Although the deadline for transitional licensing for financial advisers is the end of June, just 15% of mortgage advisers had applied for or received their transitional licence at the end of February.
Part of the reason is that a number of groups, including the largest player, NZ Financial Services Group, had not disclosed their proposition to the market.
Royle said advisers had been told there were three possible outcomes post the June 29 transitional licensing deadline; exit the industry, become a FAP or become a licensee under someone else’s FAP: “Until now these seemed to be the only options for all mortgage advisers,” he said. “The good news is there is a fourth option.”
Royle and his wife Heather, who used to lead Kepa’s mortgage offering, have developed a service called “Refer Direct”.
It is based on their experiences in the United Kingdom when regulatory changes turned the industry on its head in the early 2000s.
Jeff Royle says brokers exiting the industry, for whatever reason, found that the value of their client books fell off a cliff, due mainly to the large number of books available. Also, the few adviser firms able to take on another adviser's clients was small, as the cost of due diligence was too high and the compliance risk too great.
Their Refer Direct model proved to be a viable alternative.
“The introducer simply referred a client and the regulated firm dealt directly with the client, providing the appropriate advice. This stopped the slightly uncomfortable conversation of 'sorry, I’m not in business anymore, so I can’t help'.”
The introducer received a percentage of the revenue generated and so continued to receive an income stream. In this way the introducer was still able to benefit from years of previous work in developing their client book.
The iLender service will give introducers' clients ongoing advice and provide brokers leaving the sector with an ongoing income stream.
Jeff Royle says Refer Direct will be limited to 100 introducers “to ensure quality of advice and consistency of client service”.
