Mortgage brokers flee industry

Mortgage broker numbers have been decimated by the impact of the global financial crisis on the property and lending markets.

Megan Salt of the New Zealand Mortgage Brokers Association said its membership roll had dropped by 10% in the past year, although she said many of those who had left the industry were newcomers.

Mortgage broking is a relatively new industry, which traces its roots back around 14 years, but took off only during the past 10 years, and in particular the past five corresponding to a bubble in house prices.

"We have lost about 10% of our brokers," Salt said. "But a lot of them would have been the new people who came in in the last few years. The older and more established people have built more sustainable businesses."

Geoff Bawden, chairman of the NZMBA, said new mortgage broking business was down about 40%, which fed straight through to incomes for brokers that had not diversified their businesses. Many newcomers had focused their businesses on the next sale, he said, not on building relationships with clients.

Bawden said many brokers were now diversifying into other forms of advice, such as selling insurance, in a bid to compensate for the slump in revenues. Some like Mike Pero have even branched into selling personal loans and KiwiSaver.

The downturn in the property market had followed a year in which banks had reduced the commissions they paid to brokers, he added.

But although mortgage brokers were fleeing the industry, financial adviser numbers seemed to be holding firm despite plunging revenues, according to the president of the Institute of Financial Advisers, Lyn McMorran.

"The numbers are remaining static," McMorran said.

Some advisers were leaving the industry, including to retire, but the IFA had seen others step up to take their place, she said.

Most financial advisers were paid based on funds under advice, she said, which meant they were not dependent on the next sale to survive.

Incomes had fallen sharply, senior Spicers adviser Jeff Matthews said. With portfolios off 10-20% in the last eight weeks alone, many advisers would have seen a significant drop in income, which is generally tied to the dollar value of the funds they have under advice. "If portfolios are off, incomes are off by the same," he said.

That has been stressful, and McMorran said the IFA had set up a "friends" network where advisers could be paired with an adviser in another area to get support.

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