MBIE proposals around commission disclosure "don't go far enough," says lender

by Ksenia Stepanova04 Jul 2018

Proposals for the compulsory disclosure of mortgage commissions don’t go far enough, according to peer-to-peer mortgage lender Southern Cross Partners (SCP).

SCP CEO Luke Jackson says the discussion document from the Ministry of Business, Innovation and Employment, which proposes the disclosure of fees and commissions, is something that SCP has already insisted on in all of its documents and dealings with mortgage advisers. He also says that the proposal could go even further.

“A borrower visits a mortgage adviser in the expectation that they will receive impartial advice on what is best for them,” Jackson said. “But there is a reasonable argument that an advisers’ judgement could be clouded by the relationships they have, as well as incentives and perks. I also know of mortgage advisers who are fearful of the repercussions they face when they don’t give a bank a certain volume of business.

“The proposal from MBIE raises a number of questions including who will be responsible for disclosure, who will police disclosure and what incentives will be included in disclosure. The question that needs to be asked is always ‘is this in the best interests of the borrower?’”

Jackson says that aggregator groups could be in the best position to monitor disclosure, as they already provide various forms of governance for advisers to operate within. Lenders could also be required to tell borrowers in their contract the remuneration they are giving out to the adviser.

“Unfortunately at the moment most of these things run on a ‘wait for the complaint’ model,” Jackson explains. “But when the public doesn’t know that they have the basis for a complaint, that’s not going to happen. You don’t know what you don’t know.”

Jackson says lenders need to be telling the public if they are putting pressure on an adviser to give them business, but unfortunately, the practice is still very common across the industry. Policing disclosure is a difficult task, as the designated enforcer will need to be extremely effective and responsive to changes in incentive structures.

“I don’t think there is a risk that the public will perceive advisers as more expensive than some lenders if advisers are required to disclose commissions,” he says. “The public already knows they get paid a commission – it’s nothing good communication won’t solve.

“Ultimately I would hope that the industry can eventually operate with there being no outside pressure on advisers when they’re giving advice to their clients.”


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  • by Rodders 4/07/2018 11:22:57 a.m.

    This reeks of self interest. Every good adviser is not swayed by tickets to the rugby. Perhaps the writer is and wants the temptation taken off the table? I know that I'm not, and never have been. Client interests first all the way. Does that mean I should question my plumber as to whether he has received any tickets to the rugby before I let him deal with my toilet explosion??? Don't think so.

  • by Noel Bowl 4/07/2018 7:49:04 p.m.

    I think that is not a bad deal for the clients really- the leg work- the expertise sits with the mortgage adviser. If he- she does a good job by the client (through the clients eyes) and the client knows that they are not being asked to pay one red cent for that leg work for that their industry expertise- then what is the problem??? Bankers and other "employee" type arrangements get annual bonus's- do they disclose those specific numbers- $$$'s to their their zillion clients. Your argument- like many before you is slanted and rather than reflective of 98% of us that play the game (disclosure wise) above the line. Here is a thought- why not smack that 2%- don't smack the honest masses as it is all getting really really boring and repetitive. It is almost like- if you earn commission that is bad- you are the bad guy versus if you earn a salary and have bonuses that is good- you are the good guy. What do I think- I think "my arxe............................" - you can work out what the "x" really stands for- denotes- hmmmmmmmmmmmmm.

  • by 5/07/2018 8:57:23 a.m.

    I disagree with you Luke Jackson as you’re basically saying Advisors go where they are paid the most! If you work out the commission of a loan over a 5 year period then the commission generally works out to be the same between the banks anyway, some customers have the choice of using any bank, and some don’t.

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