"Leave mortgage adviser commissions alone" - lender

Banks enforcing targets on mortgage advisers is the issue that needs to be addressed and adviser commissions should be “left well alone,” according to specialist lender Southern Cross Partners.

The FMA told banks to remove sales incentives earlier this year, and a progress report is expected to be provided this month. Minister for Commerce and Consumer Affairs Kris Faafoi has also moved to introduce legislation banning sales incentives from the finance sector, however Southern Cross Partners Director Terry Butler says focus instead needs to be put on performance targets, as they puts significant power in the hands of banks and pressure advisers into delivering business.

“If a broker hasn’t put a certain volume of business through a particular bank, the bank cuts them out – that’s the problem,” Butler stated. “Commissions are a good thing, and even better if Government moves to create a fair playing ground for advisers, perhaps through a uniform commission structure.”

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“I call on Minister Faafoi to instead scrutinise the performance targets that some banks put on mortgage advisers – many of them border on coercive.”

Butler acknowledges that public trust needs to be restored, but says that eliminating the independent adviser market will not benefit consumers in any way. He says trust must be regained through the new code of conduct, increased regulation and better training under a consistent commission structure across the sector – not by removing commissions entirely.

“I’m not saying public trust doesn't exist because of anything the mortgage advice industry has done,” Butler explained. “I’m saying trust has been shaken by attacks on the industry from politicians, regulators and the media.”

“It’s true that at Southern Cross Partners we don't pay commissions. Instead, advisers charge their clients a fee which is added on to the loan, but that is because more expertise is required to put a deal through and the deals are short term, averaging 12 months instead of 30 years like the banks.”

“Our model may well become the standard for the adviser industry,” Butler concluded. “It’s unfortunate and not in the best interests of the consumer when it comes to standard mortgage deals, but sometimes the opposing voices are so loud that common sense falls by the wayside.”