Brokers operating in New Zealand need to prepare for the potential introduction of a best interests duty in New Zealand, according to Pepper Money’s director of sales and distribution for Australia and New Zealand.
The non-bank lender’s director of sales and distribution for Australia and New Zealand, Aaron Milburn, said that he believed that mortgage brokers in Australia were largely prepared for the upcoming implementation of the best interests duty and had been changing structures and processes in anticipation of implementation next year, thanks to the unified work of the industry.
‘Brokers are doing the right thing by customers’
Speaking to The Adviser following the tabling of the best interests duty bill in Parliament, Mr Milburn said: “I think that, on the whole, brokers are doing exactly what the best interests duty is requiring them to do – the right thing by customers.
“The vast majority of brokers already do that. And I think the good ones have already started to act in the way that they believe the legislation is going to go. So, I don’t think many brokers are working in a way that will change once the legislation comes in [because] I think people have already changed their structures and processes to account for what what they believe that the regulation is going to look like if it drops next year.”
Mr Milburn highlighted that at the non-bank lender, they had implemented systems that “looked after” the client by ensuring they were in appropriate loans, such as by utilising a cascading credit model. As an example, he revealed that nearly a third of customer applications brought to Pepper by brokers were for specialist loans that – once manually assessed by credit staff in consultation with the brokers – were settled as near-prime loans, saving them money on their interest rate and fees.
“As we always manually assess that application, in consultation with the broker, it helps make sure that the customer is in the right product, first time,” he said.
"There’s a higher probability of settlement with Pepper than, say, with a lender with a singular model or monoline credit policy such as a major bank or a non-major bank,” he said. “We have three opportunities to help that customer versus one at a major out or non-major lender. And, if the broker is unsure about exactly where their borrower would be on the product spectrum, they can use the Pepper Product Selector tool to select the product upfront, without them needing to understand the minutae of a credit policy.”
Mr Milburn welcomed the unification and collaboration that had been taking place between lenders, brokers, aggregators and industry bodies to ensure that the industry was meeting the requirements ahead of implementation and that “the customer is front of mind and always achieving the outcome that they desire, first time.”
“We came together in a way I’ve never seen this industry come together and, in a really considered, professional manner – with no emotion, playing into it – we directed how we felt that the legislation should play out. And I do believe that it was listened to.
“I think that some of the work that a lot of our industry leaders did, really helped what came out at the back end,” he said.
New Zealand are ‘fast followers’
However, Mr Milburn added that he believed that brokers in the land of the long white cloud should also start preparing their businesses for a similar duty.
He elaborated: “Generally, what New Zealand does from a mortgage broking industry [point of view], is look to what’s happening in Australia and overlay that with what’s happening over there.
“There is no best interests duty to speak of in New Zealand such as what is being proposed here. But given the fact that the major banks over there are Australian parented, they are fast followers.
“So, my view would be – and what I’m already saying to New Zealand brokers on my travels there – is that they really need to start to get set for this because it will come into New Zealand.
“And the best way you can prepare for that is by taking some of the lead from the Australian market,” he added.
Mr Milburn concluded: “At the end of the day, legislation or no legislation, if we don’t get it right for the customer, we don’t have an industry.
“Customers come to us because they don’t trust that the banks are giving them the best deal. So, this whole industry is premised on the fact that we do the right thing by customers. And without that, we don’t have one.”
[Related: Pepper launches mortgage offering in NZ]