ComCom accused of being out of touch with the reality of mortgage advice

March 24, 2024

2 minutes read

TMMO readers responded scathingly to accusations by the Commerce Commission that mortgage advisers are at risk of being “unduly influenced” by the commissions the banks pay them for placing mortgages.

Monday, March 25th 2024, 8:01AM

by Jenny Ruth

One adviser said that ComCom chair John Small’s comments was yet another example of those at the legislative and compliance level having “absolutely no idea of reality.”

A number of readers objected to Small continuing to talk about mortgage brokers because legislation now deems them to be financial advisers and they are required to have passed Level 5 of the New Zealand Certificate in Financial Services before they can operate.

“Small should be made to go on a friggin Level 5 advice course so he knows what he’s talking about next time someone from the media gives him a call”.

Commission chair John Small told journalists that while he didn’t think brokers are ignoring customers’ needs, he is concerned about inadequate disclosure of the conflicts of interest they face.

“We know that any given broker will work through an aggregator platform and will have access to some banks but not all banks. I’m not sure if you went to a mortgage broker that they would tell you that,” Small said.

“From the broker’s point of view, they will get different amounts of money from different banks. I’m not sure when you go to a mortgage broker that they would declare that to you,” he said.

The ComCom is recommending that the Financial Markets Authority, the financial markets conduct regulator, should monitor this sort of disclosure more closely and that it should issue guidelines for brokers.

A number of advisers said legislation already mandates that they disclose commissions and the banks they can work with but that there is very little difference between lenders in how much commission they pay.

“The banks we can work with are disclosed in our disclosure statement,” one said. “The fees we receive from each bank are clearly stated in our disclosure statement which is provided at the beginning of the advice process.”

Another said the majority of mortgage advisers “operate with integrity and are focused on the needs of their customers first.”

A number of advisers were less than complimentary about Small: “Someone small is trying to act big,” said one, while another said Small had been caught napping, “nay caught sleeping,” and had revealed his ignorance of how advisers operate.

A number also took issue with ComCom’s call for Kiwibank to be provided with more capital so that it could act as a “maverick” disruptor of the major banks.

Small, as a government employee, was “biased” towards the government-owned bank, said one adviser while another said the fact that Kiwibank needs more capital showed “the government’s experiment owning a bank hasn’t worked.”