NZFSG is calling out banks for undercutting mortgage rates quoted by advisers, setting up a channel conflicts register as lenders fight harder for borrowers in a slowing market.
As the market nose dives, NZFSG chief executive and managing director Bruce Patten says advisers are getting calls from clients who have been directly phoned by bank staff offering interest rates 0.1% below the quote they have given a client.
In other instances an adviser has locked in a rate for a client refixing their mortgage only for that client a week later to get a phone call from a bank employee saying ‘I see you have refixed your loan, next time around why don’t you call me rather than the adviser’.
It is frustrating the industry and Patten says the register will let NZFSG know when advisers have an issue. It can then share it with the banks to show where they have operated outside what the aggregator believes is normal practice.
“The banks shown the first iteration of the register have, within reason, listened and taken it on board,” he says.
The register, in its infancy, is a central collection point for information that some advisers stew on and become frustrated about but don’t pass on while others regularly let NZFSG know when they encounter problems with bank staff.
Patten says the banks need to know when they are crossing the line and the register is a way to put in front of them half a dozen situations where they have operated outside normal conditions, instead of presenting one issue at a time and achieving little.
Channel parity issues are becoming a major problem for advisers as the property market slumps, fewer mortgages are being written and bank staff with little to do are phoning clients and undercutting the interest rate if those clients deal directly with the bank.
“All the banks are quiet, so they are making staff phone their customers and it’s creating more channel conflict than advisers are used to. The bank staff don’t check their own systems to see if a rate has already been quoted to an adviser’s client and just shoot a rate off their hip.
“The client is suddenly going ‘well hang on Mr Adviser the interest rate you gave me isn’t as good as the bank has given me’, or ‘the cash back offer is not as much as the bank branch is offering’.”
“It’s not a level playing field and creating a lot of conflict.”
Patten says the mortgage market is far quieter than it has been for a long time. “When it is in this phase the advisers who have been in the business for some time are still busy because they have a big client base, it is the newer advisers who feel it.
The slowdown has been caused by a number of events – uncertainty around November’s general election, geo-political events, sluggish property sales, rising interest rates and the cost of living.
“Home buyers are too nervous to do anything.”
He says when the market is hectic bank staff are too busy chasing their own tails rather than worrying about what’s happening in the third party space. Now they are looking for opportunities to create business.
“Some branch staff are taking it on themselves to phone clients because they are getting pressure to produce some results. Sometimes they are not going about it the right way. They are not considering the impact to the wider industry and what is best for the client.
“That’s why we said to the banks we will start a register so we can share that information and they can do some staff training about how a client should be dealt with. The last thing we want to do is catch a customer in the middle of a battle over who they are supposed to be dealing with.”
Patten, who has been in the business for 25 years, says the conflict is never not there but it is more prevalent than ever.
One of his biggest concerns is that the banks do their “normal knee-jerk reaction” and lay off staff, then the market picks up again and it takes them a year to replace people. Generally, hiring more staff involves preparing a business case, having it approved, finding the right people and then training them. It can take up to 12 months, Patten says.
He is hoping the banks will be pragmatic this time having seen the market slump before and realising it is only a point in time.
However, he says the banks are accountable to shareholders and could lay off staff if the mortgage market stays quiet for too much longer. “Hopefully, they are looking at the same issues we are – the fact the election is coming and an expectation the property market will pick up again after that and into next year.”
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