Newpark in discussions with banks on new regime
The general manager of mortgage adviser group Newpark Home Loans is confident of striking a deal with banks to operate under the new financial advisers' regime.
Thursday, August 1st 2019, 12:10PM 
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Newpark is one of a few groups that does not want members to operate under its FAP licence. Instead, it wants members to become their own FAP.
The licensing issue has caused concern with the major banks, who are said to want advisers to operate under their group's FAP. Small groups have complained this stance favours bigger players.
Andrew Scott says Newpark is “coming to an agreement” with lenders around the new regime. He says this is likely to involve building a “principles-based approach” around duty and obligation into its broker agreement, and enforcing independent audits each year.
Scott says his advisers will have to be independently-certified each year to make sure they continue to adhere to the banks' standards.
“I like that approach as it allows the advisers to manage costs. If they stick to the standards, the audit should be straightforward.”
He says Newpark will make some changes to its broker agreement to give confidence to lending partners.
“It will allow businesses to maintain independence and integrity while giving the banks a great deal of comfort,” he said.
The banks are yet to formalise their position on how they will treat individuals and businesses that take FAP status, leading to confusion among smaller players in the market.
After positive talks with two lenders, Scott said Newpark would take a FAP licence at group level “to give banks a degree of comfort”. He said this would not change the group's stance on wanting members to have their own FAP.
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Looking at what some of the insurers are doing already around the subject of production-linked volume-based commission payments and the current spotlight around the conduct and culture issue of incentives I would say the likelihood of override payments continuing for head groups is very uncertain.
With the above in mind advisers and small businesses electing to operate under an existing head group’s licence (FAP) could ultimately come to regret their decision. If the override commissions do indeed disappear then groups will inevitably increase their levies to members and demand an ever-increasing slice of upfront mortgage commissions. It would make no sense for an adviser to remain with their head group if they can cut out the middleman and deal directly with the banks and insurers themselves.
With many advisers now essentially tied to their head group by their dependence on that group’s cloud-based CRM to operate extricating one’s self won’t be an easy or quick process.
The Newpark group only has Adviser shareholders so we do not mandate what type of licence to apply for, or what CRM Advisers must use.
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