Mortgage advisers could find their selection of available lenders limited by their financial advice provider under the new regulatory regime, Newpark’s Andrew Scott has warned.
Newpark Home Loans general manager Andrew Scott believes group FAPs, with responsibility for diligence on lenders, are likely to have an “approved product list” for their advisers, controlling who they can place business with.
“Advisers may join a group thinking they have open access to every lender, but they might be in for a shock, and there could be restrictions on what they can and cannot do,” Scott says.
Scott believes group FAPs will be cautious about which lenders and insurers they deal with, and will “determine criteria for which products make it onto approved supplier lists”.
He adds group FAPs may not be able to approve smaller second tier lenders due to a lack of publicly-disclosed information, and are likely to stick with retail banks and large second tier lenders.
“That could change the landscape somewhat for second tier lenders, for owners of a FAP, and advisers underneath that licence, and ultimately for customers, as there will be restricted choice, not getting access to a solution,” Scott says.
“It’s something to think about for an adviser who thinks they are just going to join another FAP, and come under someone else’s licence” Scott says. “You have to know what you are getting yourself in for.
“You should ask your group, before you commit pen to paper, ‘what’s your approved supplier list?’ That should determine whether you want to join a particular FAP. I wonder whether advisers have thought about these scenarios, or are blindly signing up to an umbrella FAP where they think it will be business as usual. There are a lot of subtleties to play out.”
Newpark Home Loans wants adviser businesses to take their own FAP licence under the new regime, rather than operating underneath its FAP.
The model is in contrast to bigger groups, including NZFSG and Astute, where most adviser members are expected to operate directly under the group’s FAP licence.