Focus on commission disclosure

Advisers will need to do a better job of explaining their no-fee, no-obligation model under the new regulatory regime, according to adviser Hamish Patel.

Monday, March 22nd 2021, 10:20AM

Under the new regime, advisers will need to show their clients how much commission they would earn in dollar terms for each loan.

Commission levels can reach up to $12,000 to $15,000 on large mortgages in Auckland. Advisers need to have a frank discussion with clients about how the industry works and how advisers can offer a free service.

The disclosure of large dollar amounts could lead to awkward discussions with clients, Patel of Mortgages Online told TMM Online.

"The key thing for advisers is how to approach this conversation. Brokers need to articulate the issue and the bigger sense of how the sector works.

"While commission numbers can seem big for certain loans, brokers need to explain that they work for clients on a no-fee, no-obligation model. And that the clients that complete effectively pay for the clients that don't, or those that can't find a house to buy.

"We need to explain how commission allows us to offer a free service to everyone," he said.

The disclosure of commission in dollar terms would be a "big adjustment" for brokers in the early weeks of the new regime, he said.

Patel called on the sector to prepare for commission disclosure talks and highlight the benefits of the adviser channel.

"As an industry, we need to get stronger on these conversations. It also becomes more important that you can demonstrate to a client what you offer. If all you can show is a rate, you will struggle to survive."

Tags: Commission Disclosure Lending Mortgage Advisers mortgages