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Bank targets, not mortgage commissions, need to go

Bank targets, not mortgage commissions, need to go

Mortgage advisers’ commissions are not the problem and should be left well alone; it’s bank enforced targets put on mortgage brokers that are the issue, says Southern Cross Partners – a peer-to-peer mortgage lender that does not pay commissions.

Southern Cross Partners Director Terry Butler, says moves by New Zealand’s Commerce and Consumer Affairs Minister, Kris Faafoi, to introduce legislation banning sales incentives from the finance industry are a concern because it will concentrate more power in the hands of the banks.

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

“If a broker hasn’t put a certain volume of business through a particular bank, the bank cuts them out – that’s the problem. 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.”

Butler says it is in the best interests of the consumer that the independent adviser survives, but public trust needs to be restored.

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

Butler says trust can be restored or shored up with measures such as a code of conduct, regulation, more skills training and a uniform commission structure across the sector – not less, but the same across all the banks.

“Potentially, independent digital platforms are as much a threat as Australia’s financial services royal commission – how long will it be before we get a Trivago version for banking and finance?”

He dismisses a ‘user pays’ fee scheme as too onerous for home buyers and unworkable because consumers will go straight to the bank to avoid fees, thereby centralising power in the hands of the banks.

“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. 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.”

For more information about P2P investing (including the risks) visit http://southerncrosspartners.co.nz or contact your investment adviser

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