With the mortgage advice sector still anticipating a Royal Commission response from the regulators, advisers say that new regulation measures will come at a particularly difficult time. With banks tightening lending criteria and the non-bank sector quickly gaining steam, more New Zealanders than ever need financial advice – and leaving that primarily to the banks will not benefit consumers.
According to mortgage adviser Kris Pedersen, regulators therefore need to be careful about how they navigate remuneration issues, and particularly take into account those who would struggle the most to secure finance.
“Right now we’ve almost got everything happening at once, and we’re getting hit from all angles,” Pedersen told NZ Adviser.
“Increased regulation will involve increased costs, and if some parts of the remuneration model are going to end up being reduced, there will be a lot of pressure on adviser businesses. As a country we have a relatively low level financial literacy. The part where we’ll have to be very careful is in any changing the commission model, because many people would likely just leave the industry if the regulators go too hard on that.”
“It would only strengthen main bank market share, and that wouldn’t be good for the main consumer – especially those who need help outside the main bank environment,” he stated. “At the moment we’re seeing the non-bank market growing hugely, and there are a lot of people out there who need access to that type of funding. If you decimate the advice industry, those people are going to struggle the most.”
Pedersen says that although any industry will have its ‘bad eggs,’ that number is likely very minimal in comparison to the sheer value that mortgage advice offers potential buyers. He says advisers are consistently achieving better interest rates for customers, and that a broader understanding of the finance market is often invaluable to clients who would otherwise be shut out of home ownership.
“The vast majority of the mortgage advice sector is pretty clean and is doing the right thing by customers,” Pedersen said. “Having seen several bank reports on how mortgage advisers perform with regards to interest rates, advisers are consistently achieving lower interest rates than what customers are getting when they deal with banks directly. That comes with a broad understanding of the market and what other banks are offering, and clients don’t necessarily see that until they’ve dealt with an adviser themselves.”