A recent analysis of mis-selling/misleading information and misrepresentation complaints by the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) shows a small rise but still low numbers overall.
Complaints, specifically about mortgage advisers, which rose from three last year to four this year, mainly relate to fees and charges, IFSO strategic partnerships manager Andrew Gunn, says.
“In some of the cases the information in documents sent by mortgage brokers to clients isn’t sufficiently clear.
“Clawback fees are a big issue – where a mortgage or financial adviser hasn’t provided sufficient information about charging a clawback fee if the client decides to break their mortgage.”
Shanks says she is not concerned about the rise in complaints.
As mortgage loan repayments have risen and some advisers are starting to charge fees, clients have started pushing back.
“It has certainly been a journey for advisers. We know they are getting much better at articulating the position of clawbacks.
“Obviously in the mortgage world, people are more sensitive to prices and changes. Some mortgage holders under pressure may need to break the terms of their mortgages for a number of reasons, so clawbacks become more relevant.”
She says advisers are getting much better at communicating clawbacks. “The bar has been raised through the new regulations in terms of the requirements for their reporting. And because of that, I think advisers have started being more particular about what they're recording, how they're recording it, and the way they handle disclosure,” Shanks says.
The change in any regime, she says, puts a spotlight on these issues and on the forms of compliance.
Advisers, she says, just need to understand how they communicate to their clients and how effective that is. Key information about fees, including how a clawback fee is calculated and when it is triggered, should be clearly documented and explained.
“The legislation says that a client needs to understand what is being put in front of them. Some will do that in simple, clear English and it'll be easy for the client to understand, and others might have slightly more complex business models that aren’t very clear.
“The key is that the client understands what the fees are and what a clawback is. As long as that's clear, in simple English, it will work.”
AdviceHQ director David Green says a mortgage is a major decision and it is important people get advice from somebody who has their interests at heart.
He says this is particularly important now that the major Australian-owned banks have cut relationship services in favour of digital banking.
“It has taken the human element out of lending. Mortgage advisers retain the customer relationship and simplify one of the biggest decisions most people will ever make in plain language.”
When it comes to general financial advice, Shanks says New Zealand is an immature market. Compared to other countries, New Zealanders have been reluctant to seek independent financial advice. She says it will improve as advisers build public confidence and trust and understand how to articulate the value of their service.