Heartland Bank enters broker market
Heartland Bank has begun a lending scheme in conjunction with the largest mortgage broker group in the country, New Zealand Financial Services Group (NZFSG).
Monday, February 28th 2022, 9:12AM 
4 Comments
by Eric Frykberg
It involves NZFSG's 900 residential mortgage advisers having access to Heartland's home loans under a new scheme.
The product will be supplied under Heartland's ‘Engage Home Loans’ white label brand.
Heartland chief executive Chris Flood said the scheme would enlarge its existing online mortgage product.
“We want to expand that and offer it to brokers on the basis that they would be working on behalf of the client.
“From Heartland's perspective, the only difference is that the broker would be completing the information, not the borrower.”
Flood said the scheme had the advantage of offering borrowers a lower interest rate. It would be lower still if borrowers did the on-line work themselves, but it would still be cheaper than other loans even if it involved broker input.
Flood declined to put a figure on the difference.
The scheme was originally due to come into force last year but was delayed “due to the noise around the CCCFA”.
But Flood said it was available now even though some advisers were still being trained up to do the work.
The “white label” format was an advantage for brokers.
“We won't be branding the loans 'Heartland'. The brokers will be using their names so it is their product.”
NZFSG chief executive Brendon Smith, said the scheme would give more choices to customers.
“My understanding is that it is not exclusive, but it is a first for the group, we are bringing it first to the market, first to customers, and we will see where it goes.
“But it gives more choice, so we think it is a good thing for Kiwis.”
Heartland recently posted an 8% rise in its interim profit to $47.5 million.
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Comments from our readers
All commissions should be disclosed though and any over-rides etc need to be included.
I'd also say that Adviser potential clawbacks should be included is early repayment statements by all lenders as this can materially affect a borrower in their decision to refinance away.
I’m 100% positive most professional advisers would not do this as they truly hold the best interests of their clients at the forefront, but a few might not if pressured from a large dealer group to use a product that the dealer group themselves benefits from financially.
On the subject of “white label” products been facilitated via the aggregators mortgage advisers working under an aggregator’s FAP licence will no doubt come under pressure to write home loans via this channel instead of competitor banks. Aggregators will clearly have an interest in seeing new home loans been placed with a lender from which they themselves will benefit financially. This industry has already witnessed instances in the past where aggregators endorsed certain insurance companies to their members based solely on how the override commissions were been paid. “White label” home loan products an example of where a conflict of interest could potentially arise with an adviser losing their ability to continue providing independent financial advice while working under somebody else’s FAP licence. The FMA will no doubt be monitoring to ensure that client’s financial interests are been placed ahead of the aggregator’s when the adviser endorses the “white label” option.
In these transactions the adviser will of course need to disclose to the client that their aggregator is also receiving commission from the lender supplying them with the finance. In this respect it’s no different to when an aggregator receives an override payment from an insurer off a new insurance policy. This despite the aggregator not having been part of the advice process. Full disclosure now applies on all commission been paid by the providers.
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My concern would be that are these group commission payments being disclosed the customer.
Will NZFSG advisers be disclosing to the consumer any group direct commission payments that are linked to these group exclusive “white label produces”.
I heard of an incident where a customer was told to use the second-tier lenders white label product rather than the Mainstream bank offer they received.
I hope this was not the adviser putting commission ahead of what is in the best interest of the customer as this would be the opposite of what current regulation is trying to achieve.