TMM - The NZ Mortgage Mag Issue 5 2018

Page 1

Issue

05

2018 Working together to create tomorrow's advisers today

Young GUNS

The under-35s reveal their goals and fears

SIGNS

POINT TO GREAT ADVICE

MARKETING GUIDE FOR WEBSITES

DISCLOSURE:

ARE YOU LIABLE AS AN ADVISER?


Can’t find a home loan that fits?

We can help when others can’t. RESIMAC Home Loans is here to help, contact us and make it possible.

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CONTENTS

22

YOUNG ADVISER SURVEY

TMM has just completed its first-ever survey of mortgage advisers aged 35 and under. Find out about the future faces of the industry in our special report.

UP FRONT ///

FEATURES ///

04 EDITORIAL

18 PROPERTY NEWS

An Eye to the Future

Calls to regulate property managers; Airbnb and sub-letting; Is the balance shifting too far towards tenants?

20 HOUSING NEWS

The New Zealand housing market continues to stabilise

28 MY BUSINESS

09 NEWS A round-up of important news for mortgage advisers

16 PEOPLE TMM showcases the main people stories from the past month

12 REGULATION

Mortgage groups outline their thinking for the new financial adviser regime

Tammy Goddard; Signs point to great advice

34 OUT AND ABOUT

Mike Pero Mortgages Conference in Noumea

28

15 SPEED DATING

Non-bank lenders share the love

COLUMNS /// 14 KIWISAVER

How to add UK pension transfers to your business

26 LEGAL

The latest on electronic signing

30 SALES AND MARKETING

Paul Watkins explains how websites have evolved as marketing tools

32 INSURANCE

Steve Wright discusses the issues of disclosure and adviser liability

03


EDITOR’S LETTER

AN EYE ON THE FUTURE

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or this issue of TMM we thought it would be useful to try to understand more about why people become mortgage advisers and how they are finding things. The first thing that struck me was how many advisers were 35 or younger. After working with all the groups, we estimate around 20% to 25% of advisers fit into this demographic. Interesting the distribution across the groups is not uniform. Some have no advisers in this demographic, or very few. The response from young advisers is that they are, by and large, bullish on mortgage advice. Also there is a real focus on technology and all things digital. Last year we had a panel of old hands at the TMM Better Business Conference. This year we will be having a panel of young advisers. This will be a fascinating session which will be full of new ideas. To find out more about the conference go to tmmonline.nz/conference Another highlight since the previous issue of TMM is a “speed dating” event hosted by five non-bank lenders. It was a roaring success and the next event is being held in Wellington.

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One of the takeouts for me was that everyone I spoke to, whether new or old hand, found out things about non-bank lenders which they didn’t know. Or, put another way, they found options they could use to help clients secure a home loan, especially when the banks said no. It reinforces our mission to provide advisers with as much information about this fastgrowing sector of the market. An editorial can’t go without some comment on regulation. The prediction I will make is that the Financial Services Legislation Amendment Bill may move through Parliament more quickly than many expect. I still hear people saying they don’t know enough about the changes to do anything. That’s patently incorrect. The message I want to put out is that there is a reasonably clear big picture of what the new environment will look like. It’s also clear in which direction things are heading. All advisers need to be thinking about what they want to do in the future. Thinking about the group you belong to is also going to be important. A prediction is that there will be more group options in the future. Also some of the existing groups may wish to “downsize”. They will be responsible for advice given and may well want to limit their risk by starting with smaller, highly skilled and experienced advisers. Again we will have a good update on regulation at the conference on October 30. Hopefully we will see you there.

Philip Macalister Publisher

PUBLISHER: Philip Macalister SENIOR WRITERS: Miriam Bell, Susan Edmunds, Daniel Dunkley CONTRIBUTORS: Paul Watkins, Steve Wright, Jonathan Flaws GRAPHIC DESIGN: Debbie Morgan ADVERTISING SALES: Philip Macalister 0274-377527 philip@tmmonline.nz

MOVED OFFICES? Make sure you don't miss an issue by changing your address. Go to www.goodreturns.co.nz/coa SUBSCRIPTIONS: Alison King subs@tarawera.co.nz HEAD OFFICE: 1448A Hinemoa St, Rotorua PO Box 2011, Rotorua Phone: 07-349 1920 Fax: 07-349 1926 editor@tmmonline.nz

TMM is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and ASSET magazine. All contents of TMM are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited. TMM welcomes opinions from all readers on its editorial. If you would like to comment on articles, columns, or regularly appearing pieces in TMM, or on other issues, please send your comments to: editor@tmmonline.nz


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ADVERTORIAL

BEYOND THE BANKS Alternative lending options in a restricted market.

WHEN THE BANK SAYS NO!

Under increasing external pressure from the Reserve Bank, and internal pressure from credit-tightening measures, banks are limiting borrowing. This in turn has led to a huge increase in demand for loans from non-bank lenders. With LVR restrictions from the Reserve Bank along with major banks shying away from bridging finance, mortgage advisers must think outside the box to meet their client’s financial needs. Many are turning to alternative lenders in the non-bank space such as Core Finance.

WHAT IS A SECOND MORTGAGE?

A second mortgage is exactly what it sounds like – another mortgage that sits behind the first mortgage secured against the same property as your main mortgage. Second mortgages are a good solution when the bank or first mortgage provider has said no and the clients require extra funding to cover business or personal expenses but are not able to increase the primary mortgage. They are available from specialist lenders like Core Finance and are normally quicker and easier to arrange than a standard mortgage, as the application criteria are often less restrictive than that of a mainstream bank. Most second mortgages are short-term with flexible terms and interest rates. They are generally structured as interest only, or the interest can be capitalised short term to assist with cash flow. While they normally attract higher interest rates than standard mortgages, they are not as expensive as other lines of credit like personal loans or credit cards. By taking out a second mortgage this allows the client to retain the bulk of their debt, their first mortgage, with a bank or mainstream lender at the cheapest rate and also ensures they maintain their relationship with the bank.

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❝ Granting a second

mortgage is not breaking the law, but it may be breaking the terms of the first mortgage.❞ – Jonathan Flaws WHY USE A SECOND MORTGAGE?

Second mortgages have a stigma of their own. They’re often seen as being a high risk option for people who have made bad financial decisions. But for people looking to invest in a second property, pay off short term debts, or finance a business, a second mortgage can be a sensible choice. Using a second mortgage unlocks the equity in your client’s home or investment property, freeing up capital to meet your client’s financial and investment needs. Unlike traditional mortgages, which may have terms of 20-30 years, second mortgages are usually short – six months to one year are common terms. This lets borrowers cover their financial shortfall or fund their business launch before longer term finance is approved, in most cases from their bank. They are a good option for people who have a long term plan and know where their finance is coming from, but need to bridge a gap in the timeline. Of course, refinancing the whole debt to a non-bank first mortgage lender is another option, but often fees and interest rates make this very expensive and the client loses their relationship with their bank. On the surface this would seem to solve the problem for the client, but what is the long term impact of taking the client away from a mainstream bank? Higher interest rates, higher fees, reduced product offering, and challenging

getting them back into a bank for lending in the future. Like other non-bank lenders, Core Finance is not subject to the RBNZ LVR lending restrictions. We have less restrictive lending criteria and do not require consent from the bank before lending. This gives us flexibility, and the ability to help people out when they need it most.

FIRST MORTGAGEE CONSENT AND DEED OF PRIORITY

A professional opinion: “By granting a second mortgage a borrower is breaching the negative pledge covenant to the first mortgagee. That is a covenant that requires them not to give another mortgage or charge over the property without the mortgagee’s approval. If this is broken then the first mortgage is in default. This may have negative consequences which could result in the first mortgagee calling up its mortgage. Whether they do will depend on the circumstances. So long as the first mortgage is not in financial default many mortgagees would rather not trigger default action. The borrower needs to make a decision as to whether to do this. If they wish to take this risk the borrower should advise their lawyer that they are aware of their obligations but wish to proceed. In this case they should instruct their lawyer not to contact the first mortgagee. Lawyers are obliged to act on their client’s instructions so if a borrower says no, then the lawyer is acting outside the scope of his/her instructions if the lawyer contacts the first mortgagee. Granting a second mortgage is not breaking the law, but it may be breaking the terms of the first mortgage.” Jonathan Flaws, Sanderson Weir Core Finance does not require consent or a Deed of Priority from the first mortgagee. ✚ To speak with a specialist lender give Grant a call on 0800 667 366 or drop us an email to grant@corefinance.co.nz


07


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TMMONLINE.NZ/NEWS

MORTGAGE EXPRESS IN AUSSIE PARTNERSHIP TALKS

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ew Zealand financial advisory company Mortgage Express is in talks over a partnership deal with Australian adviser group Astute Financial, TMM can reveal. Mortgage Express, the financial services arm of real estate business Harcourts NZ, has been in talks with its Australian counterpart for the past month. The discussions are said to focus on a formal partnership agreement rather than a takeover by the Australian group. Astute has been on the lookout for a Kiwi partner in recent months, industry sources said. The deal between Mortgage Express and Astute was not yet agreed or finalised as of mid-September, the time this magazine went to print. Mortgage Express and Astute did not respond to requests for comment. Astute is a fast-growing Australian

mortgage adviser group founded in 2000 as a single mortgage business. It now has about 500 members, in the finance, insurance, and financial planning sectors. Astute has a loan book of more than A$20 billion. Talks are said to have been led by director Brad Wood. The deal between Mortgage Express and Astute could still fall through, sources said. Over the past year, sources said Mortgage Express had spoken to other advisers about partnership deals. The scrutiny on Australian advisers from the Royal Commission, and the threat of additional regulation on both sides of the Tasman, are likely to be key reasons behind the partnership talks. Adviser groups are likely to seek out merger partners and partnership deals to cope with the additional regulatory burden.

NEW MORTGAGE GROUP COMING TO MARKET

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ewpark is setting up a new dealer group specifically for home loan advisers. It has appointed long-time Sovereign employee Andrew Scott as general manager Newpark Home Loans. Newpark independent business development manager Darren Gannon says the group has not played seriously in the mortgage space before. “We haven’t explored [mortgages] seriously before,” he says. This time it plans to “turbo boost” its activity in this area and it is targeting top brokers across the country. “There is a gap in the market to support mortgage brokers who are career-focussed,” he says. The people it wants to attract are ones who focus on quality rather than quantity. “The feedback we are

getting from brokers is that they are not getting the service they need, expect and are hoping for from their groups.” Part of the reason behind the decision is that a large group of advisers offer insurance and home loans. Gannon says some mortgage advisers who belong to an existing group have wanted to do their insurance through Newpark, but the groups weren’t allowing them to do so. “We need to make sure our members are being looked after on both sides of the fence,” Gannon says.

ASB REVIEWING REMUNERATION

A

SB chief executive Vittoria Shortt says the bank is continuing to run Sovereign Home Loans as business as usual, but all its remuneration and incentive structures are under review. Following the sale of the Sovereign life insurance business to AIA, ASB kept the home loans book. Sovereign Home Loans is essentially ASB product distributed through mortgage advisers and with a trail commission remuneration model. Shortt says there been no changes to the brand and the model. However, the use of the Sovereign name isn’t its decision. “Any branding decisions aren’t ours,” she says. “AIA needs to make decision around branding.” She says the bank has an “ongoing review of incentives and remuneration”, and this has been driven in part by the Financial Markets Authority and the Sedgwick report out of Australia. “We continue to have a look at remuneration and incentives,” she says. ASB removed all individual sales targets in branches July 1. As for the future of Sovereign Home Loans and any changes she said: “I’m definitely not going to talk about what we are contemplating. It wouldn’t be appropriate. It’s not the kind of info we would share until we had worked it through and talked to relevant people.” The bank reported a 10% rise in its annual profit to notch up another record high in the year to June 30. Its net profit after tax rose $108 million, or 10%, to $1.177 billion. This included an increase in net interest margin. This was up seven basis points to 2.24% primarily on the back of lower costs associated with breaking fixed rate loans and improved lending margins.” ASB's home loan market share sits at 21.7% and growth during the year was “broadly in line with system growth.”

Andrew Scott 09


TMMONLINE.NZ/NEWS

TMM NEWS BRIEFS TMM delivers much of its news online through www.tmmonline.nz We’ve selected some of the best stories over the past month are showcased below. To read the full stories go to tmmonline.nz

WE'RE NOT AVERAGE: KIWIBANK'S NEW BOSS

Kiwibank's new chief executive Steve Jurkovich is keen to grow its share in the home loan market and is considering expanding distrubution through mortgage advisers. Kiwibank plans to turn around its sluggish home loan lending and may look to do more in the mortgage broker space. Home loan lending was well below system growth at 2.7%. However, Jurkovich said the bank was determined to turn that around this financial year. Running at system growth level is being average, he says. "I don't think of Kiwibank as being average." Jurkovich says he's "not a massive fan of being rate-driven." Rather the focus was on things like turnaround times, onboarding and supporting the right customers. He says the bank may expand what it is doing with mortgage advisers in the marketplace. He is "open-minded" to expanding third-party distribution and said "I anticipate modestly expanding" what it does in this area. Subsidiary NZ Home Loans remains a big part of the the bank's operations, driving mortgage growth.

CRESSIDA DEPLOYS $50 MILLION CAPACITY FOR PREMIUM PRODUCT

Specialist mortgage lender Cressida Capital has rolled out a new premium mortgage product, and has $50 million of capacity to build market share. Cressida’s new product, Cressida Gold, will bring the firm in line with its non-bank rivals with a lower fee base for low-LVR clients, advisers said. Cressida Gold is targeted at clients up to 65% LVR. It is only available for properties in the Auckland area, according to the firm. Advisers said the product also excluded land or construction properties, and CCFA applications.

SOUTHERN CROSS ENJOYS STRONG YEAR

Peer-to-peer lender Southern Cross has seen its loan book grow by nearly 25% so far this year, as alternative lenders continue to take a bigger slice of the New Zealand market. The company’s total value of loans under arrangement grew 24.8% in the year to date, as growth in investor funds rose 19.9%.

RESIMAC BUILDS NON-BANK MARKET SHARE

RESIMAC Home Loans took a bigger slice of the non-bank adviser market last year, as overall applications rose by 32%. The mortgage lender has revealed its accounts for the year to June, showing its share of the non-bank adviser space rose to 42%, up from 35% the year before. The group saw a 33% increase in overall settlements during the year, as alt-doc and specialist applications rose by 28%.

MARKET PRICING 50% CHANCE OF OCR CUT: ANZ

The overnight interest rate swap market is pricing in a 50% chance of an OCR cut by mid next year, according to ANZ. The swap market priced a 20% chance of an OCR cut immediately after the central bank’s recent MPS announcement, but has moved following weak business confidence data. ANZ recently indicated an OCR cut was more likely than a hike. The bank's economists reiterated they were “leaning” towards officially forecasting a cut.

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ADVERTORIAL

CREDIT DISLOCATION is upon us As an adviser, it’s inevitable that you will come across customers who no longer fit the lending criteria of the banks.

W

hether they are encountering road blocks with income verification, credit scoring, serviceability calculations or cross-collateralisation of security, there is no doubt that a credit dislocation is occuring. Rather than casting these customers in the “too-hard basket”, embrace them as an opportunity to grow and diversify your business. Instead of turning them away, turn to a non-bank lender. Non-bank lenders have the ability to offer solutions that the banks simply can’t, as their lending criteria can be better tailored to an individual customer’s circumstances. Having a non-bank lender on your side allows you to provide superior service to your customers

and increase your ability to say yes more often. Non-bank lenders have a compelling offering for a wide range of borrowers, such as those who are self-employed, have multiple income streams, are credit-impaired or are residential investors. Even those borrowers in “everyday” type situations, who have been turned away by the banks, can find a fitting solution with a non-bank. Bluestone is a fast-growing non-bank lender, providing flexible home loan solutions to those who fall outside the mainstream lending criteria. This non-bank is in a prime position to cater for residential investors, an extensive customer group who may experience difficulties finding solutions with the mainstream lenders. Bluestone

can lend up to 80% LVR on a standalone investment property and accept a 20% deposit from any source.* Self-employed customers are greeted with tailored solutions at Bluestone, as income verification is approached on a case-by-case basis and Bluestone’s Business Easy product requires only three months minimum trading period. Bluestone also takes an understanding approach to credit-impaired customers, with no credit scoring, and defaults under $1000 and over 24 months old ignored. Both advisers and non-bank lenders are encouraged to work together to bridge the gap and provide solutions to borrowers where credit dislocation is occurring. Non-bank lenders such as Bluestone should be seen as an asset to your business, helping your customers get the homes they deserve. ✚

Bluestone Servicing NZ Limited (1913755) (FSP181884), as Manager for the Lender, NZGT Custodians (Bluestone) Limited (1262490) (FSP40011). *Terms and conditions, fees and charges, and Bluestone lending criteria apply.

TOO HARD? HARDLY A PROBLEM. When you’re about to give up on a deal because you think it’s ‘too hard’, think again. Bluestone can give you confidence by providing financial solutions when you think you’re all out.

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Find out more 0800 668 333 sales.support@bluestone.net.nz Bluestone Servicing NZ Limited (1913755) (FSP181884), as Manager for the Lender, NZGT Custodians (Bluestone) Limited (1262490) (FSP40011). Terms and conditions, fees and charges, and Bluestone lending criteria apply.

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REGULATION By Susan Edmunds

Mortgage groups

PREPARE FOR CHANGE

Mortgage brokers will be given the option to operate under someone else’s licence.

M

ortgage adviser groups are preparing for the new regulatory environment, but say a lot more detail is needed to make clear their

next steps. The working group developing a code of professional conduct for the sector is expected to deliver its final draft to the Commerce Minister either just before Christmas or early in the new year. Then, once that is signed off, it will be about nine months before the new advice regime will take effect. The Financial Services Legislation Amendment Bill ushers in financial advice providers, licensed by the Financial Markets Authority. These can be independent advice businesses of one or two advisers, or qualifying financial entity-type organisations with hundreds of financial advisers and nominated representatives working for them. Mortgage adviser groups have indicated that they will take a licence. But whether that’s to cover all their existing members, or just a small number, is not yet clear for many.

The cost of licensing is yet to be decided. A big consideration for most is that being a licensed provider carries with it additional responsibility for members’ advice processes. Whereas previously they might have provided marketing support, under the new rules, they would be ultimately responsible for each piece of advice an adviser gave.

PLANS

Josh Bronkhorst, managing director of Mortgage Link, has been working through a series of license-ready best-practice roadshows around the country. As part of that, members have been asked to indicate whether they want to have their own licence or come under Mortgage Link’s. Bronkhorst said he would like an indication from members by the end of November. He said 99% of advisers, particularly in Mortgage and Insurance Link’s branded business, were expected to opt to work under the group’s licence. “There may be some variation in the group who trade under their own brand.” Mark Collins, chief executive at Mike Pero

Mortgages, said a final decision had not yet been made but it was almost certain that the business would take out a licence for the Mike Pero advisers to operate under. Jenny Campbell, chief executive at Mortgage Supply Co, said she would apply for a licence. But she said there was still too much uncertainty around the cost of a licence and other aspects of the regime. “But we’re definitely moving forward with a licence of some description.” She said she would not make a decision on how many advisers would come under it until the parameters of licencing became clearer. “It has to make a good business case for us. My gut feel is that I think it will be for everyone, that would be great. But it has to make sense for me to do that. As much as there’s all the noise from regulators saying it’s not going to be as bad as you think, I don’t believe anything until I see it in black and white from the regulator.” Loan Market and NZFSG have also indicated to members that they will take a licence for each, but that would not mean that everyone would come under the licence.

WE CAN WHEN OTHERS CAN’T WE WILL WHEN OTHERS WON’T FOR ALL YOUR NON BANK LENDING

JEN 021 447 926 AKL & NORTH ISLAND

012 WWW.TMMONLINE.NZ

MICHAEL 0274 219 263 WGTN & SOUTH ISLAND


RESPONSIBILITY QUESTIONS

Bronkhorst said it was a lot of extra responsibility for the groups, with additional liability for financial advice providers. “In an ideal world, all our advisers would apply for their own licenses but realistically that’s not going to happen.” But he said, as a smaller group, it already had more oversight of its 140 members than some of its larger counterparts. “It comes down to your onboarding process and choosing the advisers you want to be part of your group.” Collins said that would be the biggest thing for the industry to get its head around. Most groups were merely providing sales support and motivation at present, but were going to have to move to more education and conduct regulation. That was positive, but a big adjustment, he said, and some groups would be forced to assess whether there was the margin in their businesses to do it. The Liberty/Mike Pero business had systems in place that had been implemented in Australia that would allow it to provide that support, he said.

BILL PROGRESSES

The select committee considering the Financial Services Legislation Amendment Bill recently provided its report and recommendations, following submissions. Most were broadly what was expected: It reworded the conflict of interest duty to make it less unwieldy, clarified the scope of nominated representatives’ discretion in their work for financial advisers, clarified that transfers between KiwiSaver funds would be counted as advice, and ruled that just having had a transition licence would mean nothing in the assessment of whether a financial advice provider should be granted a new, full licence once the new financial advice regime comes into effect. But what the committee didn’t tackle was the issue of what counts as financial advice, and what is merely sales – and the industry said that was what would have made the biggest difference. It was an issue that was pointed out in many submissions to the select committee. MBIE said, in a document prepared for the committee, that it had consulted on an option that distinguished sales from advice in 2016 but it was “not a preferred option”. “We were concerned that creating a distinction would exacerbate some of the issues with the current regime, and pose a risk to consumers who might not understand the limited protections when dealing with ‘salespeople’,” officials told the committee. “It may also reduce access to advice, as some businesses may choose to only provide ‘sales’ in order to avoid any additional compliance costs.”

review was to ensure public access to advice, The officials told the select committee that however the bill does not bring any certainty the problem should be tackled in other ways to small adviser firms in terms of the cost or – the same standards would be applied under business impact of the new regime.” the bill to anyone offering financial advice, She said the bill did not reflect the core whether they were considering one product purpose of the original legislation, which or the whole market. They would have to was to encourage public confidence in the ensure the client understood the nature and professionalism and integrity of financial scope of the advice, which should eliminate advisers. The bill has now passed its second concern about consumers expecting more reading. wide-ranging advice than they received. Financial Advice NZ chief executive Katrina Shanks said the committee had missed its CHANGE FOR THE CODE chance. The select committee considering the bill “We ask that Minister [Kris] Faafoi take recommended that FSLAB be amended another look, particularly at the demarcation so that instead of requiring the code between sales and advice,” she said. provide minimum standards that must be Shanks said Financial Advice NZ had clearly demonstrated when financial advice is given, argued that, to achieve good financial advice the code should apply to people who give outcomes for New Zealanders, they needed regulated financial advice. clarity. The public had to understand the But working group chairman Angus Daledifference between sales and advice and the Jones said it was not simply a case of the different types of advisers, she said. code becoming occupational rather than a “As it stands, the bill only provides a definition service code. of regulated financial advice but is silent on “What’s important is that ‘person’ includes the definition of ‘product advice’. This decision individuals (financial advisers and nominated could have been made in the select committee, representatives) and entities (financial advice and would have provided a stronger framework providers) so we are proceeding on the basis for the code – and for Kiwis and advisers – on that the code applies to them all. So it is this crucial line in the sand.” broader than an occupational code.” ✚ She said there were also concerns around the risk of lowering professional standards and the lack of certainty about the impact of the new rules on small advice firms. Financial Advice NZ has warned about the risk of small advice firms and advisers leaving the market if When you’re about to give up on a deal because the new rules are too you think it’s ‘too hard’, think again. Bluestone can onerous or expensive to give you confidence by providing financial solutions comply with. when you think you’re all out. “While the code will set standards, the bill sets the tone,” Shanks said. “The public deserves to know that the advice that they receive is from a person held to consistently high standards right across the industry. The current bill leaves room for standards to be set at the lowest common level. “Sole practice or small adviser firms Find out more are crucial in ensuring 0800 668 333 that Kiwis can access sales.support@bluestone.net.nz financial advice – a

TOO HARD? HARDLY A PROBLEM.

point we highlighted in our submission. A key objective of the

Bluestone Servicing NZ Limited (1913755) (FSP181884), as Manager for the Lender, NZGT Custodians (Bluestone) Limited (1262490) (FSP40011). Terms and conditions, fees and charges, and Bluestone lending criteria apply.

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KIWISAVER By David van Schaardenburg

NZ Funds targeting clients' points of pain

NZ Funds has launched a new pension transfer service with a difference: its nationwide UK pension transfer team are offering to do the transfer advice and processing free of charge, before passing the client back to their adviser to be advised within the context of their usual ongoing advice relationship. "

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ust over a year ago we identified two problems in the pension transfer market. First, while almost all advisers have clients with international investments in their client base, the process of advising on UK pension transfers is so complicated and tedious, their advisers were often unable to help those clients,” NZ Funds Principal David van Schaardenburg says. “Second, when clients were transferred there were a limited number of available investment solutions, many being based on either antiquated schemes or schemes managed by financial advisers, not licensed fund managers. This has come about in part due to the UK’s HMRC deregistering KiwiSaver schemes as QROPs in 2015. A number of the schemes still registered as QROPs also charge significant front-end fees and exit fees. Furthermore, some profit from taking hefty currency margins when converting client funds from Sterling to Kiwi. It feels a bit like the fund industry was in the 80s. Some who do offer a modern superannuation scheme to transfer to do not provide a transfer service, leaving it up to the adviser to navigate the complexities and administration of the pension transfer process.” With the launch of NZ Funds' UK Pension Transfer Service, to complement the modern cost-effective Superannuation Scheme it launched a year ago, the manager has overcome both points of pain. Advisers can now pass their client on to one of NZ Funds pension transfer team, who will process the transfer (free of charge) and then pass the client back to the adviser. The adviser can then set their remuneration for advising the clients in the usual way such as evaluating client risk profile, their optimal asset allocation, sustainable savings and withdrawal rates plus navigating changes in clients’ financial objectives or circumstances.

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Funds transferred from UK pensions are managed through the NZ Funds Managed Superannuation Scheme which now has a strong one-year investment track record. The growth strategy delivered a 14.7% return over the last 12 months, and 16.4% since inception as at 31 July 20181. The scheme also has a choice between adviser-directed asset allocation or automated annual lifecycle rebalancing. The lifecycle technology is based on the same proven process used by the NZ Funds KiwiSaver scheme. “Feedback to date has been very encouraging. In addition to NZ Funds’ seven nationwide offices, a number of independent advisers have already signed up to the service with several dealer groups now undertaking due diligence on our transfer service,” van Schaardenburg says. “What is more exciting in our view is that the service has been able to add value from day one to complement the other important international investment transfer service we provide to advisers and their clients being transfers from Australian superannuation schemes.” A NZ Herald story on August 2, 2018: “Sneaky life insurance fees catches out Kiwi woman…” highlighted an insidious problem with many Australian Superannuation programs. In Australia, life insurance is often built into the superannuation schemes. You need to opt out to not have it. This type of group insurance has a number of benefits such as lower premiums and in some cases the fact that it will cover pre-existing conditions. However, the insurance coverage will often end when you are no longer an Australian resident. Despite this we’ve found super providers who have continued to charge clients the insurance premiums even after being advised of member relocation to New Zealand. Through our Australian

super transfer service, we have been able to negotiate a refund of premiums, backdated to when the client left Australia. Many New Zealanders (and recent immigrants) put off the decision to transfer. After all, retirement is still years away and the money should snowball until then. Or so the thinking goes. Sadly, when it comes to UK pension transfers, the cost of procrastination can be prohibitive. After an initial four-year exemption period, returning New Zealanders and immigrants accrue a New Zealand tax liability each year just under 5% of the final pension transfer value. By way of example, a person who puts off transferring for 15 years from return/arrival could lose up to 16%2 of the value of their savings in tax. By educating accountants, lawyers, and financial advisers throughout the country on how to transfer cost effectively, and by eliminating these points of pain, we are seeing a rising flow of clients reducing or eliminating costs and taxes that might otherwise have accrued. “It is great to be delivering value to advisers and their clients and getting two sets of positive feedback” van Schaardenburg says. “It really is a case of helping New Zealanders (including the newer ones) to make better financial decisions”. ✚ 1 Growth Strategy inception date, 25 January 2017. Returns are post fees, pre-tax. Past performance is no indicator of future performance. 2 Assumes GBP/NZD exchange rate 0.52, the Schedule method as the calculation option, the client has other income over $70,000 in the assessable tax year.

David van Schaardenburg is a Principal at NZ Funds. He is also an Authorised Financial Adviser. The opinions expressed in this column are his own and not necessarily that of his employer. His disclosure statements are available on request and free of charge.


SPEED DATING

Lenders share the love

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ive non-bank lenders have clubbed together to run a speed dating event for mortgage advisers in Auckland. The five; Bluestone, RESIMAC, Avanti, First Mortgage Trust and Liberty ran the event to help advisers learn more about the solutions they have available as alternatives to banks. "We wanted to create an event that made it easy to find out about the many options available from not just one, but five non-bank lenders; to ask questions about client scenarios; and to be better able to open doors for Kiwis who might otherwise put home ownership or other property goals in the too-hardbasket," RESIMAC general manager Adrienne Church says. Around 120 advisers attended the event and experienced advisers and those new to the sector said they took valuable lessons from it. Karen Renwick of Mortgage Link said the meeting was a "great format": "All the non-bank lenders were keen to offer solutions. As an adviser I look to them already, when that's appropriate. It was a first for me dealing with Bluestone, and was a great opportunity to meet them and understand their product range." David Windler of the Mortgage Supply Company, believes advisers should “collaborate” more with non-banks as lenders tighten credit conditions: “For the non-bank to gain traction with advisers the sectors have to do it together. The non-bank channel will only get stronger, with the current credit environment. “We are seeing instances where you’d expect a bank solution, but we aren’t getting them. A well-rounded understanding of non-bank options is going to be important to advisers over time,” Windler added. Alvin Rao, an adviser with two years of experience at Home Boost Mortgages, said the event had raised awareness about the alternatives already available to clients: “My loan book has a fair percentage of bridging/construction type applications that may not fit standard main bank criteria but due to equity position could sit well with a non-bank for a short term. “An opportunity for non-banks may follow the well-publicised Royal Commission audit, where as a result we may see the big five tighten lending policy, flowing on to non-bank lenders identifying the gap in product and market and being able to offer a product to fill the void to a larger client demographic,” Rao added. Avanti Finance national business development manager, Julia Winterbottom says "as non-bank lenders we are all about offering solutions and while one of us won’t have all of the answers, collectively we believe we can help more advisers help more customers. With abetter understanding of the specialist options available, an adviser is able to make an informed recommendation around the appropriate solution to meet their client’s needs."

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PEOPLE

THE LATEST NEW APPOINTMENTS

TMM keeps you up to date with all the new appointments in the mortgage advice profession.

BLUESTONE ADDS TWO BDMS

Melissa Scott Melissa Scott has joined Bluestone as a business development manager replacing Raj Scott. She has recently relocated back to New Zealand after spending the past 11 years in Perth. Scott has held a variety of roles within the industry, including residential lending credit assessor and branch senior manager, overseeing both sales and lending. Scott is well-versed in the way a deal works and endeavours to provide numerous scenarios and solutions by thinking outside the box.

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Her passion is building strong relationships and ensuring that she is approachable and available to provide guidance and support when needed. She will be looking after the Auckland City/Central, East Auckland and Whangarei regions. Meanwhile, Maree Maxwell is Bluestone’s new BDM in North, West and South Auckland. She has been in the banking and finance sector for more than 16 years, and over that time has worked in a variety of roles within the New Zealand’s major banks. For the best part of the last decade, she's been thriving in relationship management roles for both business and private banking. As a result, she is well-versed in a wide range of credit/lending scenarios, with a great commercial acumen and a thorough understanding of the Auckland property market.

NZHL CONFIRMS SKILTON AS CEO

Kiwibank-owned New Zealand Home Loans has confirmed former chief distribution officer Aaron Skilton as its permanent chief executive. NZHL has handed Skilton the top job on an ongoing basis after he took on the job of

Aaron Skilton interim CEO earlier this year. Skilton replaces Julian Travaglia, who left NZHL in May to become general manager of Public Trust. He has worked for NZHL since April 2015. In his most recent role as chief distribution officer, he provided NZHL with analysis and advice on strategy and financial advisory regulation. Prior to joining NZHL, Skilton was chief executive at financial services business Greenstone Inc. He also held the role of


associate director at financial services company Marsh, where he was responsible for the Marsh Mercer Benefits business. Skilton graduated from Massey University. NZHL say the appointment comes off the back of strong recent customer satisfaction scores. According to the company, NZHL has one of the highest net promote scores (NPS) in the banking industry. It says nearly three quarters of its clients have "high levels of satisfaction".

TV PERSONALITY JOINS MORTGAGE EXPRESS Angi Mann

Sara Hartigan Adviser group Mortgage Express has hired TV and radio personality Sara Hartigan from Loan Market to boost its Auckland office. Hartigan, a well-known contributor to TV and radio on mortgage issues, joined her new group earlier this month after four years at Loan Market. She was a judge on TV One series Our First Home. Hartigan's passion for property began at 22 when she bought her first home, buying an investment property just three years later. Mortgage Express said she had an "impressive portfolio". Mortgage Express said in a statement: "Sara believes no deal is too tough to secure and invites clients at all stages of their home buying journey to get in touch with her."

PAA AND IFA PEOPLE KEEP THEIR ROLES

Key members of the former PAA and IFA adviser associations have taken on roles with Financial Advice NZ. Among the familiar faces is Karen Garner, business manager. She had held that same role with the IFA since 2003 before she was appointed to start with Financial Advice NZ in June. Andrew Gunn was manager of member learning and development at the IFA before taking on the role of learning and development manager at Financial Advice NZ. He is also a director of Skills Active

Aotearoa and a director of the Professional IQ College. Former PAA learning and development manager Angi Mann takes a role with Financial Advice NZ as education consultant. She will continue to offer consultancy services through her own consultancy to financial advisers and advice businesses. Administration manager Andrea Vandermade has also shifted from the PAA but finance and member manager Cheryl Cassidy has not.

BANKERS AND RUGBY PLAYER JOIN MORTGAGE LINK

Anthea Livingstone started in banking when she left school and has returned as an adviser with Mortgage Link. She studied Psychology and Mass Communication and university then worked for a number of direct sales companies in management and sales roles. After that she ran her own social media content company for a few years before heading back into finance. Livingstone says she has a passion for construction finance and is especially interested in sustainable building. She hopes to get more involved with finance for sustainable housing. She joined Mortgage Link after speaking to many head groups. Phil White, based in Newmarket, Auckland, has spent more than 25 years as retail lending manager with ANZ at various locations around the country. His focus is on long-term relationship building with clients, “including utilising my experience, skills and the use of a unique spreadsheeting tool to help clients achieve better financial outcomes.” Down in Feilding, Peter Mwai has joined the group. He is an immigrant from Kenya and has a degree in Social Sciences with an

economics major and political science minor as well as an advanced professional diploma in positive behavioral support. “I worked as an account manager and channel account manager at Siemens Ltd for three years. I migrated to New Zealand to play union rugby. I have played rugby in Wairarapa and Wanganui provinces and finally I have spent the past seven years working in intellectual disability. I have a strong desire to make lives better by ensuring that the relationships I establish are beneficial and based on trust, teamwork, hard work and mutual understanding. I conduct research and invest time to learn what I don’t know so that provide my clients good solutions and where I don’t understand I will consult.” For more of MortgageLink’s new advisers see www.tmmonline.nz/people

WESTPAC MAKES APPOINTMENT

Business manager Jack Chase has been appointed sales manager at Westpac. He has been with the bank since May 2017. Before that, he was premium manager at ASB.

EXPERIENCED ADVISER JOINS TEAM

Mortgage Express has hired former BNZ business development executive Pete Fenwick, in its Auckland office. Fenwick has over two decades of experience in finance, spending several years at banking group BNZ. He previously held the role of commercial partner at the lender, looking after business clients. Fenwick also worked as a business development and adviser assistant over the years at BNZ. Fenwick is tasked with looking after clients in the Auckland area and has carved out a niche helping parents buy a home for their children. He will provide advice on home and business lending, as well as personal finance, refinancing and restructurings. Fenwick said: “Working in business banking has exposed me to various scenarios of how to structure deals most effectively." Mortgage Express chief executive Sarah Johnston added: “Pete has the ability to develop long and trusted relationships with his clients, and is genuinely committed to finding the right solution.” ✚

Got a new person in your team? Let us know by sending an email to editor@tmmonline.nz with details. 017


PROPERTY NEWS By Miriam Bell

Rental market balance tipping Recent government policy changes and Tenancy Tribunal decisions suggest the balance in the rental market is tipping towards tenants. We take a look at some examples. By Miriam Bell

W

ith a third of New Zealanders now renting and tenant advocacy groups becoming increasingly vocal, changes to the country’s tenancy laws have long been on the cards. And now the government’s proposals are out. Housing Minister Phil Twyford recently announced the proposed rental law changes. These include limiting rental increases, removing no-cause terminations, increasing the notice period a landlord must give to 90 days and stopping rent bidding. Other proposals include greater scope for tenants to have pets and make minor alterations to rental properties and the introduction of new tools and processes into the compliance and enforcement system. The government will also be consulting on changing fixed-term agreements to improve security of tenure.

But critics are pointing to problems with the planned reforms and say they will have unintended consequences. NZ Property Investors Federation executive officer Andrew King says the proposal to increase the tenancy termination notice period to 90 days in all circumstances, including the sale of a property, is a particular concern. “That change will mean problem tenancies are significantly harder to deal with. But it also makes it much harder to sell a property as the pool of buyers is diminished and the value of the property is potentially diminished.” He says that if landlords feel they have lost too much control over their properties, many will exit the rental market which will only make the existing shortage of rental properties worse. But Property Institute chief executive Ashley Church believes that, on the face of it, many of the proposed reforms don’t seem unreasonable and are unlikely to lead to an increase in rents.

Andrew King He says the devil will be in the detail and then how any reforms are instituted in reality. “Good landlords probably won’t need to worry about most of the proposals and doing things like getting rid of rent bidding seems pragmatic.”

Regulating property managers

T

he shifting environment has seen property managers come in for a lot of negative attention of late and calls to regulate the industry have been gaining momentum. REINZ chief executive Bindi Norwell has spent much of this year calling for some clear guidance for the property management industry. “There are many amazing property managers out there but, unfortunately their high standards are being undermined by a lack of regulations and also by a small group who don’t have the same ethics.” She says consistent standards are needed to ensure that adequate protections and clarity in place so that tenants are not living in unsatisfactory conditions. For example, there needs to be consumer protections around holding money in a trust account and property managers should have the appropriate insurance to operate. There should be a dispute resolution process in place, a system to ensure that

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❝ We want to

try and improve the standards of service property managers provide to both tenants and landlords. ❞ - Karen Withers regulatory compliance is being adhered and an industry-wide recognised qualification, Norwell adds. The need to raise the property management industry’s game has prompted the Independent Property Managers Association (IPMA) to forge a new relationship

with the Property Institute. IPMA president Karen Withers says the problem has been that currently anyone can become a property manager because there are no requirements for qualifications or even experience. “We want to try and improve the standards of service property managers provide to both tenants and landlords. Partnering up with the Institute will give us greater professional credentials and allow our members to improve their skills with the introduction of formal standards and continuing professional education.” The alliance will enable IPMA to strengthen their existing ethics and formal complaints processes and also boost their public profile and voice. Withers says IPMA have been stepping up the game for their members for some time. But working with the institute means they will have the traction to cast the net wider, draw in more industry operators and raise standards across the wider industry, she says.


Heating, insulation neglect costs

S

everal Tenancy Tribunal decisions also highlight the changing trends in the rental market. While the Healthy Homes Guarantee Act minimum standards are soon to be released, no one knows what they will require from landlords. But two recent tribunal decisions have awarded tenants exemplary damages for their landlords’ failure to provide an approved form of heating. In both cases, the tribunal cited the Housing Improvement Regulations 1947, saying they mean an approved form of heating must be provided and that failure to comply with this is an unlawful act. Further, in one case, the tribunal notes the definition of “approved form of heating” may differ between councils, but “it is more than supplying a plug in the lounge for something to be connected to”. Auckland Property Investors Association president Andrew Bruce says this seems to be a new interpretation of the regulations and he hasn’t heard it before. APIA suggests that landlords should install energy-efficient and cleanburning forms of heat sources, like heat pumps, whenever practicable. Meanwhile, another decision shows that neglecting to lodge tenancy bonds and insulation failures can end up being expensive for landlords. In this case, MBIE’s tenancy compliance and investigations team took a Whanganui property management company to the tribunal for failing to lodge tenancy bonds and failing to provide tenants with insulation statements. The company ended up having to pay nearly $34,500 in damages for multiple counts of failure in these areas.

Airbnb room rental subletting

A

mid the gloom, there was one piece of good news for landlords – and it came from the tribunal. The possibility of tenants subletting their rental properties, or parts of them, via short term rental services like Airbnb has been a growing concern for many landlords. But a new tribunal decision means it has got harder for tenants to justify doing so. In this case, the tenants involved rented out a room in their house for several months before their landlord was alerted to the situation. While the tenancy agreement specified subletting was not allowed, the tenants argued that as they were not making the whole of the premises available to guests they were not subleasing. The tribunal found that the tenants hosting Airbnb guests in the property and giving them exclusive rights to possession and occupation of parts of the property qualified as subleasing. That meant the subleasing of a room in the property was a clear breach of both the Residential Tenancies Act and the tenancy agreement. The tenants were ordered to pay the landlord $1222.94 in compensation. Tenancy.co.nz director Scotney Williams said the decision flew in the face of what he had thought as it was generally accepted that tenants were entitled to do some business at their place of residence. “In this case, the tribunal must have decided that using rooms for Airbnb is unsatisfactory in terms of a tenant’s business. It’s a very clear signal that the tribunal does not consider letting rooms on Airbnb is acceptable for tenants.” But if a landlord wants to prevent their tenants putting their rental property on services like Airbnb, they need to include an explicit “no subletting” clause in their tenancy agreement, he adds.

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HOUSING COMMENTARY By Miriam Bell

ALL QUIET

on the NZ front

Talk of Aussie-influenced house price drops have been all the rage of late, but the reality is that the song remains the same for New Zealand’s quietly stabilising market, writes Miriam Bell.

P

redictions of housing market doom – or at least signficant price slumps - have been doing the rounds again in recent weeks. This was prompted, initially, by recent data from Australia which showed house prices had dropped for the first time in six years. There was immediate speculation that New Zealand’s housing market could be at risk of “contagion” from a marked slowdown in the Australian market. Reserve Bank Governor Adrian Orr then added fuel to the fire when he said house prices could fall by 10% to 15% here as they could in Australia. Orr said the Reserve Bank was not projecting that. Rather it recently forecast that house price inflation will slow to 2% to 3% over the next few years – and Orr noted the market could also rise. But this did not stop a flood of commentary on the state of the market. Could New Zealand’s housing market really be poised on the precipice of a major correction? The reality is that it’s unlikely. The latest data continues to tell the nowfamiliar tale of a slowing market, led by the cooldown in Auckland. But the ongoing supply shortage is a driver that is not going away and it has now been joined by the prospect that interest rates will remain at historical lows for even longer. < sub head > Subdued growth There can be no doubt that Auckland price growth has stalled. The July and August data from QV, REINZ, Trade Me Property and Harcourts all records decreases in house prices – although, in contrast, both Realestate.co.nz and Barfoot & Thompson present slightly more upbeat news. According to QV, property values in the Auckland region declined over the last quarter, slipping down by 0.4%, to reach $1,048,956 in August. Once adjusted for inflation, average Auckland values dropped

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❝ We desperately need to increase the supply of new houses in order to fill the significant shortage of properties around the country. ❞ - Bindi Norwell

by 0.8% year-on-year. QV Auckland senior consultant James Steele says the return to “normal” market conditions continued as values remain stable under depressed levels of activity. “With less demand, sellers are adjusting expectations and are more open to negotiation in order to get their property sold. In general, this has limited the value growth seen over the previous period and kept prices stable with some softening occurring in properties

which have issues or are poorly presented.” The REINZ data had Auckland’s median price down by 1.8% in July to $835,000 as compared to $850,000 in June. It also shows the median price slipping by -0.1% year-onyear to $835,000 from $836,000 in June 2017. REINZ chief executive Bindi Norwell says Auckland continues on its steady trajectory with only minor changes in median price each month. “The stability of Auckland’s median price will be welcome news for firsttime buyers struggling with Auckland’s house prices, but time will tell whether the low to mid-$800,000 mark is a longer-term trend.” Where Auckland leads, other markets tend to follow and commentators have long been anticipating that the Super City’s slowdown will eventually spread. This is happening, although many smaller regional markets continue to play catch-up and are still seeing strong growth. The upshot is a mixed bag of price results from around the country. QV has nationwide property values dropping by 1.6% over the three months to August but up by 3.3% year-on-year, once adjusted for inflation. This left the national average value at $672,504. Despite this, they note that a trend of flat, or slowing, value growth was evident in regions around the country – particularly in the main centres, apart from Dunedin. They are seeing a shift in the market across many regions, with most market activity and value growth taking place at the lower end of the market, QV general manager David Nagel says. That’s despite relatively static values around the country and is due to continued demand from first-home buyers for affordable properties. In a similar vein, REINZ has July’s median house price nationwide dipping by 1.8% from June but increasing by 6.2% year-onyear. This left the national median price at $550,000 in July. Further, it has four regions –


WHAT’S DRIVING HOUSE PRICES?

REINZ HOUSE SALES: DOWN

Once seasonally adjusted, sales volumes were down nationally in July as compared to June. They were also down slightly year-onyear. Sales activity was down month-onmonth and year-on-year in both Auckland and Wellington.

Northland, Taranaki, Nelson and Marlborough - hitting new record prices in July. Norwell says the shortage of properties available for sale across the country is pushing prices up in all regions across the country except for Auckland. “We desperately need to increase the supply of new houses – be that through KiwiBuild or from private developers and builders – in order to fill the significant shortage of properties around the country.”

INTEREST RATES: DOWN

MARKET TRENDS

House prices may be holding up, but market activity around the country can best be described as quiet with sales taking place at a moderate pace and a lack of new listings. According to REINZ, 5661 houses sold nationwide during July. This was an increase of just 0.7%, or 42 properties, from the same period of time last year. Meanwhile, the amount of stock on the housing market just keeps declining, with new listings continuing to fall in most regions in July and August. Realestate.co.nz’s latest data shows that the total number of properties available for sale nationally was 21,207 which was down 1.6% on August 2017. Nationally, 8739 new listings came on to the market in August. This was a slight increase of 0.1% on last year, which indicates new listings are flat-lining. Nine regions had the lowest number of properties available for sale since Realestate. co.nz started collecting data in 2007. However, both the Auckland and Canterbury regions went against the grain and saw some growth in new listings, as compared to August 2017. These market trends are particularly pronounced in Auckland, with Barfoot & Thompson’s August data highlighting the muted sales activity and limited listings. The real estate agency saw 795 sales in August, which was down by 4.2% on the 830 sales seen in July. But Barfoot & Thompson managing director Peter Thompson says that, traditionally, August is the month where the lowest number of sales are recorded in a year. He adds that August saw an increase in new listings, as compared to July and August 2017. “But the number of available listings at month end is 4022 which is the lowest they have been since September last year, and this low number is also likely to have an effect on prices as spring advances.”

CHANGING OUTLOOK

Despite the slower price growth and sedate trading patterns evident in markets around the country, and particularly Auckland, most commentators don’t foresee a major market correction. Instead most say the market is

❝ The market

outlook is now a battle between two powerful opposing forces. ❞ - Dominick Stephens stabilising in an orderly way after a period of unusual growth. They expect the market to remain subdued, with the supply shortage providing some support for prices. For Westpac chief economist Dominick Stephens, the likelihood of further falls in mortgage rates means the housing market outlook has, in fact, improved. He has revised his previous forecasts due to the Reserve Bank signalling they are nearer to the “trigger point” of reducing the OCR. The game has now changed and the market response could lead to a drop in mortgage rates over the coming months, he says. Further, Reserve Bank comments on the LVRs mean he expects an LVR loosening to be announced later this year, boosting the market early next year. “The market outlook is now a battle between two powerful opposing forces: Government policies, like the foreign buyer ban, that will cool the market versus Reserve Bank policy that will boost it. That makes the outlook particularly uncertain.” Yet Stephens says he is now forecasting essentially flat prices over the remainder of 2018, followed by a sharp, but short-lived, rise in prices for early 2019. “But the Reserve Bank won’t be able to hold interest rates down forever – causing rates to drop now will set us up for a larger increase down the track. We expect mortgage rates will rise in the 2020s, and when that happens house prices will take a hit. We are forecasting a house price decline of almost 3% for 2020.” ✚

Interest rates remain low and banks are still battling it out with cuts to short-term rates. But commentators are now speculating that lower interest rates are set to stay around for longer than previously thought.

OCR: DOWN

The Reserve Bank left the OCR on hold at the record low of 1.75% in August and governor Adrian Orr says it is now likely to stay on hold until 2020.

IMMIGRATION: DOWN

Monthly net migration dropped in July as compared to June. Annual net migration was down in July for the sixth month in a row and commentators say the rate is easing.

BUILDING CONSENTS: DOWN

Building consents were down in July for the second month running. But year-onyear consents remained up and Auckland consents continue to show healthy growth.

MORTGAGE APPROVALS: UP

Reserve Bank data shows mortgage lending overall was up in July, as compared to June. New lending to investors was also up from the previous month.

RENTS: NEUTRAL

The average national rent in July was down slightly on June’s record but it was up year-on-year. Average rents in Auckland, Wellington and Christchurch remained021 unchanged.


LEAD By Daniel Dunkley

Youthful AMBITION TMM’s first survey of young mortgage advisers reveals young people are attracted to the industry’s pay and lifestyle, and hold optimistic views about the future.

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T

BIG GROUPS TAKE THE TALENT

Adviser groups have no trouble attracting young professionals from university. More than one in five [20.6%] of respondents to the survey became a mortgage adviser after finishing higher education. The statistics indicate the sector is viewed as an aspirational long-term career. Most said they joined the profession after working in another financial services sector. A total of 49% said they already worked for a financial institution. About 4% said they worked in wealth management, either as a financial planner or an accountant. Blue-collar workers made up 4% of respondents. Sales, foreign exchange, hospitality, FEMALE traders also made up the mix and self-employed of young advisers. About 22% heard about the profession after talking to family and friends. MALE Kiwi advisers are doing a good job representing the sector. About 12.7% of respondents said they joined the industry after using an adviser for their own home purchase.

❝ If I had a choice,

the three main things I'd want from an aggregator would be resources, reach and also experience.❞ - Kieran Welsby

What were you doing before you became a broker?

OTHER NO

- b N-F adviser with greater income security.” lue IN co ANC Kieran Welsby, an adviser at Orange lla E IN r Network, and member of NZFSG, said DU ST NON-FINANCE RY he reached out to NZFSG “as they INDUSTRY seemed to be the largest and most - white collar respected of the groups”. Welsby said he researched aggregators beforehand. “If I had a choice, the three main things I'd want from an aggregator would UNIVERSITY be resources (documents available for example), reach (how many lenders are they affiliated with) and also experience (knowledge/support I can tap into when I need it).

FINANCIAL INSTITUTION

A LACK OF GENDER DIVERSITY The survey reveals a lack of diversity even in the youngest generation of What is your advisers. A total of 69.8% of respondents were male, while 30.1% were gender? female. The figures are in line with the Australian broking industry. The MFAA’s 2017/18 report noted a 70%-30% male-female split. The adviser industry is yet to reach global standards on gender OTHER diversity. According to a recent Mercer study, women made up FRIEND/FAMILY 46% of the financial services global workforce. FEMALE Elyce Maxwell, of The Mortgage Girls, set up to boost female representation, said she had begun to see improvements in diversity. “I think that there are more females coming into the MALE industry. I have never felt that my gender has limited me in this industry.” ENGAGED A BROKER AS NG IN IES RKI FF UD O TA ST W T S GE A OM OR ER FR UPP OK S BR A

New Zealand’s biggest adviser groups take most of the young talent coming into the profession. About 63% of respondents said they belonged to NZFSG. Many said their company’s links with NZFSG made it the easiest choice. Sharon Xu of Plaxo said the group was “easy for communication” and had low membership fees. About 8% of respondents said they belonged to Loan Market. A further 10% said they belonged to Mortgage Link. Young advisers said technology and branding influenced their decision to join a particular group. Ash Robinson, of Squirrel mortgages, said the group’s peer-to-peer lending platform impressed him: “I personally like Squirrel because of funky brand and internal, the technology and products we are building on the side and being a salary-based

UNIVERSITY A KEY ROUTE TO THE INDUSTRY

WEAL INDU TH-KNOW LEDG STRY E

MM’s first survey of young mortgage advisers reveals the industry remains attractive to the next generation, despite the uncertainties posed by regulation. Income, lifestyle, and career progression continue to lure young Kiwis to the profession. Some may be surprised that up to a quarter of mortgage advisers in New Zealand are aged 35 or younger. Most of these people are in the 29-35 age band but there are a few who are younger than this. The distribution across the groups was also interesting, with NZ Financial Services Group, including Loan Market, Mortgage Link, Mortgage Express and Mike Pero Mortgages all having good numbers of young advisers. Groups such as Prosper, Mortgage Supply, SHARE and Q Group had either small numbers or none at all. TMM’s survey shows that the young advisers are happy with their career choice. Nearly half of the respondents said they wished they had become advisers sooner. Like many millennials, New Zealand’s next generation of mortgage advisers dream of becoming their own bossed one day. A large proportion of respondents said the prospect of self-employment attracted them to the sector. The next generation of advisers is likely to be at the forefront of technological change. Young advisers predicted artificial intelligence would continue to influence the industry and disrupt the way business is conducted. Like their older counterparts in this year’s TMM Annual Survey, young advisers revealed their fears for the profession. They expect regulation, additional scrutiny on commission, and additional disclosure to become a burden in the years to come. Respondents cited intense competition and workload as their most significant challenges today.

FROM WORKING IN THE FINANCIAL SERVICES INDUSTRY

O M NLIN ED ER IA ES 023 CO EA RC VE H RA GE


RY

LEAD

UNIVERSITY

NZ V AUSTRALIA

FINANCIAL INSTITUTION

WEAL INDU TH-KNOW LEDG STRY E

INDUSTRY - white collar

How did you first hear about finance broking as a profession?

AS NG IN KI FF IES UD OR TA ST W T S GE A O M O R ER FR UPP OK S BR A

OTHER

TMM’s survey mirrors one done by the Mortgage Finance Assocation of Australia. Here we compare results and find some remarkable differences.

FROM WORKING IN THE FINANCIAL SERVICES INDUSTRY

What were you doing before you became an adviser? Working for another financial institution AUSTRALIA 35% NEW ZEALAND 49%

University AUSTRALIA 10% NEW ZEALAND 20%

Why did you decide to become an adviser? Income growth potential AUSTRALIA NEW ZEALAND

57% 76%

Lifestyle factors AUSTRALIA NEW ZEALAND

42% 58%

To become my own boss AUSTRALIA NEW ZEALAND

40% 47%

What challenges do you face? Lead generation and marketing AUSTRALIA NEW ZEALAND

65% 61%

Staying up to date with policy changes AUSTRALIA NEW ZEALAND

54% 27%

Time and workload management AUSTRALIA NEW ZEALAND

40% 52%

Sources: MFAA Young Professionals Report

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CHALLENGES AND DIFFICULTIES

Young advisers are happy with their career choice but also raised concerns about the profession, and shed some light on their fears for the future. Respondents were asked to name the three biggest challenges in their careers to date. Number one was lead generation. Young FRIEND/FAMILY advisers face pressure to perform and bring in business. A total of 63.4% of advisers described new business as a challenge. The findings mirror the MFAA’s young professional survey in Australia, where ENGAGED A BROKER 65% of respondents said they wanted help with lead generation. O The second biggest challenge was M NLIN ED ER workload and time management. A IA ES CO EA total of 52.3% of young advisers said they RC VE H RA struggled to manage their daily tasks. GE Staying up-to-date with lender policy changes was the third-biggest challenge faced by young advisers. A total of 28.5% of respondents said it was a challenge to keep up.

INCOME AND LIFESTYLE ATTRACT A NEW GENERATION

Respondents to the survey cited income growth potential as the biggest factor luring them to the profession. About 76% of respondents said pay was their primary reason for joining the industry. Lifestyle also attracted young people in their droves. More than 57% of respondents said this was a reason for taking up the profession. About 33.3% said they wanted to improve their future prospects by offering mortgage advice. Global studies indicate self-employment is set to triple by 2020, and the mortgage adviser industry looks set to see more advisers go out on their own. A total of 47.6% of respondents said they joined the profession to become their own boss one day. Young advisers seem happy with their career choice. When asked what they would like to have done differently with their career, 46% said they wished they had become a mortgage adviser “a lot earlier”.

❝ Regulation

may get quite hard for the [older] advisers, and they may struggle or decide that it’s too hard to keep up.❞ - Jonny Dixon

Why did you decide to become a mortgage adviser? INCOME GROWTH POTENTIAL LIFESTYLE FACTORS TO BECOME MY OWN BOSS BETTER FUTURE PROSPECTS A CHALLENGE WANTING AN INTERESTING... OTHER 0%

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What professional challenges do you often face?

Respect • Relationships Transparency • Integrity

LEAD GENERATION STAYING UP-TO-DATE WITH... TIME AND WORKLOAD STAYING UP-TO DATE WITH... EARNING TRUST, RESPECT... TOO MUCH COMPETITION RECRUITING AND TRAINING... CLIENT MANAGEMENT... MOTIVATION OTHER 0%

Partnership for Growth Mortgage Aggregator Advicelink and More...

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digital-based advice were earmarked as the The figure was markedly lower than the MFAA’s future of the industry by some respondents. Australian survey, which found 54% of young Young advisers expect changes to the advisers wanted help with policy changes. commission model but see the positives. The New Zealand survey found 54.8% of MARKETING, BRANDING... Eugene Bartsaikin of Sycamore Financial young advisers would like help with marketing Advisers believes the commission model will and branding. further 50% said they needed REFERRALS &SALES A SKILLS change to become “hopefully less upfront”, assistance with referrals and sales skills. INCOME GROWTH POTENTIAL LEGISLATIVE CHANGES AND... with “more lenders opting for a trail model”. The Financial Services Services Legislation STARTING AND GROWING... LIFESTYLE FACTORS Bartsaikin also believes the “standard of advice Amendment Bill (FSLAB) is set to radically will also increase”. DIVERSIFICATION reshape compliance TOSERVICE BECOME MY OWN BOSS and disclosure The industry’s young guns believe requirements in the industry. A total of 39.6% TECHNOLOGY BETTER FUTURE PROSPECTS regulatory changes can help the younger said they would like more support with OTHER generation take over. Jonny Dixon, of regulation.A CHALLENGE WANTING AN INTERESTING... Hammock Mortgages NZFSG’s Bruce Patten group was 20% Christchurch-based 0% said his 10% 30% 40% 50% 60% Limited, said it could benefit the new keen to help members tackle regulatory OTHER generation. “Regulation may get quite hard for matters. “Regulation is still a grey area, 20% 10% advisers 30%the [older] 40% advisers, 50% and they 60%may struggle 70% or80% and we are working0% hard to keep decide that it’s too hard to keep up. [It] is an informed of what is happening, but it is a slow opportunity for young, experienced, hungry moving thing at the moment. We are having advisers,” he added. Angus Dale-Jones the chairman of the Code Hope Kerr-Bell, an adviser at Majesty Committee, come and speak to our members.” Mortgage Brokers, believes regulation can Patten said NZFSG ran workshops on boost professionalism in the sector, but wants branding and marketing for young advisers. LEAD GENERATION regulators to avoid onerous measures: “I “Most of these advisers are new to the STAYING UP-TO-DATE believe industry regulators need to respect industry, so weWITH... have started running an TIME ANDprogram WORKLOAD for them. They are run the customer's choice and support and trust induction STAYING eight UP-TO DATE WITH...and include information on advisers’ ability to provide advice and educate every weeks, EARNING TRUST,sales, RESPECT... their clients without making it too hard or marketing, setting up relationships.” TOO MUCH COMPETITION restricting for them to do so. I also feel there RECRUITING AND TRAINING... is some uncertainty about the future of the FACING THE FUTURE CLIENT MANAGEMENT... industry, but hope that it is supported and Despite the raft of regulatory challenges and MOTIVATION demands, young advisers people are aware of the options and advice growing compliance available to them.” ✚ OTHER are bullish about the industry’s future. They expect technology to change the way Sources: MFAA Professionals 20% 0% 10% 30% 40% Young50% 60% report 70% business is conducted. Artificial intelligence and 2017/2018, TMM Young Advisers Survey 2018

What areas of business would you like support in?

mortgagelink.co.nz

Insurance Dealer Group and More...

insurancelink.co.nz

Mortgage & Insurance CRM Exclusive to Mortgage & Insurance Link

Supporting Advisers since 1991

Use our brand or your own

MARKETING, BRANDING... REFERRALS &SALES SKILLS LEGISLATIVE CHANGES AND...

Interested? Give me a call.

STARTING AND GROWING... SERVICE DIVERSIFICATION TECHNOLOGY OTHER 0%

021 835 506 10%

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025


LEGAL By Jonathan Flaws

Well, I’ll be bound

Electronic signing – making it stick. By Jonathan Flaws

I

n 2016 I wrote about digital signing, “there seems to be a gathering clamour for the greater use of electronic commerce, particularly in the finance industry, to speed up the time from contact to consummation and to make the process of dealing with customers at a distance safer and more efficient.” That clamour hasn’t stopped, if anything it has increased. Electronic signing is a good thing for all sorts of reasons, but it is important that before you go off and sign up to a system promoted by an IT provider, you make sure it meets your requirements – or more particularly, if you are not the person who will

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ultimately be relying upon the electronically signed documents, it meets the requirements of the recipient. An electronic signature has to stick to the signer and legally bind them to the contents of the document. Making it stick is not about the technology – it’s not about whose electronic or digital signing widget is used to mark the document – that’s only part. To make it really stick, it’s about the process or more particularly, proving the process before a judge if and when that is required. The actual bit of technology that puts the mark in the document is just one step in a process that needs to be satisfied before the recipient, let’s call it the lender, can stand

before a judge in court and be assured that the electronically signed document is valid and binding such that the legislation requires the court to treat the document as having been “signed” by the person who is to be bound by that document. The signature is the mark inserted in the document that confirms that a process, as set out in the legislation, has been followed. Follow the process and the mark is evidence that the signer is legally bound by the content of the electronic documents. Miss a step in the process and there is a risk that the court may not accept that the signer – or purported signed – is in fact legally bound.


LENDER’S RISK

When you think this through, if what you are having signed is a loan agreement, it is the lender who needs to be satisfied that the signing process will stand up in court. As a broker you may find a process that you think or are told is compliant, but it is the lender who is ultimately the party who is relying upon that being correct. The legislation is IT neutral. This means that any digital or electronic mark inserted into the document can be compliant provided the process by which it is inserted, and thereafter maintained, complies with the legislation’s requirements.

THE STICKY PROCESS STEPS

Consent The first step is that the parties have to consent to the transaction being an electronic transaction and agree the mean of communication. Both parties – not just one. So, the first process is one of establishing consent. The law says that this can be taken from the circumstances but rather than rely on circumstantial evidence, the document should specifically state that it can be signed electronically and it is even better if the person signing can also consent by giving the lender his/her individual email address and stating that he/she consents to electronic signing and to receiving the document and communications by email to this address. Linking the process with an identified signer This step requires that the signer be identified. You will no doubt be carrying this verification of identity out for the purposes of AML and, in some cases, on behalf of the lawyer for mortgage registration. How you identify for signing is not specified. But if you have obtained a photo ID, e.g. passport or driver’s licence and checked this is a valid document (several external service providers can do this for you), and have a unique identifier for that person - i.e. their personal mobile number that only they access, you have probably done enough. Then the process of linking the person to be bound to the information and the document that contains the information must be able to be linked to them – and to them only. This is where technology comes in. Many electronic signing systems now send the document to the signer, and at the same time send a four-digit pin code to their mobile. The signer opens the link in the email and inserts the four-digit code from the mobile message and is given access to sign. Coupled with your prior ID verification, that is

❝ As a broker you

may find a process that you think or are told is compliant, but it is the lender who is ultimately the party who is relying upon that being correct.❞ a two-factor identification access which links that identified person to the signing process. The mark Call it a signature if you will, but really this is a mark placed in the document by the signer. Most systems allow the signer to choose a mark by typing their name in a font of their choice. Some present their name in an already chosen font. Others allow the signer to upload a graphic (a jpg or tiff) of their signature and use this. Some include the mark in a digital certificate. This is often referred to as PKI (public/private key encryption) and is a strong form of electronic signature because it includes a hashing algorithm. Once the digital certificate is placed in the document, any changes thereafter can be identified. The document becomes tamper-proof or tamper-evident. The signing reason The legislation also says that the signature (the mark) must also indicate who the signer is and the reason why they are signing the document. In most cases the mark is the person’s name, so they are identified, and the reason is hard-coded text along the lines of “I agree to be legally bound by the contents of this document.” Subsequently readable The document, once signed, must of course be easily readable in the future. This is generally a given if the document is presented as a PDF that can be read using Acrobat reader or anther PDF reader. Tamper-proof or tamper-evident The final step is that any change to the document must be able to identify. Most IT vendors will tell you that they keep a log of the signing process. This is a good start, but that log should be attached to and made available with the document, or at least given to the ultimate recipient. But that doesn’t make it tamper-proof or tamper-evident. A digital certificate, either attached to the individual signatures or attached to the document once it has been

signed by all parties, is the most effective way of proving in the future that the document hasn’t been tampered with or identifying if it has. The digital certificate is imbedded in the PDF and when you click on it, it asks if you want to verify it. If you follow the prompts it should return a statement telling it hasn’t been changed since it was first put on the document.

WHICH SYSTEM SHOULD WE CHOOSE?

The answer is that there is no real magic in the mark and any system should be able to deliver the IT functionality. But the real magic is in building a process that includes the six steps outlined above, which includes the IT mark or signature. You may find that you can work the IT vendor and create a process, or you may wish to choose a provider who already has the six steps already built in. SuiteBox (www.suitebox.com) is an online meeting or video conferencing programme that provides a digital signing package that includes all of the above plus a photo or video of the signing session. ADLS Inc. (www.adls.org.nz) has provided a digital signing solution for lawyers which also includes all of the above. Although ADLS Webforms digital signing has been put together by lawyers for lawyers, I understand that it is intended to make it available to external organisations for uplifting and signing their own documents. Both of these systems have also addressed the issue of signing by witnesses so that deeds and guarantees can also be signed electronically and not just contracts that don’t require a witness.

THE IMPORTANCE OF WITNESSING

Witnessing is important if the document that you are having signed includes an agreement to mortgage and a caveat, and ultimately a mortgage signed and registered under a power of attorney. In a case last year Thorn v United Steel Ltd a mortgage was overturned because the mortgagee that signed it under a power of attorney had received its power of attorney under a contract that was not signed as a deed. The Property Law Act requires that an attorney signing a deed must be appointed by a deed. The documents signed to cause the mortgage to be registered were held to be a deed. If you are relying on caveat lending, the base document therefore needs to be a deed which includes proper witnessing. ✚ Jonathan Flaws is a partner at legal firm Sanderson Weir.

027


MY BUSINESS By Miriam Bell

Signs point to

GREAT ADVICE Fluency in sign language means that Tammy Goddard, from Mike Pero Mortgages, can offer mortgage advice to an often-overlooked part of the community – and this is helping to build her business. WHAT PROMPTED YOU TO GO INTO MORTGAGE ADVISING?

I bought my first house at 19 and, since then, I’ve been involved in property investment. The concept of investing to bring in a passive income has always appealed to me and I have an affinity with numbers. I thought that, by becoming an adviser, I could take my expertise in property investment and put it to good use helping Kiwis get into homes of their own. Working as an adviser also gives me flexibility which helps with my young family.

HOW DID YOU LEARN THE BUSINESS?

I had some knowledge about the business coming into Mike Pero Mortgages (MPM). But the bulk of my learning has come through the training provided by MPM, along with the different training days each lender puts on. Plus my national sales manager, Colleen Dennehy, is never more than a phone call away and we talk about different loan scenarios on a daily basis. I love learning and this has helped me up-skill quickly and hit the ground running

WHAT MAKES YOU PASSIONATE ABOUT THE INDUSTRY?

Owning a home is a lifetime goal for many Kiwis yet it is getting harder and harder for many people to realise that goal. I believe everyone in our society deserves a shot at achieving their home buying goals. Getting the right help, at the right time, greatly improves the chances of this for people. And I am enjoying helping people get that chance.

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HOW DO YOU APPROACH BUSINESS DIFFERENTLY TO OTHER ADVISERS?

I tend to look at my client as a whole, assessing their needs based on their whole financial situation, and not just whether they can get a home loan or not. I try to educate clients on the effects of debt and their insurance needs. I also run seminars to teach people about the buying process. My goal is to ensure I leave no stone unturned. My clients appreciate this effort and I often receive lovely gifts from grateful clients.

I HEAR YOU ARE FLUENT IN SIGN LANGUAGE AND OFFER SPECIAL ASSISTANCE TO DEAF PEOPLE WANTING TO GET INTO HOME OWNERSHIP. CAN YOU TELL US ABOUT THAT DIMENSION OF YOUR WORK?

My mother is profoundly deaf, and so are three of my siblings. As a result, I’m fluent in sign language and have been since before I could talk. This means I’m able to help a part of the community that often struggles to access quality information and get good advice – especially in the financial area. I find this particularly rewarding.

DO YOU MAKE USE OF SOCIAL MEDIA AND NEW TECHNOLOGY OR PLATFORMS IN YOUR WORK?

Every Mike Pero Mortgage adviser uses Spark, which is a technology platform that operates off an iPad. This has been great for streamlining my business on to one little tablet. I also run my own Facebook business page under the MPM banner. I try to post two to three times a week in an effort to educate my followers. This also helps to generate leads. On top of this, I use Skype and Facetime to communicate with my deaf clients.

WHAT HAVE BEEN YOUR BEST AND WORST TIMES IN THE BUSINESS?

I think what has been, and always will be, my best time is getting happy reactions from clients when I give them the good news that they have loan approval. I never get sick of seeing that. It’s so satisfying.

The worst times are related to the tightening of lending criteria across the lenders. It’s never easy to have to decline a client the opportunity to get a home loan.

WHO IS THE INDIVIDUAL THAT HAS MOST INSPIRED YOU IN BUSINESS?

My national sales manager, Colleen Dennehy, has been an absolute inspiration to me. She has been a huge support, a wonderful teacher and mentor. I’ve found that what she doesn’t know probably isn’t worth knowing.

WHAT IS THE BEST ADVICE YOU’VE RECEIVED?

To surround yourself with a good network. I’ve done that and the wealth of knowledge and experience at MPM is unsurpassed. That means I can rest assured that someone here has done what I might be trying to do for my client.

WHAT ARE YOUR GOALS AS AN ADVISER? HAVE YOU THOUGHT ABOUT GOING OUT ON YOUR OWN?

One of my goals is to build a business that helps more customers reach their financial goals. The other is to be the best I can be and to ensure I’m giving my very best to my clients – whatever the issues are impacting on their chances of success Going out on my own doesn’t make sense for me because of the support, training, advisor network and lead generation assistance which is provided by MPM and my sales manager.

LOOKING AHEAD, WHAT ARE THE CHALLENGES FACING THE INDUSTRY?

We work in an industry that has been under increased regulatory scrutiny in the last few years and that is set to continue as there is lots of change ahead. The key will be to remain as agile as possible, to adapt to the changing market and to continue expanding business into new revenue streams. It will be best for advisers not to be one trick ponies. So I’m going to learn about new areas of lending to try and help more customers.

FROM: I am originally from Christchurch. But these days I’m based in Tauranga. FAMILY: I was brought up in a deaf family with sign language as my first language. Now I have two young children. INTERESTS: I love

travelling around in our motorhome and taking my children on new adventures. Boating is another interest, but walks along the beach are my favourite pastime.

FAVOURITE BOOK:

My five-year-old and threeyear-old keep me very busy so I don’t have much time for books anymore. I try to sneak one in occasionally

FAVOURITE MOVIE:

Mrs Doubtfire. I love the story of the ends a dad will go to to be with his children.

FAVOURITE MUSIC: Shania Twain, Ed Sheeran, Pink…The list goes on and on.

MOTTO: Take the time to be accurate and thorough in order to get it right from the start.

WHAT ARE YOUR TOP TIPS?

Firstly, know your limits, seek advice from your network, and don’t overwork a deal. Alongside that, diversify, write risk and fire and general, and ring fence your clients to create a sustainable business. ✚

029


SALES & MARKETING By Paul Watkins

The evolution of

WEBSITES

Don’t get left behind as your clients spend more and more time online. By Paul Watkins

W

ebsites are evolving just like everything else. They started life as simple online brochures, lists of services provided, and in some cases an “about us” page. Then extra pages, such as for specialist services got added to those of many businesses. Legal pages around privacy and T&Cs were added. More recently, videos hosted on YouTube were links on websites. For brokers, interactive pages such as mortgage calculators appeared. Then evolution in broker sites seemed to come to a halt. For the last few years, very few innovative sites have appeared, most being better-designed versions of previous ones. Before I go into the current thinking behind successful websites, my conversations with brokers tell me that the main reason advisers don’t keep their websites up with modern trends is that they don’t know how to. That’s

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a fair comment. Added to this challenge is that most think it costs thousands to get it updated or redesigned regularly. Let’s deal with these challenges first, before you stop reading, thinking I am adding a considerable cost to your business. The cost issue comes about from 10 years ago when there were only a few good web designers out there. And they could charge $5000 or even up to $10,000 for a basic site. Things have dramatically changed. I just facilitated a new site for a broker (meaning put them on to a highly competent developer), that contains seven main pages, a new logo and look, interactive elements such as downloadable e-books and calculators, lots of video content, optimised for both desktop and mobile, and designed to generate leads. The whole thing cost just $1500 and it is designed in WordPress, so the broker’s PA can upload new videos and change text themselves. Costs would

obviously vary depending on requirements. So now that cost of design is out of the way, we can discuss the latest evolution in websites. Simplicity is now a key characteristic: Lots of whitespace, only two or three colours max, and simple design are critical factors. When clients go to it, they want their key questions answered immediately. This brings up the next point, which is what should be on a “home” page. The answer is whatever it is that drove the prospect or client to the site in the first place. I will discuss driving traffic to your site shortly, but the answer here is that every page must be treated as a home page. One web developer likes to tell me that “every page has to sing its own song”. If prospects are wanting to know about buying their first home, have one page optimised for “first-home buyers”. Similarly, if you have a speciality service for those with


rough credit histories, then optimise one page for that. Get the idea? Each page is, in effect, a home page for the service prospects are looking for. Very rarely would you drive traffic to your main single home page. The next characteristic of modern websites is video. One world-famous web developer is quoted as saying, “Want to improve your website? Add video. Period.” Have short videos of yourself speaking for two minutes about your service. Videos of happy clients. Aminated or “whiteboard explainer” videos (the one where you see someone drawing the story in fast motion). These kinds are not expensive at all. Whiteboard explainer videos can be done for as little as $300 and fully animated for about $1000, depending on the length. Think about this. You scroll down your Facebook news feed and 90% of the time you bother to stop, it will be on a video. Video is extremely powerful. The next characteristic to consider is interactivity. People love doing things on websites, so have quizzes, games, puzzles, downloadable e-books, checklists, calculators, or anything that requires interaction. The most effective are ones that require them enter their name and email, as this provides a lead. Before you groan at this, know that few people have a problem giving their name and email. All such requests would come with disclaimers such as “you can unsubscribe at any time” and “your details will remain private and not passed on to any third party” etc. The big things that have changed are headlines and the reduction of blatant branding. The first should be obvious. Rather

❝ Have quizzes,

games, puzzles, downloadable e-books, checklists, calculators, or anything that requires interaction.❞ than “great mortgages at great rates”, which I have seen numerous times, headlines that work now read like this: “Looking to get into your first home? Here are the seven critical things that can get you there.” Or… “Not sure your bank is giving you the best mortgage deal? Let us check it out for you, for FREE! No strings, no hooks, just a FREE service we offer.” As you can see, these example headlines are both quite long, chatty in style and very much answer a specific client issue that they may have been searching for. That’s how websites generate inquiries now. And this also reinforces how they need to have specific pages devoted to the search queries of your clients, which are based on their main concerns. If your headlines are too generic, don’t expect too many inquiries. Pop-ups work. When you are on a site and suddenly a pop-up covers the screen, it may annoy some, but research shows that most people don’t mind them. I know that sounds counter-intuitive, but so long as the offer in the pop-up is strong and relevant enough, they generate a good response. For example,

if prospects are directed to the page “Financing your first home” and once there, a pop-up fills the screen with “Download NOW, this FREE 12-page guide to buying your first home and how to avoid the three critical mistakes most make!” you will be pleasantly surprised at just how many will willingly give their name and email to download it. Don’t make them scroll. The best websites now have all the key information “above the fold” to use website jargon, which means the user doesn’t have to scroll to find out more. They can and do scroll, of course, but only if that first upper page excites them. Two quick final points. The first is that just over 50% of all searches are done on a mobile device. So, your site MUST be responsive. Responsive in this context means that it changes or conforms to the screen size of the searcher, be it for a cell phone, tablet, or full desktop. If your current site doesn’t, then you are seriously losing 50% of your potential search traffic. The other final point is remarketing. This is when you go to a site and then no matter where else you go, an ad for that site seems to show up. This is a small piece of code built into the site and while once again it may annoy some, it does work. There is no space in this article to discuss how to drive traffic to your site, so I’ll save that for next time. I will preface it however, by saying that the only two sources of traffic that matter and generate solid qualified traffic right now are Facebook and Google AdWords. More on these to follow. ✚ Paul Watkins writes blog content and newsletters for financial advisers.

More Referrals More Loyalty Newsletters are a powerful way to increase referrals. They also generate loyalty to reduce the number of existing clients who go direct to their lender for future requirements. I can offer high value, low cost newsletters, filled with lending and lifestyle articles. They would feature your own logo and masthead, along with a space for your own comment. Frequency to suit. Email or call me for an example.

Contact Paul Watkins 0274 747 285 paul@paulwatkins.co.nz

031


INSURANCE By Steve Wright

DISCLOSURE:

Are you liable as an adviser?

You need to ensure your clients understand their obligations. By Steve Wright

M

ost advisers understand that they may get into trouble with their clients if they don’t give them suitable advice on their disclosure obligations to the insurer, what disclosure means, and what the consequences of non-disclosure, inadequate disclosure, and misstatement are. What you may not be aware of, though, is the law around non-disclosure that makes

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❝ Anyone receiving

a commission from an insurer is deemed in law to be the agent of the insurer for disclosure purposes.❞

you potentially liable to the insurance company. Under section 10 of the Insurance Law Reform Act of 1977, anyone receiving a commission from an insurer is deemed in law to be the agent of the insurer for disclosure purposes. This applies even if you are not an employee or tied agent of the insurer. If you receive commission or any other “valuable consideration” for arranging the insurance for the client, you are deemed by law to be


❝ If you receive

commission or any other “valuable consideration” for arranging the insurance for the client, you are deemed by law to be the insurer’s agent for all purposes until the policy is issued. ❞ the insurer’s agent for all purposes until the policy is issued. What does it mean to be an agent? Agent and agency are legal concepts designed to facilitate commerce and allow many others (agents) to do the work of one (the principal). Very simply, anyone appointed and authorised to act on behalf of someone else has the powers of that principal to perform the authorised activities, and legally bind their principal. Agents owe their principals a duty of good faith and must always act in good faith and in accordance with their instructions and authority. Agents can be liable to their principal where they act contrary to good faith or outside of their authority because unless it is clear to everyone they are no longer acting as agent; their principal will still be legally bound and legally liable. So, back to the Insurance Law Reform Act 1977. Under this law, which overrides all other private agreements to the contrary, advisers are legally the insurer’s agent simply by operation of law up until the policy is issued. This means you are automatically the insurer’s agent even if not specifically appointed as such and even though you may not be the insurer’s agent for other matters. This is important in practice because, for

client’s disclosure purposes, telling you is as good as telling the insurer. This sounds all good and well. If the client tells you and you pass the information on to the insurer, the insurance company cannot claim material non-disclosure as a reason to decline a claim, disclosing to you is the same as disclosing to the insurer by law. But what if you fail to pass that information on to the insurer? This is where things get tricky for you: As you are the insurer’s agent, there is no problem for the client, disclosure has been made. However, the insurance company is now liable to a client it may not have covered had you passed on the information and it will most likely have to pay the claim. As you can imagine this will make you very unpopular with the insurer and they would likely be able to claim compensation, for the claim they now cannot decline, from you. Now you will be very unpopular also with your PI insurer, who, if they are liable, may choose not to renew your PI cover. Fortunately, this liability is easily avoided. Understand your legal position and if the client tells you, you must tell the insurance company. If a client discloses something to you verbally, I would recommend you tell them to disclose everything fully on the application form. If they refuse, ensure you tell the insurance company (in writing) and consider whether this is the type of client you want to work with. In all cases where claims are declined for non-disclosure, it is possible for a client to claim they told their adviser. Although they will typically have signed an acknowledgement and disclaimer when signing their application for insurance, you may want to consider getting the client to specifically confirm in writing, once the application is complete, that they have disclosed everything in writing and that they have not disclosed anything to you that is not written down on the application. This could simply be done by signing and dating a pre-printed acknowledgement as part of the compliance requirements. This way the issue is specifically dealt with and not buried in a lot of other things they didn’t understand. ✚ Steve Wright is the manager of professional development at Partners Life.

033


OUT AND ABOUT

MPM CONFERENCE:

We’re all in this together

Ninety-six MPM advisers and staff spent three days at conference in Noumea recently. The theme was how brokers can navigate tougher market conditions to really maximise their business potential in the coming 12 months.

MPM chief executive Mark Collins and Top Risk Writer Philippa Norman.

034 WWW.TMMONLINE.NZ

Rookie of the Year Nigel Sew Hoy with Robert Alexander.

Top Writer Value Darren Lawson and Kelsey Hughes.


MARK YOUR DIARY The 2nd Annual TMM Better Business Conference is being held on October 30.

2018 Registrations are open now - for more info go to www.tmmonline.nz 035


Your clients could earn 3x Airpoints Dollars™ on eligible AIA insurance products

If your client buys or holds an eligible AIA insurance product they could earn 3x Airpoints Dollars™ on premiums paid between 1 August 2018 and 31 October 2018*. For every $100 of premium paid, your clients will earn 3 Airpoints Dollars*. To register your clients’ Airpoints™ details with AIA call us on 0800 800 242 or register them directly through INSIGHT.

*Ts and Cs apply.

Visit aianz.co/promo aia.co.nz