Rising interest rates increase demand for advice

CEO discusses diversification opportunities

Rising interest rates increase demand for advice

While rising interest rates are hitting borrowers’ back pockets, they provide opportunities for advisers, the founder and CEO of Aurora Financial  says.

Simon Rolland (pictured above) said that its mortgage clients were increasingly looking for structured advice to help them bring their repayments down.

Aurora Financial provides advice on insurance and mortgages, and through its asset management firm, Aurora Capital, also provides advice on KiwiSaver.  It’s team of mortgage advisers are all mortgage specialists, while its insurance team are insurance and KiwiSaver advisers.

Rolland said mortgage advisers provided value-add services such as debt consolidation to help clients save money, and KiwiSaver represented a huge opportunity.

The official cash rate has risen 11 times since October 2021, and mortgage interest rates, which were at historically low levels during COVID-19, now sit in the 6% to 7% range.

National property values have declined 10.5% year-on-year (CoreLogic NZ April figures), and the total value of residential lending ($3.8bn) is down 33% year-on-year (RBNZ February figures).

In response to whether Aurora Financial had witnessed the slowdown in demand for new residential loans, Rolland said that while new business had slowed slightly, its clients were increasingly looking for advice.

“Refinancing has just gone gangbusters … we’ve only seen a small slowing of new lending, but definitely a lot of refinancing,” Rolland said.

A positive aspect of rising interest rates is that they make mortgage advice more valuable, he said.

“People are concerned – the cost of living is going up, interest rates are going up, and so are wages across the board, but not at the same rate,” Rolland said.

Aurora Financial has continued to see first home buyers coming through, as well as more experienced investors, he said.

“We’ve [also] seen a slowdown in people buying their first investment property, but people who are buying their second or third are still going strong,” Rolland said.

Diversification opportunities in debt consolidation, KiwiSaver

Rolland said that Aurora Financial had experienced high demand for asset finance options, such as debt consolidation for car loans and credit cards.

This gives advisers an opportunity to help clients with their day-to-day cashflow, without costing them extra money, he said.

Aside from advice around loan structure and debt consolidation, mortgage advisers could upskill and expand their advice to include retirement savings.

“I think the real opportunity at the moment for advisers – and especially mortgage advisers – is KiwiSaver,” Rolland said.

KiwiSaver can help advisers to maximise their client base, their business and networks and build out a second stream of revenue, he said.

He pointed out that a large portion of the population used KiwiSaver, and that funds were locked in until age 65 (unless accessed for the home withdrawal or hardship reasons).  As KiwiSaver member and employer contributions are based on a percentage of salary or wages, they continue throughout the employment period, and retirement savings are withdrawn before pay goes in.

“It’s still important that clients receive advice around it, so it’s actually another good conversation to discuss, but doesn’t add any pressure to the family or from a cost of living point of view,” Rolland said.

Mortgage advisers could obtain the Financial Service Level 5 certificate (investment) qualification and training to give advice on KiwiSaver, or they could choose to outsource the advice to a third-party company, in return for a management fee.

“That’s one option that we’ve been using for people who are mortgage advisers (or insurance advisers) but don’t have the qualifications, the desire, or even the money, given that KiwiSaver is a very low margin product,” Rolland said.

“I definitely think that [KiwiSaver] is going to be the go-to product, whether it’s through a service model or the adviser can get the qualifications and training and start giving KiwiSaver advice.”