NEWS

Astute file audit promising

Astute has started auditing mortgage adviser files and is pleased with what it has found so far.

Chief executive Sarah Johnston says the key issue is around record keeping and making sure advisers write down notes around what they are doing.

“I’ve not found anything that would make me resign,” she says.

She says part of the audit process is to understand the rationale of why an adviser has picked a particular lender for a deal.

“We don’t dictate where business goes,” she says. Rather advisers have to demonstrate they went through a process and can prove their decision.

The auditing is being taken seriously and all the results are presented to Astute’s board.

The group currently has 120 advisers. “We currently process two to four audits per day, meaning that each month we have processed 40-60 [audits],” she says.

“We can increase this number at any time but we are using this time to help our advisers to upskill their record keeping and use of GEM.

“Each adviser gets an email with their results, and a follow up phone call with our GEM trainer to see if any further assistance or explanation can be given.”

Johnston says advisers need to go through a bit of a mindset change and move from “compliance to commitment”.

“[Mortgage advice is] a profession not a job.”

“We believe the conduct regime we are entering into is not about ‘simply going through the motions’ or just meeting the minimum requirements.

“It is our commitment to our advisers that led [to] us taking the leadership in going for our own transitional financial advice provider licence and inviting advisers to be authorised bodies under our licence so that together we create that culture of commitment for our clients.

“By fostering a culture of commitment where everyone is willing to do what needs to be done, and they do it no matter what it takes, will see us coming up with new ways to achieve results better, cheaper, and faster for our clients. We believe this is the best way to demonstrate ‘clients first’.”

Advisers cannot lose sight of the requirement to put clients first, she says.

SHARE CEO hails Newpark mortgage business

SHARE chief executive Tony Dench said the growth of Newpark Home Loans was a major driver behind its acquisition of the Newpark Group.

SHARE has completed its acquisition of the Newpark Group aggregation business from former shareholders including Darren Gannon, with the business transferred to a new company, Newpark 2020.

Dench said the “fast-growing” Newpark Home Loans was complementary for SHARE, which was looking to build out its mortgage proposition: “We had built a comprehensive mortgage process, but didn’t have a large number of mortgage advisers.”

“Our philosophy has always been about looking after all of a client’s requirements, from KiwiSaver, wider investments, insurance, and mortgages,” Dench told TMM. “We needed to grow our mortgage business and this deal allows us to scale up very quickly.

Newpark Home Loans has grown significantly over the past two years.” Dench said SHARE wants to build “longterm relationships” with clients, looking after all of their financial needs. He added advisers would have a wider network to refer deals after the merger.

Insurance advisers could choose to refer mortgage business to Newpark Home Loans, and Newpark members could refer business to SHARE if they wanted to. Advisers won’t be encouraged to branch out into new business lines if they don’t want to, he added.

Dench said Newpark members would be given the same choices over structure, governance and CRM they had before. “We will give Newpark members everything they had in the past, but they will have more options. It’s our intention to open the Newpark licence to have advisers go under that if they want, or for advisers to have their own FAP if they choose.

“CRM again is not a compulsion, but we’ll offer access to SHARE’s Xplan, which I think is tremendous,” he added.

Asked whether the new group would be strong enough to take on the big names in the market, Dench said his business offered something different to advisers. “It’s more about providing choice than taking on the competition,” he added.

NZFSG-Kepa finalise merger

NZFSG's merger with Kepa, first reported by TMM Online, has received regulatory approval and closed on October 30 as planned, according to the group's chief executive Brendon Neal.

The two groups sought approval from the Overseas Investment Office and NZ Commerce Commission for their tie-up. The NZ Commerce Commission did not give formal approval for the acquisition of Kepa. Rather, NZFSG informally notified the Commission of the transaction, and the Commission indicated that they did not intend to consider the acquisition further at this time,” NZFSG chief executive Brendon Smith said.

“All of our Kepa staff have accepted positions with NZFSG and started with the new group on November 2. I will continue to run Kepa as CEO while we merge the two companies over the coming months with additional responsibility now as head of strategy for the wider NZFSG Group.”

Neal added: “Lee Rudolph, who established and grew Kepa General from scratch has successfully acquired the rights to the Kepa General client base and will continue to run that business.”

The merger combines Kepa’s network of 400 advisers with the 1,200 plus network of NZFSG and Loan Market. NZFSG said Kepa’s general insurance arm will remain with Kepa’s holding company Kepa Financial Services (KFS). The assets will be divested in the coming months and KFS will be wound down.

Advisers unconvinced by DTIs

Mortgage advisers are unconvinced that the Reserve Bank's plan to introduce debt-to-income ratios will reduce risk and fix the housing market.

The RBNZ governor Adrian Orr confirmed the central bank wants to introduce controversial debt-to-income ratios to curb excessive lending, and reduce the risks of going into default if they lose income.

Orr said the Reserve Bank would “dust off” plans on DTIs, after weighing them up seriously in the past.

It comes amid rising pressure on the Reserve Bank to try and cool the housing market, after lowering interest rates, introducing a funding for lending programme, and scrapping LVRs in May.

Advisers remain opposed to DTIs. One told TMM Online they would be “just another exercise for the broker to undertake for the customer, lender and the Reserve Bank”.

Mortgage People's Martin Thomas said DTIs would be difficult to implement in Auckland.

He said they were “probably impractical in Auckland with median house prices over $1,000,000. If you’re borrowing $800,000 it assumes an income of $133,000 – that will cut most FHBs out of the market, if the banks cap DTI at 6 times.”

Andy Phillipson of The Mortgage Shop said debt servicing ratios, used years ago, were “far more accurate”, and “far more reliable”. He isn't a fan of DTIs as they “can easily come to grief as soon as [the] borrower goes to a finance company and takes on more debt”.

“In my role now, I am doing a lot of ‘financial repairs’ for clients. Despite fighting hard to get a home loan for them, it is not uncommon for a borrower to return 6-12 months later with $40-$80k of new outside debt that I then have to consolidate or tidy up,” he said.

Ian Webb of NewBuild Residential Construction Lending said DTIs could be a better tool than LVRs, but should not be implemented alongside LVRs. “I don’t agree there should be both LVR and DSR/DTI restrictions, unless they completely exempt regulation over a person’s primary residence, and also residential construction for any purpose, as shortage of supply is the main reason for the problem in the first instance.”

He called on the government and regulators to “free up supply of land, and speed up consents, then any restrictions on consumers would not be required at all. We should stop dampening and restricting demand and instead be focussed on the supply side to resolve this issue.” ✚