Award-winning advisers weigh in
New Zealand's mortgage landscape is experiencing an unprecedented shift. While opportunities abound, a perfect storm of challenges threatens to capsize even the most seasoned navigators.
From opaque clawbacks and regulatory whirlwinds to economic turbulence and staffing woes, New Zealand mortgage advisers are facing an uphill battle in 2024.
In this article, NZ Adviser talked to two award-winning mortgage advisers, Eugene Bartsaikin of Twine Advisers (pictured above left) and Angela Downie of Platinum Mortgages New Zealand (pictured above right), about the challenges they face in 2024 and how they plan to overcome them.
- NZ adviser challenge: Clawbacks
New Zealand mortgage advisers are feeling the weight of an ever-growing regulatory burden, but few issues cause as much frustration as clawbacks.
Clawbacks, where lenders reclaim fees after certain events, often leave advisers confused and frustrated.
Bartsaikin said it’s most challenging when the adviser only finds out after the clawback is triggered.
“Right now, we're recovering about 50% of our clawback,” he said. “We often miss the opportunity to possibly do things differently to avoid the clawback or inform the borrower that this would happen.”
One simple solution is around disclosure, Bartsaikin explained.
“Banks could disclose to the borrower if a clawback is issued from an action – ideally this is recovered at the time of the event by the bank, but if the onus of disclosure fell on the bank at that moment it could resolve many uncomfortable situations,” he said.
Bartsaikin's example of a client accidentally triggering a larger-than-expected clawback due to a minor misstep highlights the inherent unfairness and lack of transparency that many advisers perceive.
“We had a client make a lump sum payment on the loan – we expected the clawback and agreed on a partial fee to offset this, the client ended up repaying it one day early by mistake and it fell within a different clawback period and the bank charged us a significantly larger sum than we expected,” Barsaikin said.
“That bank made it good in the end, but it was an avoidable situation.”
- NZ adviser challenge: increased regulatory compliance
While clawbacks may be a pain, Downie said the industry’s frequent regulatory changes have also proved to be a significant hurdle for advisers.
The mortgage industry operates within a highly regulated environment, and Downie said staying abreast of frequent regulatory adjustments is crucial.
“Whether it's new compliance requirements, updates to lending criteria, or shifts in disclosure obligations, ensuring adherence to these changes demands time and resources,” Downie said.
“Moreover, implementing necessary adjustments to processes and documentation can add to operational complexities and costs for mortgage advisers.”
- NZ adviser challenge: Economic fluctuations
Economic uncertainty poses a significant challenge for New Zealand mortgage advisers, according to Downie.
Fluctuating interest rates, evolving housing dynamics, and shifting borrower preferences create a volatile landscape that demands constant adaptation.
“Remaining adaptable and agile in response to market shifts is essential to effectively serve clients and maintain competitiveness in this dynamic environment,” Downie said.
However, challenges don't exist in isolation. This volatility coincides with a surge in client demand fuelled by rising buyer confidence. While this presents opportunities, it also translates to "longer hours, heightened stress levels, and increased pressure" for advisers.
“Striking a harmonious equilibrium between managing the influx of clients and delivering high-quality service becomes paramount for mortgage advisers to sustainably thrive in such demanding circumstances,” Downie said.
- NZ adviser challenge: Continuous value-add and diversification
Technology, intended to help manage workloads, seems to be adding another layer of complexity.
Bartsaikin points out that while technology enhances service offerings, current commission models don't reflect the additional value provided.
“Over the years, we’ve taken on much more of what the banks are doing to service mortgage holders but I'd argue the commission rates need to be standardised across major lenders,” he said. “I do wish all banks adopted a commission model based on a lower up-front and continuous trial.”
Bartsaikin argued that this could minimise the clawback issue while recognising regular recurring commission to cover on-going service.
- NZ Adviser challenge: recruiting staff
Bartsaikin also highlighted the challenge of staffing and training.
“Over the years we've gone through the hiring process now six times. We may get hundreds of applications, but only a very small handful may be suitable,” he said.
Bartsaikin said attracting talent with the required skills becomes difficult when the current commission structure can't compete with banks' salaries.
“Lending assistants also now do much more than purely administrative work, however again the commission model is just inadequate to be able to pay at a competitive level to a similarly skilled person at a bank.”
The final word
While these issues present a challenge to New Zealand mortgage advisers, it’s not all doom and gloom.
Kiwi borrowers are a resilient bunch and mortgage advisers continue to offer value to consumers reflected by the third-party channel’s growing market share.
“I honestly think that adapting to these challenges requires a combination of proactive regulatory compliance measures, strategic market analysis, and effective workload management strategies to ensure continued success in serving clients and sustaining business growth,” said Downie.
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