowledge, Industry• More leads Experts, and opportunities Sup top increaseort, Exceed,the to lending helped this country’s housing choose to pay smaller repayments income stream to your business market survive the global financial crisis and add the difference back on to the Higher, Achieve, Focus, Professionalism, New Solutions, Upgrade, Flexibility, Results, Develop in relatively good shape, says the chief mortgage total, allowed people to borrow • Support and training to help you cross-sell S&P interested in your referral business? executive of RE/Max global. more than they could afford, and get into risk or mortgages ment, Training, Specialist Knowledge, Industry Experts, Support, Exceed, Higher, Achieve, Vinnie Tracey was in New Zealand recently large amounts of debt quickly. LVR restrictions Access to preferred suppliers who better • after the buyout of the local master Between 2004 and 2007, there was S&P says it would look at LVR Focus, Professionalism, New Solutions, Upgrade, Flexibility,meet Results, your clients’ Development,best interests Training, franchise of the real estate firm from its US$270 billion in exotic mortgages, he restrictions on bank lending if they Specialist Knowledge, Industry Experts, Support, Exceed,• Higher,Software platform Achieve, and templates Focus, to improve Professional head office in the United States. said. Those were loans that would likely were introduced. your efficiency “I would look at the New Zealand real not have been approved under normal “From a Standard and Poors’ ism, New Solutions, Upgrade, Flexibility, Results, Development,• Structured Training, professional development Specialist Knowledge, estate market as pretty darn healthy, you lending criteria. perspective, analysis of a bank’s • Flexible membership options haven’t made the critical mistakes we “It was dumb lending. People were credit and risk management Industry Experts, Support, Exceed, Higher, Achieve, Focus, Professionalism, New Solutions, made in the United States.” able to borrow more than they could standards is integral to our credit stability analysis,” S&P analyst It makes sense! There, Tracey said, about a third of pay back.” Upgrade, Flexibility, Results, Development,Training, Specialist Knowledge, Industry Experts, homeowners were still in negative equity, But Tracey expected increasing demand, Gavin Gunning said. with mortgage balances of more than driven by immigration and pent-up He said that included an analysis Support, Exceed, Higher, Achieve, Focus, Professionalism, New Solutions, Upgrade, Flexibility, their homes were worth. demand from young people who had not of the bank’s policies for loan “In Las Vegas, 63% are underwater been able to afford to set up their own security. S&P’s bank ratings Results, Development, , Training, Specialist Knowledge, Industry Experts, Support, Exceed, because house prices were going up 30% households during the recession, would already take into account risk Go to www.tnpnz.co.nz year-on-year for five years at a time.” bolster US prices again. management policies including Higher, Achieve, Focus, Professionalism, New Solutions, Upgrade, Flexibility, Results, Develop LVR ratios and bank ratings factor or phone 0508 367 867 Tracey said that huge price growth was He said the look of some of the country’s in current and future policy in and become a valued TNP driven by lax lending by banks. housing stock would change and would ment, Training, Specialist Knowledge, Industry Experts,member Sup todayport, Exceed, Higher,home Achieve, loans likely need to include homes suitable for determining credit risk. Popular options, such as no-doc loans multi-generation families. and monthly adjusting adjustable-rate

8 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 9 NEWS By Susan Edmunds Trail commissions on the comeback

There is a growing view that banks will change their remuneration model for mortgage brokers.

The heads of some dealer groups are will see a return to trail income as a means negotiate but at the moment most banks predicting that banks will once again of rewarding those advisers who actively will cut the interest rate by up to 50 basis review their remuneration model for manage and work with their client.” points without much argument. mortgage advisers and reintroduce Currently the market is very active and His view is that banks are keeping their trail commissions. banks are chasing new borrowers, carded rates unsustainably high at the Mortgage Link director Charlie Reid is particularly first home buyers and they also moment, allowing them to discount. predicting that trail commissions will make have a focus on retention of business. A second issue is all the promotional a comeback. Currently only Sovereign and “Banks and brokers shouldn’t be fighting gimmicks at the moment from $2000 cash Resimac are paying trail commissions for customers,” he says. back offers to free tablet computers. to brokers. Reid says banks need to rethink what A recent NZ Property Investor Magazine Reid says part of the reason to for paying they are doing in the market. Two things survey of investors showed that these trail commissions is to help banks service which need to end is the discrepancy offers weren’t very important in terms and retain customers. between carded rates and what banks of making a lending decision. Things like “I believe we will see our lender partners end up charging customers. rates and service were more important to reassess their point of difference and we He says there should always be room to the borrower.

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10 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 11 HOUSING COMMENTARY Will the people expect interest rates to stay low strong inflows of people from other parts Auckland’s population rose 11% over six for a long time. But I think they will rise of the country and overseas, prompting years, and house prices rose 93%. But sooner than they expect and that could increased demand. in South Taranaki, where the population come as a nasty surprise.” Realestate.co.nz reported that houses for fell 5%, prices rose 161%. Invercargill’s records keep He is picking rates to start rising at the sale nationwide would take 33 weeks to population increased by just 100 people end of next year, bringing prices down. clear, under the long-term average of 40 but prices rose 181%. Westpac is predicting 3% annual growth weeks. In 12 of the country’s 19 regions, “Restrictions on land supply didn’t seem in house prices in 2014, and for prices the market was firmly in sellers’ favour. to matter last decade. Dunedin has a to start dropping after that. Stephens But Stephens said measures to increase famously expansive urban limit, and was expects the OCR to eventually reach a housing supply would not bring prices the largest city in New Zealand by land tumbling? area until the Auckland super-city was peak of 5.5%, a 300 basis-point rise from down, as the Government hoped. founded. Yet Dunedin house prices rose its current level. “A shortage of housing does have an 133% over six years, much faster than Are higher sales volumes and record prices Stephens said floating rates would follow effect but it’s small compared to interest “restricted” Auckland or Queenstown.” although a drop in bank funding costs rates… That’s because financial factors sustainable? Susan Edmunds reports could cause them to rise less steeply than have played a far greater role in taking Realestate.co.nz reported that the level the OCR. house prices to where they are than of new listings coming on to the market continued to increase, with 12,688 new But Mark Lister, of Craigs Investment physical supply or demand.” listings in October, up from 11,514 in Partners, said low interest rates would not He said during 2011 prices rose mainly in September and up 12% on the same time drive people to borrow to the extent that areas where there was a shortage, such as Another month, another record house rose 14% in Auckland – the standout fallen very sharply, and as night follows last year. price. performer. The second biggest rise was in day, the housing market has responded. they had before the global financial crisis. Auckland and Christchurch. But by 2012, New Zealanders’ appetite for debt had they’d started creeping up everywhere, On a 12-month moving total basis, But what’s propelling the property market Canterbury, where prices increased 4% for So long as mortgage rates stay this dropped, he said. “Even with low interest even in regions where there was an 132,291 new listings have come on to to ever-increasing heights, and whether the year, followed by Otago with 3.4%. low, we expect house prices will keep rates, people are reluctant to take on oversupply. the market in the last year, compared to it’s sustainable, is a matter of contention Quotable Value reported that house rising. And if the profile of house sales more debt than they should.” 124,503 in the previous 12 month period. for the country’s economists. prices nationwide are now 1.1% above is anything to go by, this bout of house Stephens said that over the last decade’s price inflation is about to radiate out Lister said the old Auckland city market house price boom, regions with higher Eaqub said a big factor in whether price The number of residential sales recorded their 2007 peak. Research director Jonno of Auckland to other regions of New in particular was in danger of becoming population growth had recorded lower rises would continue was whether people in October was up almost a third Ingerson said values were being driven Zealand.” overheated as people worried about house price inflation. had the money to pay for them. compared to the same month the year up by Auckland and Canterbury but there missing out on the chance to buy a before, and the national median house were signs other regions were starting NZIER economist Shamubeel Eaqub home there. price hit a new record of $380,000, to pick up pace. Hamilton prices are up said low interest rates were fuelled by according to the Real Estate Institute. 3.1% on last year, Tauranga prices 2.2%, increasing competition among New He pointed out that new Reserve Bank HOUSING GRAPH Wellington 2.4% and Dunedin 4.5%. Zealand banks as well as an historically governor Graeme Wheeler had noted But while sales volumes were up low official cash rate (OCR). Auckland’s market as a concern. “Interest nationwide, prices were not necessarily QV said that all the main provincial rate rises could be something the Reserve following, REINZ chief executive Helen centres had increased in value over the The market activity is infectious – sellers Bank considers.” O’Sullivan said. Auckland, Wellington past three months, except Wanganui and are responding to the rush on sales with and Christchurch showed strong price Invercargill, which are slightly down and ever-increasing asking prices, although Eaqub disagreed with the idea that higher growth but the other centres had more Whangarei, down 1.3%. Over the past 20% of the properties that sold last interest rates were on the horizon. “We’ve mixed results. month only Invercargill continued to drop. month did so under the auctioneer’s been saying we don’t think interest rates hammer. will rise anytime soon.” Westpac chief executive Dominick Stephens said low interest rates were Stephens said it was notable that the fuelling the growth. For the past year, Realestate.co.nz reported that the He said the economic recovery would be number of house sales was up at least 5% interest rates had been at levels that he seasonally adjusted truncated mean a long, slow grind and that if the global in every region of the North Island. considered surprising. He said there had asking price had reached a new high economy worsened, there was a chance of $445,529 on its site – the highest level the Reserve Bank could even drop rates. The biggest increase in the number of since the collection of data began properties sold was in Central Otago But that wouldn’t necessarily put more “So long as mortgage rates in 2007. Lakes, where there was an increase fuel on the housing market fire, Eaqub of 54.4% on the same time last year. stay this low, we expect This rise in asking price was noticeable said, because it would mean such dire Northland followed with a 52% increase, right across the country, with Auckland economic conditions worldwide. “It and Hawkes Bay with 47.7%. house prices will keep rising” reaching a new record high of $611,864, doesn’t tend to inflate the housing market and Canterbury reaching a new high of but puts in a floor.” Demand for expensive homes is rising $414,070. much faster than the increase in price Eaqub and O’Sullivan said a lack of supply or sales volumes. More than 70% more But Stephens said the current interest was partly behind price rises. homes in the $600,000 to $1 million price been a big market lift in response. rates were too low to be sustainable, In Christchurch, the severe shortage of which meant that the price rises would band were sold in October compared to Westpac is forecasting a 6% annual houses was pushing prices up quickly, Economists expect Auckland’s houses to maintain a significant price premium over those in the rest of the not continue indefinitely. The correction 2011, and 96% more homes worth more increase in national house prices this year although that would likely stall once more country. While the volume of sales is improving nationwide, value increases are largely confined to New could be a harsh blow when it came. Zealand’s biggest city. than $1 million. and an 8% rise next year. homes were rebuilt. “The housing market is behaving as if Year-on-year, REINZ reported that prices Stephens said: “Mortgage rates have And Auckland in particular had seen

12 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 13 LEAD STORY Broker Group Survey Big names missing in action NZ Mortgage Mag has had an excellent hasn’t worked. By Philip Macalister and Susan Edmunds response to its annual survey this year, with Roost lists 11 mortgage advisers on its site. only a couple of exceptions. An observation which is often made is: How Despite sending many emails and leaving can so many groups operate in the market numerous messages with Adam Parore and surely there needs to be some sort of Mortgages, we have had no response. It is critical mass for organisations to survive and unclear whether the group exists. provide services to their members? The last newsletter on its website is dated We think that the market will develop 2009 and under the interest rates tab, it so that there will be a number of large says: “There are no rates.” players but there will also be room for AMP-owned Roost Mortgages refused to smaller niche groups as long as they have take part in the survey – although it did a sound offering and clear benefits to their last year. AMP acquired Roost, originally members. These may come in many forms Mortgage Choice, from Miranda Caird including technology, support or structure five years ago. The transaction was aimed such as a franchise model or a licensee one. at trying to sell more insurance business Readers can speculate about the future through the mortgage channel but NZ of various groups based on information Mortgage Mag understands the strategy collected as part of this survey.

There are changes Mortgage broker groups will likely group. Only a small percentage of advisers The Mortgage Mag survey provides a NZF has agreed to sell its half share in would discuss it and the outcome of the find their role changes over coming are truly independent. pretty good picture of the composition of the business to its joint venture partner, sale depends on a special meeting of NZF ahead for our broker years from one of simply aggregating The changing focus of the group space the market. Liberty Financial. Under the terms of the shareholders, who may say no to the price commissions to providing a full range is summed up by Newbuild managing The group space is undergoing a deal it was agreed that an independent offered in the valuation. groups as they start of services. director, and PAA spokesman Ian Webb. significant amount of change. NZ valuation of the business be obtained. Both these prices are well below what the offering much more than The groups have come to dominate the He said groups started out as true Mortgage Magazine understands two of NZF announced some details in late $20.63 million the partners paid for the home loan space over recent years as aggregators, which, by his definition, the bigger groups are in the process of November and it is clear there is a massive business in 2006. aggregation. We asked banks increasingly refuse to deal with were independent advisers running their merging – or one may be being bought discrepancy between what it thinks the This valuation doesn’t necessarily mean individual brokers and brokers see the own business but working together for by the other. stake is worth and what the valuer thinks. mortgage advisory business are declining value in combining forces to achieve higher commissions. Details of the transaction weren’t The stake is in NZF’s books at $7.5 million in value, but reflects the commercial the country’s groups higher commission targets. But regulation forced groups to offer available at press time, but if such a but Simmons Corporate Finance says the intensity of the battle. what sets them apart To illustrate the importance and role of more than that. Now offerings such as deal goes ahead it will make a major value is only $2.76 million. From the survey it is clear that mortgage groups in the mortgage market it’s worth CRM software and back office services are change in distribution of home loans. To illustrate the rift between the two businesses are increasing in value, based from the competition. noting what one banker said to the NZ a vital part of their product for advisers. Our understanding is this will happen parties NZF said, in a statement to the on the huge increase in volumes written Mortgage Magazine. before Christmas. “Back office support allows these guys to NZX, that the joint venture board was over the past year. He doesn’t want to deal with individual go out and drive business,” he said. The other major change in train at the unable to provide forecasts to Simmons. Allied Kiwi said its loan volumes had brokers any more. To use the bank’s moment is the sale of the pre-eminent As most advisers belong to a group, What will happen to this business is open doubled, Mortgage Link was expecting a products an adviser had to belong to a retail brand Mike Pero Mortgages. to speculation. Neither Liberty nor NZF 25% increase, year-on-year, Loan Market

14 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 15 LEAD STORY

said loans were up 50%, and Newpark of time and effort into talking to clients is hot with some groups, particularly members were AFAs and the percentage appointed Paul Gill as its general manager in members. Many of these appear to be said they had increased,. Lifetime about insurance and loans, only to find a when it comes to life insurance advisers. was very low. and he is tasked with promoting and from the old Plan New Zealand, which group said loan volumes had increased bank stepped in and scooped it all up. At the moment it doesn’t seem to have One of the services that groups can growing the group. was acquired by Loan Market. significantly due to the Christchurch “It’s complicated because we’re trying been so strong with mortgage advisers. really add value to their members is Following the review of its operations We include the two franchise groups in rebuild and new members joining. NZ to do the whole package but we’re Some question whether lead generation with technology. Mortgage Link has “a significantly the survey, NZ Home Loans and Mike Pero. Home Loans had more than $200 million competing with the bank for part of what is an appropriate activity for groups and Allied Kiwi is clearly the leader in this streamlined company structure with While Mike Pero is a strong brand and extra in loan volumes this year compared we’ve originated. When I get involved what the real value of a lead is. space with its MyCRM package and staff expenses now directly channelled was arguably the biggest player in the to last. in arranging finance, the current bank Allied Kiwi general manager Brendon Quotemonster for insurance advice. into supporting our adviser network market for years, others are now bigger. What is unclear is what proportion of wakes up.” rather than a corporate structure,” Charlie Smith is a bit ambivalent about this. He We profiled the main CRM options in Since the survey was completed New home loan business is now handled by Reid says. What are advisers looking for from their thinks that if advisers are doing a good the previous issue of the NZ Mortgage Zealand Home Loans has reached the mortgage advisers. groups? job and they have good systems and Magazine, but there are a number of “Our resizing of the Mortgage Link billion dollar mark in lending this year. At the peak of the previous property cycle Allied Kiwi conducted research of processes then business will come from other smaller players out there and in corporate structure has given us the The milestone was reached after a record the market share was recorded around the members and found three things topped referrals and the likes. recent months two groups -TNP and ability to give back to our licensees. The week for the business where $31.3 million 40% market. The number now is thought their wish lists: Help with regulation The issues of regulation and succession Newpark - have started the rollout of their license fees, and payment terms, are now of loans were settled and a best ever loan to be around 25% mark. and compliance; help with succession planning are interesting ones as own, custom, CRM packages. negotiable. We have a monthly office month in November with $121.3 million fee of $535 per month which is scaled Groups are expecting more growth but planning and bringing onboard new mortgage advisers are registered financial Smith said technology and IT was settled. The previous best month was depending on number of advisers, plus a one of the things which may hold advisers advisers and the reputation of the group advisers, rather than authorised financial expensive and companies had to $109.3 million in December last year. 1% lender commission charge.” back is that there are only three big banks and its management. advisers and the regulatory hurdles for constantly reinvest into their packages. Much of the growth this year has come now allowing their products to be sold RFAs are not much higher than they were Reid says the model is a mix of Newpark also did some research with its He said technology was an important from the Auckland market which as a by advisers. prior to regulation. commission and fees and sees risk members. While they are mainly in the life tool to help advisers meet their regulatory region has grown over the past year from sharing between licensees and advisers To compound the situation there is a insurance space some of the same things The question being asked is whether this requirements. 27% to 43% of the company’s home loan growing perception that advisers, whether came through. two-tier system will be abolished, leaving and the group. portfolio with the number of branches Regulation it be with KiwiSaver, home loans or life Newpark managing director Darren RFAs to step up to an AFA level. Reid says the Mortgage Link proposition doubling over the past two years to the insurance, are competing more fiercely Gannon said lead generation was top, Smith believes there will be changes and This year we included some additional is still firmly based around advice, rather present 18. with the banks. followed by help with regulation and then all advisers should be thinking about this questions into the survey to capture how than transactions, and the group is New Zealand Home Loans chief executive The head of Newpark’s mortgage group, succession planning. and doing, at least, Level Five papers. regulation is impacting on the mortgage Mark Collins has big plans to grow advisory industry. Glen McLeod, said brokers often put lots The issue of lead generation is one which We asked the groups how many of their “Our resizing of the Mortgage the group over the next few years and A theme to come through in discussions is actively looking to recruit franchise is that there is a trend from straight Link corporate structure has owners. transactional business through to an He says one of the big things for his advice driven model. given us the ability to give group in the next year is around training CONGRATULATIONS NEW ZEALAND MORTGAGE MAGAZINE However only around 10 per cent of back to our licensees” its advisers. mortgage advisers have moved from being “There is presently an unprecedented level registered financial advisers to authorised of interest in new consultants entering financial advisers (AFA). the company’s training and mentoring If you’re an experienced adviser keen looking at other services. Likewise home loans are still very much a programme from which they ultimately on teaming up with like-minded people commission driven profession. While many One of these is life insurance. He says that progress to become business owners. TEN YEARS IS A Mortgage Link has an offering but it is advisers have the ability to charge a fee He says this bodes well the company’s on- willing to help each other build successful probably not that well used by members. for service it appears very few are actually going growth which he is forecasting to LONG TIME TO BE IN He sees life insurance as being an doing this. be around 25% in 2013. businesses we want to hear from you. important part of the offering but advisers BUSINESS IN THIS Prosper Group head Geoff Bawden says need to remember “what their primary NZ Home Loans is owned by NZ Post fees are charged “in one-off situations core business is.” and uses Kiwibank, Sovereign and Become part of the Prosper group and where the income otherwise derived does Liberty products. not adequately reflect the work put in by Reid echoes a view of many others INDUSTRY. Mortgage groups come in all sorts of you’ll retain ownership of your income the adviser.” and that is the need for some form of We know because we’ve been around rationalisation amongst the groups. He shapes and sizes from small to large and stream and have your commission paid Most change says it could take a number of forms from the franchise model, to co-operatives for a while – and, with a growing team, The group which has gone through the including having groups co-operating to licences. to you daily while you benefit from the most change in the past year is Mortgage on services such as education and What is clear from the survey is that we’re all set to be around for many Link. It has essentially been in a holding compliance. Obviously this sort of business is picking up significantly and more years to come. support that comes from being a valued pattern for a year while it reviewed its arrangement wouldn’t lead to sharing some organisations have big future part of this well-recognised group. strategy and its model. “trade secrets”. targets. One of the biggest issues was maintaining Another that has seen a lot of growth All this is excellent news for the sector, a corporate office during what has been is the TNP Home Loans business, especially after many tough years – thanks headed by former NZ Mortgage Find out more about the benefits of becoming part a difficult business environment for to the global financial crisis. mortgage advisers. Brokers Association chairman and chief Groups are at the heart of the mortgage prosper of the Prosper group by contacting Geoff Bawden During this process the office was closed executive Darren Pratley. advisory world and look set to develop and former chief executive Rod Templeton TNP is a relatively new player in the broker more and more services to help their ADVICE | INSURANCE | HOME LOANS [email protected] left. However, in late October the company group space but has seen good growth members better run their businesses.

16 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 17 GROUPS IN DETAIL Name CEO Model Ownership Total settled Loan vols Size New Departed Fees and charges Split Fee for service Plans for expansion RFA v AFA PAA members Technology Technology Data and trails Biggest issues Outlook v 2011 members compulsory Allied Brendon Dealer Group Inform Holdings $4 billion Doubled Over 250 102 11 Two options. A flat fee of 100% to the This is not common 10% AFA All need to MyCRM MyCRM free Members can Managing growth Positively rosy Kiwi Smith with an and Brendon plus (group size 375) $400 per month, where the adviser (or 2.5% belong to an to members. export their data. No additional group Smith adviser receives 100% of all to Allied Kiwi association. Most use it. handcuffs. of branded commission. Another option on mortgage Majority belong Can choose Kiwi Mortgage is a Hybrid arrangement at commission if to PAA alternatives if Market brokers $250 per month plus 2.5% the adviser they want of upfront mortgage com- prefers the mission (the adviser receives Hybrid 100% of any trail). arrangement). Lifetime Warren Group Lifetime Group Not disclosed Increased 7 (58 advisers in 2 0 Not disclosed Most Actively looking for All RFA All MyCRM Yes Trail remains Time Busy with so many Group Stephens shareholders significantly total within the home loan advisers ownership of opportunities due to Group) and or businesses in Lifetime Group for growth and Christchurch Canterbury, Nelson and the client is development. rebuild and and Wellington, and reassigned to ensure new members North Island. servicing continues. Mike Pero Steve Franchise NZF Group and 49 4 2 None, we do not RFA 47 All Microsoft CRM Yes Operating efficiently Very positive about Mortgages Weston Liberty Financial charge fees except AFA 2 and effectively the future. Business for commercial deals in a regulated model sustainable were commission is environment for the majority of not received from the franchisees. lender Mortgage Marcus Independent Harcourts $750 million 50% 33 8 2 Percentage split None 1 AFA 50% iLend by Finware Yes Express Williams contractors International Mortgage Paul Gill License Existing or past $500 million All indications 29 3 0 The licences fees, and All have the ability to Our new group Several AFA Membership Finware Not If they leave the Understanding by Lender partners will Link Mortgage Link plus are a 25% payment terms, are now do so and a number offering encourages not compulsory. compulsory. industry income is our lender partners... reassess our point Advisers/Support increase negotiable. We have a do. All income from both new adviser Now advocating on forwarded. If particularly in respect of difference and staff. monthly office fee of $535 this is fully retained by business and existing advisers join an they leave the group to retention of clients we will see a return per month which is scaled the licensee. business expansion. association. but remain in the to trail income depending on number of industry we agree advisers, plus a 1% lender a transfer of client. commission charge. The client ownership remains with the adviser. Newpark Glen Aggregator Newpark Financial No comment Increased 14 5 joined 0 Up to each member to Continuing to expand All RFA Half iLend by Finware Service is Owned by the Changes within the Positive Outlook. McLeod Services 51% Edge or join- decide the business on a case- provided broker banking environment Focus on Finance Services ing by-case basis. Also to each productivity 49% looking at rolling out member. lead program. NZ Home Mark Franchise NZ Post subsidiary $962 million 12 months to 60 franchises, 35 7 Confidential There is a one-off Significant plans. All RFA None Xplan Yes The clients are The quest for A huge oppor- Loans Collins The New Zealand September comprising 73 application fee, after Our goal is to double owned by New relevance in a world tunity for those Home Loans 2011 $731m. Business owners, that fee free banking. production to $2 Zealand home Loans where banks are businesses that Company Limited 12 months to 46 new business billion annual new Company Limited offering the best offer unique value September consultants and business production deals directly to added services that 2012 $962m 27 client service over the next 4 years clients. banks are unable or consultants. unwilling to offer. Prosper Geoff 2 models. Those As above $300 million Submissions 25 advisers 4 0 Fixed monthly fee. All mem- Mixed. Fees are We will grow 4 x AFA, the Not monitored Those branded Only for We make no claim Any group who offers Constant change. Bawden Trading as Prosper (includes pre made April 1 (including 3 bers retain 100% of what charged in one-off organically with the rest are RFA but probably less Prosper all use X those to ownership and an aggregation services and Ali (all shareholders approvals) to Sept 30 are specialist risk they generate by way of both situations where the right people. than 50%. Not a Plan, Those who branded adviser is free to take for a profit is going Toumadj in the company). just under $280 writers and 1 upfront and passive income income otherwise requirement of aggregate but Prosper as their passive income to be continually Those aggregating million. We F & G specialist) derived does not Group member- are not branded above with them if they challenged and will under the licences would expect adequately reflect the ship Prosper are free leave the group have to reinvent owned by Bawden submissions this work put in by the to use whatever themselves to retain a and Toumadj year to exceed adviser. CRM system they value proposition. $500 million choose.

Share Scott Dealer Group, The adviser/share- $135 million Up 42% on the 9 0 0 All remuneration received by Only a couple Looking to grow the Of the total About 95% are XPlan Yes Groups it is Very positive Black primarily offering holders - 41, each previous period SHARE that is available to be network to around number of members maintaining insurance advice with one share paid to advisers is passed on 100 advisers (currently advisers 80% their relevance but with some to the advisers 60) providing advice are AFA in an increasingly mortgage on primarily insurance and of the transparent industry specialists. and mortgages. mortgage brokers 66% are AFA The Loan David Sam White, $1.8 billion Up 50% in 150 Net $460 per month or up to Some Always looking to About Symetrey No We continue to Attracting better Excellent Market Hart David Hart, Bruce total growth 10-25% commission grow 10-12% pay trail through renumeration trail Group Pattern of 10 are AFA after they leave. from main stream for the balance Data belongs to the lenders. year RFA broker TNP Darren Dealer Group TNP No comment NA 54 N/A Fixed Fee Model N/A Further growth in 95% RFA Mostly TNPPA Profile & No Depends on Profitability and Strong growth Pratley members Adviserbase contract terms diversification and business development

18 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 19 SALES & MARKETING

Paul Watkins Has your advertising become less frequency of emails, newsletters, 1 effective? You are not alone if phone calls and other forms of your answer is “yes”. Advertising is contact? If you haven’t, don’t offering an ever-decreasing return expect loyalty and referrals to grow. on investment when it is of the general broadcast type. Highly Have you seen or perceived targeted, specific niche advertising 8 increased efforts on the part of is the only kind that works now. competitors such as the lenders This of course requires you to clearly themselves? This is has to be a identify your target market first. Coping with a definite “yes!” On the subject of target markets, Has your method of remuneration 2 has this changed for you? 9 changed? Trail versus upfront versus You decide. fees? Of course it has. What have decade of change you done to compensate? Are clients more knowledgeable 3 now? “Yes” is the only answer once Has your structure changed? Don’t be left behind in new world again. The reason is the internet! 10 You may have been part of a They can check rates, lender offers larger group or by yourself or in of mortgage broking. and options daily. This brings up a partnership. It is almost certain the fundamental question of how that this will have changed. Will it you as a broker add value to the change again? transaction. If you can answer this, then you are well on the way to coping with change. Has the motivation of clients to use 11 your services changed? Reflecting on the last decade of Moving to advertising, a decade ago, Has the number of lenders This last one is a biggie. Whereas in mortgage broking, have things accredited agencies received 20% 4 changed? It has decreased. Has this the past you could list the features changed? Have the customer’s attitudes commission on media booked. This affected your offer? Some brokers and benefits of your service, that or thinking changed? Has the market included television, press and radio. still claim to “search myriad lenders is no longer the case. You must as a whole changed? How about the So a $500,000 campaign would lead for the best deal”. Does this still now make all communication size of loans? Has how you do business to a $100,000 income for the agency. apply? You decide. client-focused. This has been a changed? What about your methods of But things changed. The media was fundamental change that you must promotion? As the world around you being squeezed by lower numbers of acknowledge to move forward. Has the level of trust from clients changes, how have you changed? advertisers and many stopped paying Clients are far more sceptical about 5 diminished? “Yes” has to be the claims but want to be more loyal You may be interested to know that other the commission. answer as there is widespread as I mentioned in the questions. professions have had to made changes Advertisers also saw the rise of this thing research to show that consumers This requires you to have a better as well. Law and advertising are just called the internet and agencies had to are increasingly sceptical about understanding of their motivations two examples. recruit new sets of talent and learn new general broadcast advertising, and desires. Let’s take law. These statistics I am about methods of promoting their clients. And special offers and who they choose to discuss are from the Legal Management just when they got that under control, to be their service providers. You News of 2010. A decade ago lawyers along came social media! This all meant must constantly ask if what you are Take the time to get inside client’s minds. charged fees in units of time such as $30 that agencies had to rethink how they doing promotes trust or makes you Run focus groups, conduct surveys per six minute unit. But things changed. charged and offered their services. sound like a quick-deal merchant. or simply ask them! The more you There was a 10% drop in demand for legal Advertising agencies of 2012 look nothing understand what a client thinks, the easier services in 2009 alone over the previous like they did in 2002. it is to craft an offer that will get them Has loyalty from key clients year, primarily due to the global financial Is mortgage broking any different? Of responding. And when you have it worked 6 increased? “Yes” is the answer to crisis. This caused an obvious issue for course not. Just be careful you don’t out, do it again! Change hasn’t stopped this one too, strangely enough. It legal firms, which was compounded by become the boiled frog in that you don’t and will never stop. seems to be a total contradiction increasing pressure by clients to discount notice the change until it’s too late. If there is one thing responsible for the to the previous question, but or cap fees. In the US there was a wave of I have been consulting to the industry for change more than anything else it’s the consumers CRAVE loyalty. When protest over time-based billing as well. about 14 years, which is nearly from its internet. As they say, the internet changes they find the “right one” they want inception. I have seen considerable change everything it touches and it touches The result was that law firms slashed to hang on to it as it’s too hard in that time. Proof is the number of firms everything. It has made the consumer expenses, starting with salaries. This led to to find a new one. So long as you that have come and gone, the structures believe that they now know it all – so some of the largest reductions in overall have a good client communication that have come and gone and the brokers where do you fit in their lives? It’s worth numbers of lawyers in 30 years! Hardest programme, you will see increased that have come and gone. spending time thinking about it. hit were the associate level (middle loyalty and increased referrals. management) with 8.7% leaving in one All were doing the right thing at the year. This in itself caused an issue as some time, but most that are gone were not partners’ work was no longer always able able to appreciate changes to the market Have you changed your client Paul Watkins runs his own to be delegated and the fees leveraged. around them. 7 communication programme? business consultancy specialising in Legal firms had to rethink their offer and Here are some questions to ask yourself Leading on from meeting the loyalty marketing. Paul can be contacted on how to charge. in light of this past decade of change. desire, have you increased the [email protected]

20 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 21 ADVERTORIAL RESIMAC Home Loans Launches in New Zealand offering ‘a genuine alternative to the mainstream banks’

highlighted that RESIMAC has continued The pilot was invaluable as RESIMAC (‘RESIMAC’), one of the leading Non- to lend new money and to securitise tested these products, policies and Bank lenders in Australia. RESIMAC is a throughout the GFC. RESIMAC have processes with their key partners, seeking respected wholesale funder, originator, In Auckland, on November 8, leading Australian Non-Bank lender RESIMAC recently completed a new RMBS issuance customer feedback which was used to servicer and securitiser of loans which which was over subscribed in Australia, further develop their value proposition has been successfully operating in the officially launched their New Zealand business RESIMAC Home Loans with this was actually upgraded from $250mill ensuring they were ready to launch to Australian finance industry since 1985. to $300mill to cater for the level of the wider market. With this customer For more than 25 years RESIMAC has over 140 brokers in attendance along with key industry stakeholders, investor demand. feedback enabling changes to products helped tens of thousands of borrowers Due to the relevance of the launch and policies this illustrated RESIMAC with their financial needs, providing RESIMAC Executives and Board members. forum content, the PAA had awarded Home Loan’s promise of working in true simple, fast and competitively priced 2 unstructured CPD points for each partnership with its distributors. home loans. Unlike many of their attendee. RESIMAC Home Loans will continue to competitors, RESIMAC are proud to Savins explained that the launch of work closely with their business partners say that they never stopped lending During his introductory address, distribution, hence the move into RESIMAC Home Loans in New Zealand is not only in the evolution of their current throughout the Global Financial Crisis, RESIMAC’s chief operating officer Allan New Zealand. the ‘footprint’ or ‘beachhead’ business products but also in the development of they have continued to lend new money further products and processes. RESIMAC and to support their borrowers and Savins said that RESIMAC plans to be RESIMAC is excited to be entering the with the current products being the also offers specialist, or non-conforming, business partners throughout this time aggressive in the market place and take New Zealand market with a point of starting point of what they will bring to loans in Australia and expects to bring demonstrating their enduring presence in on the banks. He says that RESIMAC “is difference of new products and an the market. The current product that is similar products to New Zealand in the the Australian market place. a genuine alternative to the mainstream excellent service proposition to provide attracting the main interest is the Low near future. “We have a strong desire to banks, New Zealand consumers will genuine competition to the marketplace. Doc product due to this not being widely RESIMAC pioneered Australian Residential benefit from increased competition, not available in the New Zealand marketplace. evolve new products in 2013” Savins said. Mortgage Backed Securities (RMBS) in market domination”. “We are very comfortable with writing this RESIMAC New Zealand has strategically 1988 and has issued more than $13bill The launch function was facilitated with type of product as we will apply the same aligned itself with the business partners through more than 20 domestic and Andrew Stabback from Australasian disciplines adopted in Australia around who understand the value proposition of international RMBS issues. Banking & Finance (AB&F) as the event co- Responsible Lending under the current growing their businesses and portfolios With robust access to capital via its solid ordinators hosting an educational forum regulatory standards” Savins said. with upfront commission payments relationships with shareholders and that focused on providing detail about RESIMAC’s launch specials include a of 0.60%, trail of 0.15% and through investors in Australia and internationally, RESIMAC, an overview of the New Zealand standard variable rate of 5.55% and owning their ‘clients for life’ with RESIMAC has been rated ‘STRONG’ by economic outlook and industry highlights a one-year fixed rate of 4.95%. These ongoing client management, have the international ratings agency Standard ability to cross sell without the banks from some of the industries finest. Advisors Association (PAA), David Hart, standard product interest rates require a & Poor’s. The ‘STRONG’ ranking reflects preying on them for other business which The launch forum included an opening chief executive officer, Loan Market Group loan to value ratio of less than 80%, its RESIMAC’s high ability, financial standing, essentially results in the loss of their client keynote presentation from Allan Savins and Mary Ploughman, executive director Low Doc launch special variable rate is efficiency and competency. to the banks. who gave an overview of RESIMAC, their securitisation, RESIMAC, who all provided 6.55% with a one-year fixed rate of 5.95% history since 1985 and future aspirations some insightful views on the marketplace with a maximum LVR of 70%. in New Zealand. Savins further explained and the current funding environment The feedback received on the day of the About RESIMAC Home Loans how RESIMAC pioneered the Residential together with discussion around the launch was excellent, with one advisor RESIMAC Home Loans is a non-bank Mortgage Backed Securitisation (RMBS) Nick Tuffley, the ASB chief economist then future opportunities and challenges. There stating that it was ‘the most professional lender focused on providing a broad market with their first issuance in 1988. delivered an overview of the New Zealand was a general sense of optimism in the launch he had attended in the 15 years he range of home loan solutions and For more information on RESIMAC Home RESIMAC is one of the few remaining market, the challenges we are all faced room with a new player in the industry had been in the industry’. competitively low interest rates for New Loans, please visit www.resimac.co.nz Non-Bank Lenders in Australia, they with and some insights into what’s on everyone was interested in what they have RESIMAC Home Loans undertook a 3 Zealand borrowers. RESIMAC Home Contacts: never stopped lending throughout the the horizon. to offer and there was a lot of questions month pilot period with selected business Loans has a team of professionals whose Adrienne Church, Director Sales AUS & NZ Global Financial Crisis (GFC) and they are There was then a panel discussion with from the room. partners which commenced mid-August aim is to make the task of obtaining a T: 099277720 M: 021440025 a strong business today that is delivering some of our industries finest, Naomi Ploughman provided more detail on 2012. This pilot period showcased three home loan a pleasant experience for the E: [email protected] on its business strategy of diversification; Ballantyne, managing director, Partners the securitisation market. Ploughman RESIMAC products: Standard Home Loan, borrower and business partners. Scot Bailey, Business Development Manager diversifying products, asset classes and Life, Jenny Campbell, professional admitted that this has been a challenging Non-Resident Loan, and an Uninsured RESIMAC Home Loans is backed and T: 099277725 M: 021440091 distribution, including geographical development manager, Professional arena for some years but she also Low Doc Loan. funded by RESIMAC Limited, Australia E: [email protected]

22 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 23 INTEREST RATES Jane Turner

The pace of economic recovery in NZ has Inflation pressures have been subdued, good hedge against future interest rate been subdued. reflecting the gradual pace of economic increases, although borrowers would have The key driver of NZ’s economic recovery recovery and the elevated NZD. to be prepared to pay a bit more now, will be the Canterbury rebuild. Indicators The annual rate of CPI inflation has fallen compared to a floating rate or shorter- suggest that building work has now to 0.8%, and through the bottom of the term fixed rates. started to lift, albeit off low levels. RBNZ 1%-3% target band. While we see Borrowers who prefer flexibility can still Employment has been slow to recover, inflation remaining low for much of the benefit from the floating rate remaining but given the surge in job ads recently, coming year, inflation pressures will rise at 40-year lows until at least the second it’s clear that activity is in the pipeline to swiftly from 2014. half of 2013, although they should be deliver growth from 2013 and onwards. The elevated NZD will no longer be a prepared for the floating rate to increase in line with the OCR over 2014 and 2015. The ASB Cantometer, a simple summary deflationary influence and the acceleration of all economic activity in the region, in domestic pressures will become more Which mortgage strategy proves suggests that aggregate activity has evident. This will prompt the RBNZ to cheapest will depend on how economic recovered to pre-earthquake levels. Over gradually lift the OCR. We expect the developments unfold, and how the RBNZ the coming year, we expect Canterbury first 25 basis point increase in September responds to these. to underpin an 18% lift in nationwide 2013, and that rates to be gradually There remain large uncertainties around residential construction. increased to 4% by mid-2015. This will the economic outlook, and given the Domestic recovery return retail borrowing rates to just below Beyond the Canterbury rebuild, there are current risks it is conceivable that historically average levels. won’t be enough to signs of improving domestic demand borrowing rates could end up either lower throughout the rest of the country. Fixed rates still good value or higher than average. push up rates. Incomes have grown modestly over Financial markets are continuing to price The perfect rate decision is something the past year, and we can see signs of in the possibility of a rate cut in NZ over that will probably only be known with the increased resilience in consumer spending the coming year. This largely reflects benefit of hindsight. and household demand. offshore concerns. Faced with uncertainty the best strategy Reflecting improving confidence, housing A rate cut is not our central view, for borrowers is to weigh up what their turnover has lifted strongly over the although we do acknowledge there priorities are and make the choice that Global past year. But with a low supply of new is about a 20-30% chance of a cut looks the best aligned with them. housing, the housing market has been stemming from offshore risks. Of course, it is important to factor in tight, placing upward pressure on prices. As a result of market pricing and the inevitability that interest rates will The lift in house prices has been led by favourable funding conditions, banks be higher in the future. It is also very a few hotspots – in particular Auckland remain able to offer very competitive important to make sure that finances have and Canterbury – where supply shortages fixed-term mortgage rates. Many enough headroom to absorb the impact uncertainties to of higher debt-servicing costs than those appear most acute. Over the next year, shorter-term rates are now lower than the a lift in construction (led by Canterbury) floating rates, which allows borrowers to being paid now. should increase the supply of new housing secure a lower interest rate regardless of and help relieve some of the pressure on the economic outcome over 2013. Jane Turner is a Senior Economist at continue into 2013 house prices. Longer-term fixed rates also provide a ASB Bank. HOME LOAN RATES Interest rates are likely to remain low The key uncertainty in the US is the fiscal negotiate and compromise, but there for most of 2013. outlook. The US government needs to may be a few white-knuckle moments % % % % address its high level of debt, and find a for financial markets toward the end of Short-term rates attractive The big rate switch The global backdrop remains marred by 11 11 11 way to reduce the size of fiscal deficits. this year. 11 political uncertainties and weak growth High (past 10 years) Source: ASB from the US and Europe. As a result, lawmakers will need to The Eurozone debt crisis continues to Variable Rate 10 10 10 10 But we see evidence of domestic recovery agree on some tax increases and simmer in the background, with gradual in New Zealand with signs of activity spending cuts over the next year. But the progress being made in supporting and 9 9 lifting in Canterbury and increased uncertainty of where the burden will fall stabilising the weaker nations. Europe has 9 9 buoyancy in the housing market. is currently weighing on US businesses tipped back into recession, highlighting 10 year Average and households, and this is restraining the difficulties in finding the right balance 5 year rate Nonetheless, we expect the challenging 8 8 8 8 economic demand. between fiscal austerity and supporting global environment will continue to To add to the uncertainty, if no agreement the economy. dominate the outlook, and expect 7 7 7 7 interest rates will remain low, with the is reached by early 2013, a number of The debt crisis will remain a key feature of 3 year rate November 2012 OCR unchanged at 2.5% for much of the temporary tax cuts will automatically the global backdrop in 2013. 6 6 6 6 coming year. expire at the same time as automatic Conditions for most exporters have been spending curbs come into force. Low (past 10 years) The final few months of 2012 have seen challenging over 2012, but we do expect Source: ASB 1 year rate The combined fiscal contraction of $607 to see improvement in 2013. We expect 5 5 5 5 the financial markets remain in a holding Variable Rate 1 Year rate 3 Year rate 5 Year rate Jan 07 July 08 Jan 10 July 11 July 13 pattern, awaiting the outcome of various billion is likely to push the US economy to see the NZD remaining elevated for back into recession. Early indications are much of the year, and to be a headwind Variable rate mortgages used to be the most expensive option Short-term fixed rates and variable rates are at or near record political uncertainties. but recently they have been the cheapest lows, but longer-term fixed rates are closer to the 10-year average that both political parties are willing to on export-sector incomes.

24 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 25 INSURANCE Steve Wright

Together. success.

Diversification helps When your clients’ need finance, talk clients and brokers to us. We offer competitive lending rates and a prompt, Finding the best fit is not always just professional service. about ticking boxes or doing the numbers 1st MORTGAGE FINANCE: It seems to me that the last ten years sale of an insurance product alongside amount of money. Available for Residential have had a profound impact on the mortgage. Good advisers know that benefits, not mortgage brokers. I deal with many Advisers who are solely focused on price, determine the most appropriate and Commercial property who are also insurance brokers. the sale don’t always appreciate how policy and that selling based on price Max LVR: 75% Even during the boom times of the important their job is, particularly as is usually the best way to create an mid-2000s, many mortgage brokers saw the insurance business can be short on insurance business that will not be very Loan size: up to $5.0m the value in diversifying their business appreciation by clients… that is until they lucrative, satisfying or compliant. by branching out into life, disability and have a major claim. Increasingly, good advisers are also Term: up to 36 mths medical insurance. When a family suffers the death of a mum realising that great advice is also about For many the transition was pretty easy or dad, it is typically only their insurance helping the client through the process because they already had the clients and adviser who brings them money while of applying for insurance, making sure 2nd MORTGAGE FINANCE: most mortgage clients need insurance. others are asking for it. they fill out the forms properly and Available for business / The tricky part was learning a whole In these cases, a decent insurance package don’t forget to disclose health and other new skill set and I think many mortgage can often mean the difference between information required. investment / property and brokers have done extremely well. financial security and financial ruin. It’s about sticking close to the client until personal circumstances Many of the very best, most talented, and their policy is issued and then continually It is at claim time when most advisers Max LVR: 75% professional insurance advisers I know realise just how important they are to helping the client understand why they are mortgage brokers who took up the their clients and everyone else realises how pay a premium, why their premiums go Loan size: up to $75,000 challenge of diversifying their businesses important great insurance advice is. up each year and just how valuable their insurance contract is. with insurance services. I’m extremely encouraged by the fact Term: up to 36 mths Perhaps having to start with a clean slate that good advisers recognise that great For me this increased focus on providing was a blessing, because while it meant advice is not just about the risks faced great insurance advice is the greatest a very steep initial learning curve, no by the client or the class of insurance or achievement of the last 10 years because pre-conceived beliefs stood in the way sums insured needed to compensate them great advice, advice based solely on the TALK TO US NOW of delivering the best insurance advice financially if death, disability or ill-health client’s needs and not the adviser’s needs, proposition. should strike. brings great value to those who pay our Ph: 0800 535 535 wages, the client! Being accustomed to dealing with a Great advice is about recommending the variety of funding providers also made insurance policy and insurance provider Congratulations to all those mortgage www.crownfinance.co.nz dealing with a number of different that best meets the client’s needs. brokers who have understood the value of great insurance advice, created successful insurance providers, so critical to being All policies differ, sometimes only in insurance businesses and, probably most able to give good advice, naturally easy. minor ways but sometimes in very important of all, forever improved the lives While many mortgage brokers have significant ways. of their clients who have suffered death, dramatically increased the value of their Truly great insurance advice occurs when disability or serious- illness by taking away businesses by adding insurance to their the client’s particular propensity to suffer their money hassles. service proposition, the thing that I find a particular risk and associated financial

the most satisfying is how most brokers consequences are matched with the Steve Wright is Technical General understand that it’s not just about the insurance policy that will pay the expected Manager at Partners Life.

26 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 27 PAA NEWS

LEAD STORY PAA NEWS

to being a successful adviser and adds Experienced advisers know that the more public legitimacy to the financial services informed consumers are about a category profession. of insurance or a mortgage transaction, the Our first Today’s culture of professionalism in more receptive they are to personalised highly-competitive markets must embrace advice and to act on that advice. industry education with vigour. With knowledge of products such as your business, your future, your choice Jenny Campbell,to being a successfulthe PAA’s adviserProfessional and adds Experienced advisers know that the more your business, your future, your choice public legitimacy to the financial services trauma and TPD being low, the research Development Manager believes CPD for informed consumers are about a category profession. advisers should: revealedof insurance an opportunity or a mortgage to increase transaction, cover the turbulent decade Today’s culture of professionalism in in thosemore areas receptive (allowing they forare theto personalised objection of • Be comprehensiblehighly-competitive – though markets not mustdumbed embrace IndependentIndependent thinkingthinking affordabilityadvice andto be to overcome).act on that advice. Independent thinking down, industryand ‘easy education to access, with easy vigour. to By Philip Macalister With knowledge of products such as your businesfor advis, syersour bfutuy ardevi, ysourers choi ce manage andJenny easy Campbell, to record’. the PAA’s Professional The role of banks remains prominent forfor advisers advisers by advisers advisers trauma and TPD being low, the research Development Manager believes CPD for with insurance and mortgage-related • Help you comply with the law – notably advisers should: productsrevealed such an as opportunity mortgage repaymentto increase cover • Advocacy at the highest level section 33 of the Financial Advisers Act. • Advocacy at the highest level • Be comprehensible – though not dumbedinsurance, in those but areas this did(allowing not always for the equate objection to of • (Government)AdvocacyIndependent at the highest thinking level down, and ‘easy to access, easy to affordability to be overcome). (Government) • Improve advice processes. Volume 9, Issue 2, March 2010 effective delivery in the minds of surveyed for advisers by advisers NZ AND INTERNATIONAL NEWS, SALES TIPS & MUCH MORE NZ aND iNTerNaTioNaL NeWS, SaLeS TipS & Much More NZ aNd iNterNatioNal News, sales tips & much more manage and easy to record’. The role of banks remains prominent (Government) consumers.the new zealand • New CPD portal, with structured • Give confidence for advisers to continue with insurance and mortgage-related • New CPD portal, with structured • Help you comply with the law – notably to provide a current, valuable worthwhile Smallproducts business such owners as mortgage felt that repayment banks • • learninglearningCPD Advo portal,cac capacityy at thewith highest structured level section 33 of the Financial Advisers Act. set out to be insurance advisers, but by no service to customers. She said: “We are mortgageadvice forinsurance, lenders and advisersbut this did not always equate to mag learning(Governme capacitynt) trusted• by Improve our customers, advice processes. and we are Volumemeans 11, Issueeffective 5,was 2012 there delivery confidence in the minds that theof surveyed banks • Business training for advisers Volume 6 • Issue 2 Volume 6 • Issue 4 • Business training for advisers March 2007 June 2007 Volume 8 • Issue 6 professionals. Let’s embrace training – as were ableconsumers. satisfy needs properly. September 2009 • Give confidence for advisers to continue • • BusinessNew CPD portal,training with for structured advisers it makes usto providebetter advisers.a current, Ifvaluable advisers worthwhile Most Smallbusiness business owners owners surveyed felt that seemed banks •• PAAToolkitlearning Friendly for capacity RFAs Guides and AFAs for Advisers Big banks Safety in Aim high are membersservice of toan customers. association, She it said:can be “We are to haveset inadequate out to be insurance knowledge advisers, about but their by no • PAA Friendly Guides for Advisers easier to trustedkeep an by up-to-date our customers, CPD and register. we are cover,means yet many was werethere openconfidence to an thatadviser the banks •• • ASSET ASSETBusiness magazine training (monthly)and for advisers numbers Conference SharingAll advisers,professionals. AFAs or not, Let’s should embrace devote training – as were able satisfy needs properly. search the “knocking on their door” to assist them. • MortgageASSET magazine Mag (monthly) and Mortgage message time to generatingit makes us CPD better hours advisers. each If year. advisers ThereMost was businessa good awareness owners surveyed around seemed • PAA Friendly Guides for Advisers herIn addition viewsare to members good processes of an association, and client it can be • Monthly newsletters, and shadows to brokers businessto have continuation inadequate cover knowledge as a valuable about their Mag (monthly) systems, easiera current to keep CPD an record up-to-date sends CPD a register.FINDING cover, yet many THE were open to an adviser • Moindustrynthly updatesnewsletters, and Bronwyn Shanks, protection, perhaps in the wake of the • ASSET magazine and positive signalAll advisers, to the AFAsFMA orwhen not, shouldcarrying devote WINNING“knocking on their FORMULA door” to assist them. industry updates ALSO INSIDE THIS ISSUE Christchurch earthquake. • MonthlyMortgage newsletters, Mag (monthly) and of adviceout monitoring networktime to checks generating on advisers.”CPD hours each year. POLICY There REPLACEMENT: was a good awareness around • Industry conference – Julie Stevens of Latest on Brokers on their In addition toContent good processes and to client come. Overall, the AIA’s research confirmed that Plan NZ house prices best work Share, has mortgage business continuation cover as a valuable industry updates Darrin Frankssystems, of AIA a NZcurrent presented CPD record at the sends a A FINE BALANCE • • IndustryinternationalMonthly conference newslet andt localers in, and speakersAuckland broking on her mind consumersprotection, continue perhaps to be in thepoorly wake informed of the same roadshowpositive and signal revealed to the the FMA results when carrying STAYabout the IN consequences TOUCH of underinsurance –indust May 16-17ry upd a2013tes ALSO INSIDE THIS ISSUE NZ Brokers can now provide NZ clients with short term lending Christchurch earthquake. • Industry conference in Auckland solutions for business and investment purposes. of market researchout monitoring on the checks “insurance on advisers.” • Regional meeting programme Jeff Staniland at What makes a Why discounting ALSO InSIde THIS ISSUe Content toANDor come. the risks KEEP of relying IN onMIND state support. • $10,000-$250,000 + • 1-6 month loans Overall, the AIA’s research confirmed that • 24 hour approval, 5 day settlement • Consider country areas underbelly”Broker education of• Banks a typical speak out • Goasegmentls that score of more Mike Pero Mortgages perfect lender won’t pay Mark Childs Interest rates Your ‘to do’ list for Darrin Franks of AIA NZ presented at the • – Industry May 16-17 conference 2013 in Auckland Broker of the Year As low as they’ll go? generating leads Peopleconsumers knew little continue about to special be poorly covers informed and • Regional meeting programme T: 0800 557 073 W: mangomedia.com.au than 800 Kiwi consumers. same roadshow and revealed the results were preparedabout the toconsequences overlook such of underinsuranceareas, unless • National– May 16-17 Roadshows 2013 That underbellyof market remainsresearch ason rawthe “insurance and their valueor the could risks ofbe relying carefully on stateexplained. support. • NationalRegional Roadshows meeting programme underinsuredunderbelly” as ever. of a typical segment of more People knew little about special covers and • • CodeRegional of Ethics meeting and independentprogramme Sure, thethan theme 800 wasKiwi notconsumers. new, but its By contrast, new immigrants had a sharper • National Roadshows appreciationwere prepared of the needto overlook to be insuredsuch areas, and unless to • Codecomplaints of Ethics process and independent importanceThat has underbellynever been remains greater as and raw the and • National Roadshows research underinsureddata was and as remains ever. fresh. Some have accesstheir value to financial could be advice.carefully explained. • complaintsCode of Ethics process and independent key results Sure,were thethat: theme was not new, but its Most Bysmall contrast, to medium-sized new immigrants businesses had a sharper • Professional Indemnity Programme appreciation of the need to be insured and to • Code of Ethics and independent importance has never been greater and the continue to want help with business cover • Professionalcomplaints Indemnity process Programme • 70-90%research of people data held was home,and remains contents fresh. Some have access to financial advice. andcomplaints Group Life process Cover assessment – now! A cornerstone of the NZ Mortgage Indeed if there is one thing we have andThese car articlesinsurancekey results have were all beenthat: designed evolvedMost significantly. small to medium-sized businesses and Group Life Cover The past 10 years of this For those who see business cover as • Professional Indemnity Magazine right from day one 10 years ago found over the years it is the number of to help mortgage advisers develop continue to want help with business cover • • Seven Professional holiday Indemnity homes Programme • 50% had• 70-90% life insurance of people – the held best- home, contents aIn harder 2003 sell, some think familiar again asissues there and is an • Seven holiday homes is that we were writing it for brokers and firms that have come and gone. There their businesses.and car insurance namesassessment cropped – up. now! We profiled Mike Programmeand Group Life and Cover Group magazine have seen some supported risk insurance but lagging behind enduring opportunity to help many clients about brokers. are advertisements from all sorts of materialThe first asset issue awareness of the magazine is Pero, discussedFor those who the see issue business of disclosing cover as And a dedicated team to assist you • 50% had life insurance – the best- in this sector. Life Cover of the mortgage advice Our view of the financial services organisations many of today’s brokers interesting as it talks about the entrant of commissionsa harder sell, and think had again NZMBA as there chairman is an • Seven holiday homes • 34% ofsupported the sample risk held insurance health but insurance lagging behind If you are a member of a professional world is that it’s not an industry of just would never have heard of. a new player to the New Zealand market. Brianenduring Berry asking opportunity brokers to help if they many were clients And a dedicated team to assist you – suggestingmaterial a tacit asset reliance awareness on public association, you are making a prudent • Seven holiday homes industry’s highest peaks numbers. Numbers are important, but it Funnily enough, when I look through Bluestone was very active here until the readyin forthis regulation. sector. healthcare• 34%for two-thirds of the sample of the held people health insurance If you are a member of a professional is all about people. the magazines of the past decade there GFC. Also, brokers discussed the merits decision to help your business grow – and AndWebsite: a dedica twww.paa.co.nzed team to assist you surveyed– suggesting a tacit reliance on public The yearassociation, ended you with are the making NZMBA a prudent deciding and lowest troughs. are some themes and people who have of Kiwibank – a discussion that is still receive information like this in person. AndWebsi at dedicatede: www.paa. teamco.nz People and their relationships are what healthcare for two-thirds of the people to godecision it alone to ratherhelp your than business join other grow – and been constant. No mortgage magazine • ongoing Only 11%-12% all these of yearspeople later. knew about Your chosen association should be like a drive business. Any mortgage adviser who surveyed associations,receive information ANZ buying like this National in person. Bank Website: www.paa.co.nz would be complete without commentary or purchased specialised insurance such business facilitator. And it’s always valuable to assist you gets out there, sees clients and provides Besides Tierney on the cover we talked (whichYour funnily chosen enough association said should“it is clear be like that a on interest rates and that has been ably as trauma,• Onlymortgage 11%-12% repayment, of people income knew about to bounce ideas off friends and colleagues. them with a solution knows that. to otheror winners purchased at specialisedthe NZMBA insurance annual such manybusiness brokers facilitator. and customers And it’s always are unhappy valuable supplied by ASB over the years. protection and TPD The rest is up to you. The first issue of the NZ Mortgage Mag awards.as Some trauma, of mortgagethe names repayment, remain veryincome withto the bounce idea”) ideas and off BNZ friends cutting and colleagues. its ties Professsional Advisers Association Inc, illustrates this with a cover picture of the One of the features that resonates with familiar:protection Warren Rule,and TPD Charlie Reid and withThe brokers. rest is up to you. ProfesssionalPO A Boxdvisers 911 A335,ssociation Inc, winner of the NZ Mortgage Broker of the readers is Paul Watkin’s excellent sales and Gary Burton, Craig Seton and Rob Parsons. The following year reverse mortgages Victoria Street West, Auckland 1142 ProfesssionalPO ABdvisersox 911 A335,ssociation Inc, Year Sue Tierney. marketing ideas. The second year of the NZ Mortgage Mag arrived big time in the market, and brokers Phone: 0800 275 722, Fax: 0800 275 712 Victoria StrPOeet B Woxes 911t, A 335,uckland 1142 Email: [email protected] Looking back over 10 years the cover On the technical side Jonathan Flaws started with a subject that is also the lead discussed whether they should be able to Phone:Vict oria0800 St 275reet 722,West ,F Aax:uc k0800land 2751142 712 is poignant. has kept readers abreast of all sorts in this issue: Broker groups. In February market their services as free. Phone:Email: 0800 275 admin@paa. 722, Fax: 0800co.nz 275 712 of legal issues that could impact on 2003 we described them as aggregation It shows how people and organisations It was clearly a time of buoyancy with the Email: [email protected] their businesses. groups. Looking at our chart of services can fall from grace. housing market going gang busters and offered it’s fair to say the groups have

25 28 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 25 29 LEAD STORY

brokers increasing their market share – cowboys out of financial services. Chris Barry. Another theme we kept hearing about was like “Tough times ahead” and “Half of While it was a tough start the year ended how that was to change in a couple of Those clouds darkened as 2005 progressed 2006 started with more on NZ Finance’s the margin squeeze on banks and BNZ’s finance companies to go”. positively with NZMBA chairman Darren years’ time. The NZMBA appointed its first with more talk about the housing market takeover bid for Mike Pero being thwarted (now legendary) Unbeatable campaign, The following year, 2008, started with Pratley saying: “I think 2010 will bring a chief executive, Megan Salt, and Geoff heading south. by Liberty, which bought a 10.1% stake and towards the end of the year HSBC the battle of the professional bodies with new era for our industry.” Bawden started his reign as chairman. severed ties with brokers saying the Perhaps 2005 was a seminal year for in the listed business. We all know where the PAA attempting to poach NZMBA An ongoing theme for the year was channel didn’t generate sufficient returns. The year 2004 also saw Superbank brokers when the banks decided to slash that story is at now. members. preparation for regulation; moving to launch with the promise of tipping the their remuneration to brokers. Non-bank Recurring themes are around dealer During the year GE bought Superbank’s Looking back at the people involved and mortgage advice and articles to help remuneration structure on its head and lenders were happy to put their hand group rationalisation (there are now book and brokers, and were talking about seeing what happened this year, when readers become better and more rewarding brokers for keeping business up and tout for broker business and the more groups than before and fewer plans to get 40% market share of the the two bodies amalgamated, the story professional advisers. on the books rather than writing new growing product trend was lo-doc/no-doc brokers), continuing education and mortgage business. provokes a little chuckle. A theme that started around this time business. Meanwhile another bank, BNZ, loans. It was also the year the NZMBA brokers’ relationship with banks post In 2007 Maria Scott took over the editorial The backdrop to the battle was the and is still current is how to recruit more started its anti-broker campaign. started its generic advertising campaign commission cuts. reigns at the NZ Mortgage Mag. Maria government’s plans to have Approved people to the dealer groups. Clouds started appearing on the horizon supporting brokers. We also asked the question why brokers had previously spent many years as a Professional Bodies regulating advisers. During the year Maria Scott relinquished when the government started getting On the more positive side we had stories didn’t support non-bank lenders more personal finance writer in the United This idea self-destructed when bodies the editorship of the magazine and it was serious about regulation. Then-Commerce about technology coming to the market strongly in light of these changes. Maybe Kingdom couldn’t agree and consequently we briefly taken up by Sonia Speedy, who was Minister Margaret Wilson was pictured as to help brokers, including Appsline, a the subsequent meltdown of the finance Her first lead story was on who makes a ended up with the present regime where quickly poached to a communications role the sheriff with six-shooters blasting and business set up by Flaws and former company sector was a reason, but did good mortgage broker. One of the more the FMA has all the power. at the Reserve Bank. Readers them got to a taskforce was established to run the Sovereign Home Loans general manager anyone see that coming in 2006? intriguing insights was that policemen One feature I loved in 2008 was “Hot know Jenha White. have great potential. shots hitting their targets”, where we Terms we are now familiar with such as The start of the year saw more discussion found fresh, young enthusiastic brokers. RFA, AFA, and disputes resolution schemes about a co-regulatory regime for financial It made a change as it seems the took up plenty of pages over the year, as advisers but the whole project was pushed leadership of the broking world hasn’t did social media subjects. October also The life and times of the NZMBA back two years after the government changed saw the introduction of Steve Wright’s rejigged its timetable. that much. excellent insurance column. Standfirst: Earlier this year the NZMBA was subsumed into the Looking back over these issues of the A question to explore next year is who How’s this for an introduction to 2011: magazine there is a clear trend that are the new leaders of the mortgage “The new year heralds a transition to a Professional Advisers Association. Jenny Ruth talks to some of the key the discussion around what makes a advisory world? regulated environment, re-evaluating good broking business had matured business models and striving to succeed in By 2008 there were some gloomy stories, players about some of the more colourful times in NZMBA’s life. and discussion on different models an environment where all the goal posts such as: “How to sell your business or exit was engaging. have shifted.” Darren Pratley Geoff Bawden with grace and dignity.” Headlines like Yet as brokers were lifting their game “Rushing to sell,” and “To the lifeboats” Ain’t that the truth. Darren Pratley says his time as New like 30 or 40 people” partied in his hotel As Bawden tells it, a lot of NZMBA a crisis was brewing. The banks were summed up the mood. During the year we profiled many of the about to embark on their second round Zealand Mortgage Brokers Association room until about 5am. planning was written on the back of It was also the time when serious debate non-bank lenders in the market and it is of commission cutting in three years. chairman, between 2008 and February Running a panel discussion at 9am that coasters during such trips. started on mortgage brokers selling something we will do again in 2013. It At the time we said “mortgage brokers 2012, was “the hardest four-and-a-half day “was one of the hardest things Both relate a memorably turbulent flight insurance. The debate was pretty heated was a little surprising to see how many are fighting the biggest challenge in years of my life but it was a fantastic I’ve ever had to do,” Tucker says. “The between Christchurch and Dunedin and at the same time an equally fierce options are available. their history.” opportunity”. conferences were always fun.” during which atrocious weather discussion erupted on the merits, or At the NZMBA conference in the middle That prediction has, arguably, proved Brian Berry, chairman between 2002 and Berry says his successor, Geoff Bawden, conditions saw them unable to land otherwise, of selling KiwiSaver. of the year the association announced correct. 2004, says it was “very much a labour chairman between 2004 and 2008, is in Dunedin and having to return to Towards the end of 2008 Bawden stepped its official tie-up with the PAA which of love”. “much more shoot-from-the-hip than I Christchurch. June 2007 marked the first of our biggest- down as chairman of the NZMBA. ultimately led to this year’s amalgamation. ever issues of The Mortgage Magazine, It wasn’t just the time the role required ever was” and relied a great deal on Berry With other NZMBA people, they headed Maria Scott summed up the year: “No By now there were signs the market clocking in at 52 pages and including our that made it a tough ask. and Tucker to mentor him into the role. straight for a bar. “I don’t remember tears will be shed for the passing of 2008 was picking up and, as revealed in this first comprehensive survey of home equity “It’s thinking on your feet, dealing with Berry’s nickname for Bawden, much after 10pm,” Salt confesses. but many have been shed during the year’s dealer group survey, volumes are release schemes. the press, making sure you’re saying the grasshopper, persists to this day. Alcohol, namely port, figured large the year.” much better. The theme of diversification has come up right things for the industry, research Taken from the kung fu movies, the night Berry told Bawden he was stepping She concluded: “Bring on 2009.” The past 10 years has been a roller coaster and thinking and talking to different term is a wise mentor’s for a young down and the board wanted Bawden to through the magazine over the years, but ride with some pretty hair-raising patches. But the next year was a bit more positive. stakeholders,” Berry says. tearaway student. Berry says he still take over. “The port night,” is how the linked to home equity release, commercial The outlook now is looking much more Our first lead in 2009 provided readers says “grasshopper” to Bawden when he pair now refer to the occasion. loans and other debt-based solutions. positive for mortgage advisers. Regulation He rates achieving a single mortgage with tips to succeed. This was reflected in wants to signal it might be time to calm It wasn’t until the GFC really hit that life and compliance, while an issue, is application form which all lenders would One incident on another port night a far more upbeat tone to the market. accept as “a major step forward in the down. involved Berry, whipped cream and insurance was openly embraced. This was manageable, groups are offering more This was also the year the government efficiency of the industry” and one of his NZMBA’s only full-time chief executive Bawden’s cat, Sookey. even though companies like Sovereign and more services and support. There is a sold home loans primarily to sell more settled on the two-tier regulatory regime need for more lending options, especially major legacies. Megan Salt, whose term coincided Berry refuses to explain: “Am not going insurance. for advisers. as there are only three big banks that will But it wasn’t all hard work. The first with Bawden’s, says: “Some of our best to go there! Don’t believe a word Geoff This was also the year bank profit margins distribute using intermediaries. chairman between 1997 and 2002, Rob work was done sitting in airports and Bawden says! We have never had any During the year the implications of came under intense pressure as they Tucker, still retains the memory of one on planes” while travelling between alcohol-fuelled evenings that have the credit crunch were being analysed Groups need to recruit more advisers and refused to lower floating rates as the annual conference at which “something regional meetings. resulted in unmentionable tales!” and the positive vibes of previous years the “generic brand” of mortgage advice was being replaced with headlines OCR came down. needs to be promoted.

30 the nz mortgage mag Volume 11 Issue 8 2012 Volume 11 Issue 8 2012 the nz mortgage mag 31 LEGAL Jonathan Flaws

Back to the future

Technology offers vast improvements to the way we do business, and the odd drawback

Over the past decade, the world has or a discharge. A non-lawyer can lodge During the decade, the Anti-Money become a different place. a paper instrument but this is a more Laundering and Countering Financing of The way we do business is probably convoluted and slow process and very few Terrorism Act 2009 replaced the previous forever altered by technology and will choose to do this. Financial Transactions Reporting Act and the changes in the financial and legal The time between settlement and it too requires financial institutions and landscape relating to land and mortgages registration has been dramatically reduced other persons to “know your customer”. have also been substantial. and the cost of registering instruments This requires not just a verification of identity but also determining if the It is probably worth taking a deep breath has also dropped. customer falls into a higher risk category and looking back over the last 10 years Searching title is now easy and requires that may require more verification or and reflecting on some of the changes the searching party to register with Land investigation. that have taken place. Information New Zealand (LINZ) and For the mortgage industry this suggests These will provide a base from which to obtain the required digital certificate. that there is now a double-up with both launch the next decade and prepare us for A person, other than a conveyancing the financial institution and the lawyer even greater change to come. professional, holding the correct digital certificate is also able to prepare and having to verify identity. This need I have detailed five changes that have lodge. Only a conveyancing professional not necessarily be the case. My firm made a big difference to my business. holding a current practicing certificate has worked with others to establish a and a more extensive digital certificate can business process and procedure where the eDealing – electronic mortgages 1 sign and certify a dealing to enable it to requirements of both pieces of legislation In 2002, the Registrar General of be registered. can be undertaken at the same time. Land declared the register of land in New As a result of these provisions, at the Zealand to be a computer register. This Verification of identity end of the current decade, it is now no meant that the old system of having to 2 A consequence of electronic longer acceptable to take a person at lodge the outstanding duplicate certificate registration has been the increased focus face value unless that face has been of title when registering a mortgage was on verifying the identity of the persons identified and checked against a valid no longer required. who are instructing the conveyancing photo ID document. This paved the way for the electronic professional to undertake the registration registration of instruments affecting on their behalf. Credit Contracts and Consumer land. The first electronic mortgages were 3 Finance Act 2003 (CCCFA) The Registrar General of Land is registered in a pilot in 2002 and by responsible for publishing requirements From April 1, 2005, the CCCFA replaced 2007, all mortgages lodged by lawyers regarding verification of identity which, the Credit Contracts Act. While it and conveyancers were required to if met, confirm that the conveyancing improved some areas – such as dispensing be electronic. professional has taken reasonable steps with the requirement to provide The effect of this change has been to verify the identity of the client. Initially borrowers with a finance rate so they to entrench the role of lawyers and the NZ Law Society published guidelines could more consciously shop around – it licensed conveyancers (“conveyancing which the RGL approved and adopted. also imposed greater responsibility on professionals”) for without being Subsequently, the RGL has published his lenders. Some have looked at its impact represented by one, a mortgagor or a own verification of identity standards. and suggested that “CCC” is a shorthand mortgagee cannot register a mortgage way of spelling the word “sweet”. LEGAL Your Complete Guide to Apartments PRE-ORDER YOUR COPY NOW raTe carD EFFECTIVE AprIl 2009 One of the main objectives of the Act was verification. If borrowers applied for loans A significant development at the start to ensure that instead of a finance rate and promised they could repay them, then of the last decade that has probably as an aid to comparing loans, a borrower the loan was made. gone unnoticed by most of us was the could use the annual interest rate The system in the States took securitisation development of web services and xml. We disclosed by the lender to reflect the true to very dizzy limits and created a huge established web services with a client in and comparable cost of credit. To do this, chasm between the borrower, the ultimate early 2003. Since then virtually all of our restrictions are imposed on the ability of B2B communications use this method. lender and the ultimate servicer. The Regional Review adveRtising Rates the lender to recover profit via credit fees servicing rights were traded around as was Web services and xml refer to the and charges. the loan itself. Merchant bankers found method by which two parties (or more) These advertising options have been designed specifically for regional advertisers and organisations with smaller advertising budgets. Fees and charges are required now to be new ways to package and repackage can transfer data effectively and quickly SpecialHow to Offer! buy, 50% Off! reasonable and reasonableness is reflected portfolios of loans and the risks associated between systems across a secure web NZ Property Investor normal casual rate sNewpecial regional advertiser rate by whether or not the amount charged with the loans until they eventually connection. It makes integration and co- Half page $1,900 $950 represents a reasonable estimate of a cost imploded upon themselves and took the operation between multiple and different invest in Third $1,450 $725 or loss recovered. lenders, bankers and borrowers with them systems in different locations achievable. Quarter $1,150 $575 Financial instruments, such as mortgages, into the financial chasm they had created. The development of mobile phones and Eighthand enjoy $650 Special$325 can be complex and it is a dream to If you assume that this event was all driven technology, VPN and virtual servers has Investor Map Guide (includes ¼ horizontal ad space and branding) $950 suggest that legislation can ever fairly by what happened overseas then you are also had a huge impact. create a level playing field. In fact it is wrong. The Blue Chip debacle and the Let me finish with a simple example. apartments not so much the instrument that creates resulting Supreme Court case were just aBoUt tHe MagaZine: The NZ Property investoR PRoFile: The magazine is distributed through nationwide I was recently sitting in the office of Investor reaches a nationwide audience of retail outlets including Whitcoulls, Paper Plus, Owns between two and five residential complexity but the need that financiers the tip of the iceberg. They represented active property investors. As a local business properties EditionFoodtown, Woolworths, Countdown, New another lawyer in Sydney in the midst of this is your opportunity to present your services World, BP and Caltex. and skills to this targeted audience who own, Bought the most recent property in 2006 or face to provide a competitive product. perhaps the most aggressive use of low- 2007 a negotiation. investThe or are newest looking to buy inand your area. fast growing MagaZine Content: NZ Property Investor Ltd doc lending which, when coupled with It is the only magazine for property investors in Owns properties worth a total of between have on board a team of credible and experienced Legislation has always found it hard to An issue arose that I knew I had dealt Newsector Zealand as wellof as the being the real largest sellingestate $1 marketmillion and $2 million journalists, who are well-known and respected business magazine in the country. It is also within the property industry. The publication regulate smoke and mirrors and the the collateral bad investment proposition, Has equity of between $100,000 and with some time ago. The file was on a distributed to all members of the New Zealand $500,000 in these properties provides comprehensive and relevant content Propertyin New Investors ZealandFederation. is apartments. created the environment for the ultimate Their main objective is to generate good including: financial industry is full of these devices. For this special promotion of your area, we removable hard drive that was hooked ongoing rental income In-depth features on how to buy and manage in irresponsible lending. wouldApartments like to offer you 50% off are our normal now shooting up all property investment advertising rate, and in addition, we will include The gross average rental income earned in Credit fees and charges required to be into my local drive on my computer in my Monthly housing market overview your business in our online directory at 2006 was $47,000 It is important to note that I have used www.landlords.co.nz free of charge! Industry news and views column disclosed are only those that apply in office in Auckland. over the country and predictions Has six or more years ofare experience in the expression “created the environment” Advertising space is strictly limited, please residential investments Home improvements column respect of the loan covered by the CCCFA. either call me or e-mail me to secure your Regional review section It took less than five minutes to open my that they will become a Intendsbigger to make andmore investments in the because the Supreme Court found that on position in this feature and your free online coming year. Property toolbox section If the lender is a bank, it is still free to briefcase, remove my laptop, plug in my listing. the facts of this case that the lender was bigger part of the market.(Statistics derived from the ANZ/NZ Property Legal section Investor annual survey, 2007) Vital rental statistics provided by Housing NZ charge fees for other services it sells to the 4G USB modem, connect to the network ReadeR deMogRaPHiCs: Below is a snapshot CiRCUlation: The NZ Property Investor has And a classified section not irresponsible. of our readers. new customer. in Auckland, access my PC using a remote Apartments present a awhole net audited circulationnew of 14,704 copies per It was sufficiently distanced from and Readers are typically aged between 40 – 59, issue and an estimated readership of over You could argue that even if the loan is terminal connection, search my PC and married and in full-time employment with 50,000. These are distributed evenly via three a setgross annual of householdopportunities income above andchannels: lifestyles unaware of the use of the funds advanced $100,000. The NZ Property Investor works in conjunction from a non-bank lender, the customer find the answer on the file. Subscriptions NZPIF members Retail with www.landlords.co.nz and any irresponsible conduct did not rest for investors and owners. However, would still need to incur such fees from All of my documents, letters and with the lender. Indeed, the lender had its own bank in order to arrange for information are converted now to buying and investing in this sector is acted responsibly and required that the payments on the non-bank loan. That an electronic file and provided I am borrower take independent legal advice. quite different to the tradtional ForKiwi more information contact amy Hubbard argument is often accompanied by a Tui somewhere with WiFi, 3G or 4G range, investment property. Phone 07 349 1920 Mobile 0274 303023 singing in the background. The irresponsible lending was in fact I can access everything I need. [email protected] irresponsible borrowing that resulted from My office is wherever I and my Mac Air In this Special Edition we look at the incompetent advice given by a lawyer who See next page for advertising specifications ... Responsible lending laptop happen to be. 4 the Court found to be negligent. growth of the apartment market Perhaps the things that have had the Recently, I was flying from New York to greatest impact in the area of responsible and explain why it’s different and Acceptance and use of mobile LA and needed to respond to some lending are the effect of the global how to successfully buy and invest 5 technology and cloud computing emails urgently. financial crisis (GFC) and the Supreme For $21, I hooked into the plane’s satellite in apartments. Court in the GE v Bartle decision. Ten years ago I thought we were pretty well advanced and at the leading edge WiFi service and was able to write, send The GFC developed from the collapse of in the way we used technology. And we and receive emails. a financial industry that had grown fat probably were. At the start of the decade, that was a very and inventive on the back of irresponsible expensive dream – or nightmare. $ lending. At the coalface, this lending But the leading edge has moved so far Your Complete Guide to Apartments will be on sale 12.50 was referred to as sub-prime or non- that looking back it is hard to see where raTe carD we were. In 2002, Apple was a struggling Jonathan Flaws is a principal of Auckland early next year. You can pre-order your copy and save. conforming (sometimes referred to as non law firm Sanderson Weir and managing EFFECTIVE AprIl 2009 company and the iPhone, iPad were yet to performing or liars loans). This lending director of First Mortgage Services. relied upon self-certification and limited be designed and released. To order your copy visit www.propertyinvestor.co.nz/apartments 34 the nz mortgage mag Volume 11 Issue 8 2012 orVolume call 11 0800 Issue 8 2012 335 675 the nz mortgage mag 35

Regional Review adveRtising Rates

These advertising options have been designed specifically for regional advertisers and organisations with smaller advertising budgets. Special Offer! 50% Off! NZ Property Investor normal casual rate special regional advertiser rate

Half page $1,900 $950

Third $1,450 $725

Quarter $1,150 $575

Eighth $650 $325

Investor Map Guide (includes ¼ horizontal ad space and branding) $950

aBoUt tHe MagaZine: The NZ Property investoR PRoFile: The magazine is distributed through nationwide Investor reaches a nationwide audience of retail outlets including Whitcoulls, Paper Plus, Owns between two and five residential active property investors. As a local business properties Foodtown, Woolworths, Countdown, New this is your opportunity to present your services World, BP and Caltex. and skills to this targeted audience who own, Bought the most recent property in 2006 or 2007 invest or are looking to buy in your area. MagaZine Content: NZ Property Investor Ltd It is the only magazine for property investors in Owns properties worth a total of between have on board a team of credible and experienced New Zealand as well as being the largest selling $1 million and $2 million journalists, who are well-known and respected business magazine in the country. It is also within the property industry. The publication Has equity of between $100,000 and distributed to all members of the New Zealand $500,000 in these properties provides comprehensive and relevant content Property Investors Federation. Their main objective is to generate good including: For this special promotion of your area, we ongoing rental income In-depth features on how to buy and manage would like to offer you 50% off our normal property investment advertising rate, and in addition, we will include The gross average rental income earned in Monthly housing market overview your business in our online directory at 2006 was $47,000 www.landlords.co.nz free of charge! Industry news and views column Has six or more years of experience in Advertising space is strictly limited, please residential investments Home improvements column either call me or e-mail me to secure your Regional review section Intends to make more investments in the position in this feature and your free online coming year. Property toolbox section listing. (Statistics derived from the ANZ/NZ Property Legal section Investor annual survey, 2007) Vital rental statistics provided by Housing NZ ReadeR deMogRaPHiCs: Below is a snapshot CiRCUlation: The NZ Property Investor has And a classified section of our readers. a net audited circulation of 14,704 copies per Readers are typically aged between 40 – 59, issue and an estimated readership of over married and in full-time employment with 50,000. These are distributed evenly via three a gross annual household income above channels: $100,000. The NZ Property Investor works in conjunction Subscriptions NZPIF members Retail with www.landlords.co.nz

For more information contact amy Hubbard Phone 07 349 1920 Mobile 0274 303023 [email protected]

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36 the nz mortgage mag Volume 11 Issue 8 2012