LEAD: Reflections on 2020

BY DANIEL DUNKLEY

‘‘It was the best of times, it was the worst of times ...” wrote Charles Dickens in his classic 1859 novel A Tale of Two Cities, and in many ways, the famous British writer’s words are just as apt for the mortgage adviser profession in 2020.

The Covid-19 pandemic, viewed at first as another local threat to Asia, spread rapidly across the globe in the first quarter, reaching New Zealand in February as the global death toll soared. Few would have predicted that the entire nation would go into lockdown quarantine in March, causing the economy to grind to a halt for six weeks to deal with the threat.

The Covid lockdown caused the biggest economic fall in New Zealand’s history, with GDP crashing by record numbers in the three months to June. However, the nation bounced back quickly, with Reserve Bank and government support giving the NZ property market an unexpected boost.

But the property market has defied gravity since the pandemic – hitting record levels. And the median Auckland property value is at $1 million for the first time. Many advisers are busier than ever amid one of the worst financial crises in history.

Despite the dire economic numbers, mortgage lending reached a record October level this year, and advisers report a frenzy of interest from investors and first home buyers. Advisers are noting record settlements, a record number of deals, new sources of deals from overseas Kiwis heading home and desperate first home buyers with a fear of missing out.

Investors also made a big comeback in 2020 following the decision to scrap loan to value ratio restrictions, adding to the workload for advisers and bringing in an unexpectedly bumper year.

While activity has hit record levels, it hasn’t been plain sailing for the sector, with banks more difficult than ever to deal with, due to rising workloads, a lack of staff, and a flood of hardship and mortgage deferral requests. Turnaround times are worse than ever, brokers say, taking up to a month at some leading banks.

In addition to the challenges, advisers have dealt with adapting to working from home, shifting to virtual client meetings, going in and out of lockdown, and dealing with the looming threat of regulation under the Financial Services Legislation Amendment Act, due to kick in next March.

TMM asked some of the industry’s most experienced advisers, those in the lending market, and group heads for their views on a difficult, but surprisingly successful year. Here’s what they said:

_ Bruce Patten

Has 2020 changed your business model for good?

Advisers say the pandemic has led to significant changes in their operations, with more people working from home, more meetings conducted by video chat, and greater flexibility in dealing with clients.

The changes are unlikely to be reversed into next year, and most brokers think the pandemic-enforced evolution will be lasting.

NZFSG’s Bruce Patten said the crisis has “brought home to us that you can work more remotely, and use technology in a better way”.

Patten’s business in Auckland was affected by both the nationwide lockdown in March and Auckland focused lockdown in August.

He added: “For example, we’ve allowed some of our staff to continue to work from home permanently, which comes with some challenges on the communications side, but if done correctly, it works. We ensure we meet together regularly, once a week, as you don’t want to become strangers.”

Patten says the industry has been forced to embrace technology and says the shift to remote-working will suit some people more than others.

“We have someone aged 60 who works from home because it suits her lifestyle, it means she doesn’t have to get in the car, and it works for her. Another worker is based far from the office, so it suits her needs.

“But I don’t think working from home is for everyone,” Patten adds. “Some people need to work from the office to be more productive, and may not be suited to working from home.”

_ Hamish Patel

Hamish Patel of Mortgages Online says the pandemic and lockdown forced him “to take a big gamble with upgrading my software systems”.

“It was lucky as when we came out of lockdown I could handle more capacity as things got busy. Things have definitely changed for us; basically half of our team works from home two to three days a week. We were going to upgrade the office next year but we might not now, as we don’t need the same space.”

“We’re about 60% occupancy now, so things have changed a lot. In terms of our computer systems, a lot of brokers have moved to cloud systems, so working from home doesn’t change things a lot. It was great to be able to work remotely through lockdown and have access to our systems.”

Patel says more meetings are being done through Zoom.

“We’re getting the odd extra appointment. Video calls used to make up about 5% of our meetings, but now they’re about 20%. But the predominant number of clients want that face to face interaction.”

For some businesses, the pandemic hasn’t changed much at all.

_ Jeff Royle

iLender’s Jeff Royle says his business “has always been online, and always used tech, so nothing has changed. Back in the UK, in 1999, is the first time we went non-customer facing.”

“We arrived here in 2006 and started the business on the premise of being non-customer facing, as it was more efficient. We’ve used other media, and it has largely been business as normal. We’re all set up from a technical standpoint.”

“Obviously, in lockdown, with people working from home, it was pretty easy. We’ve found however since then, most of our staff prefer to come into the office for the camaraderie.”

_ Andrew Scott

Newpark Home Loans general manager Andrew Scott says his firm has experienced positive changes during the year, “particularly the value of communication to people”.

“Clients were appreciative that advisers made efforts and were in communication during the lockdown. Across the business, we were also trying to keep in touch with people as much as possible and keep people up to speed.”

How difficult has it been to operate through 2020?

The strong sales figures might not tell the full story of 2020, and advisers say they have found it hard going at times.

“It’s definitely been a rollercoaster,” says Patel. “During the first lockdown things seemed pretty depressing, and we all thought the world was going to end. We decided to connect with clients and build some goodwill with them, even though we weren’t earning any income at that time. It gave us something to do, and we reconnected with people. We have a stronger relationship with clients as a result.”

The sheer level of activity has been hard for some advisers to cope with, particularly with under-staffed banks.

Patten says it’s been “manic so far”. “It’s been a really lumpy year, times where we’ve been really busy looking after clients. The banks are not being able to cope with the volumes. They’re not reacting fast enough to staff-up, and it’s an ongoing issue. It’s as bad as it’s ever been with turnaround times. If anything is keeping us awake at night, it’s how poor bank service is.”

Newpark’s Scott describes the shift to remote working as a “seamless transition” for his business.

“We just got on with it through lockdown, and our people acquitted themselves really well. We had the right tech tools available to carry on. The disruption was also good as it enabled us to focus on our priorities as a business, and it proved our systems worked. We refocused on our commitment to our membership,” he adds.

Scott notes the challenges faced by advisers with young families this year.

“It’s a hard job being an adviser, and a lonely job as it is. With the lockdown effect, doubly so. Trying to run a business with the demands of a family, and juggling those things, workloads trebled overnight. It was humbling to get feedback that we had supported our members.”

Looking at the underlying numbers, Royle said it was “probably going to be a record year. We’ve had challenges, and we’re working probably three times as hard to get deals over the line than we did before. There’s a lot of hard work in getting these outcomes for customers. We focus on the non-bank sector, and at times, they were saying they’d run out of money, that’s how busy things have got.”

But he is also frustrated at the slow turnaround times facing mortgage advisers.

“Turnaround times are a joke. They’re unacceptable, and banks are too slow to react. Westpac were first out the rank getting branches to take the load, followed by ASB, but those people aren’t used to dealing with brokers.”

Is your business now more resilient than it was at the beginning of the year?

Advisers believe their business is more resilient following the latest financial crisis, better equipped to deal with another downturn or emergence of Covid-19 into the community.

NZFSG’s Patten says: “We’re definitely a lot more capable of weathering the storm. Under whatever circumstances that might happen now, we’re able to continue to operate. It’s good for the industry to be able to make positive changes and improve everything, and work on that business continuity plan.”

Patel agrees: “I think it’s made us more resilient. Before the crisis, the Auckland market was flat, so we were having to work harder to get business. With Covid, we doubled down, and it made us think hard about what we wanted to do differently. The short, sharp shock made people change. We’re glad we didn’t try to slash the business and make cuts.”

Patel believes brokers will be more resilient as a profession in 2020, as banks continue to slash branches and struggle to cope with home loan demand.

“Banks may be looking at the fixed cost of branches, and the fact they have to pay advisers bugger all when there’s a shutdown or downturn. They might be looking at their balance sheets and thinking this is not such a bad business model, working with brokers and paying variable costs.”

Newpark’s Scott says his company is “absolutely” more resilient than at the beginning of the year. The group has completed a sale to rival adviser group SHARE ahead of the new regulatory regime.

“The partnership with SHARE is just complementary, as we had a couple of pieces missing with our offering, and they had a couple of pieces missing. SHARE has the experience of running a corporatised model, effectively a licensed model, and a funding model not reliant on override income.”

“We now have a whole new funding model which gives a new level of certainty for staff, who have all worked so hard this year. The merger also means we have ticked a box for succession planning for our members.”

Even lenders have found 2020 to be a learning curve.

‘We have seen unprecedented support from advisers in our first full year of operation in New Zealand’

_ Aaron Milburn

Aaron Milburn, NZ country head at Pepper Money, says partnering with advisers was the key to its successful year, and “largely maintaining the strategy that we had put in place from day one – to support as many Kiwi families [as possible to] achieve the dream of homeownership”.

Milburn adds: “We do that by partnering with advisers, using education as a cornerstone. We want to ensure that advisers know of the solutions at Pepper, and that customers understand how important advisers are to helping them succeed.

“We have seen unprecedented support from advisers in our first full year of operation in New Zealand, celebrating month-on-month growth and growing adviser numbers.

“At the beginning of the pandemic, we were the first lender in both Australia and New Zealand to protect the trail of advisers from Covid affected customers, highlighting the respect and partnership that we have with our advisers. Together we have helped hundreds of Kiwi families get into homes that they simply would not have been able to otherwise. It fills me with immense pride and fuels our resolve to continue on with that work in the years to come.”

How has Covid affected your preparations for the new advisers’ regime?

The implementation of Financial Services Legislation Amendment Act changes were delayed until March next year due to the pandemic. Most advisers say the virus outbreak and lockdowns have had little bearing on their preparations.

Royle says “we were always going under our aggregator [NZFSG’s] FAP. Pushing it back gave us a breather. All of our staff have done their Level 5 qualifications, so from the training and competency perspective, we’re all there and ready.”

“Coming from the UK, the Kiwis have no idea about regulation and compliance,” Royle adds. “Over there, it’s a 10/10, and these new regulations are 4/10. Coming from the UK, we always had a system in place to put us in a strong position for future changes.”

Patten adds: “We’re all set up. We took the opportunity to get everything prepared in April when we went into lockdown, spent time looking at the new environment, and we are all ready to go.”

Scott at Newpark says the delay helped his business and others in the market prepare for the seismic changes facing the sector.

“Lockdown was good in a way because it was apparent that many advisers weren’t ready for the original implementation date. So it was a silver lining in some ways.”

“Many advisers felt underprepared ahead of the original date. From our perspective, it gave us time to test new business models, and reinforced the gut feeling we had to examine ourselves closely and come to the conclusion of our deal with SHARE.

“I think we ended with a good result,” Scott says. “If there was one other group out there that was the right fit, it was SHARE. We can bring something to the table for our advisers that we weren’t able to before, and we have a greater capability and capacity, built up over a long period of time, to support advisers. I’m certainly very positive about it, and we’re in a good place for the year ahead.” ✚