6 Step Process of Mortgage Advice
STAGE 1 – Establish the Client Relationship
During this stage, you should be establishing the scope of your advice with the client. It should be clear that the client understands what is and is not covered by the advice you will give, and what the implications are.
Evidence must include:
Email of the client receiving a written declaration
Note containing a summary of a conversation with the client
Nature and Scope of Advice
By next stage, it is recommended that you obtain confirmation from your client that they have received and understood your Nature & Scope of Advice, and that they are satisfied to proceed with your advice. This can be done by the client signing the Nature & Scope of Advice PDF or via an email reply from your client.
How and when you need to disclose certain information to your client throughout your Mortgage process is critical to your advice process. Trail makes it easy by allowing both Stage 2: Nature and Scope of Advice and Stage 3: When the Advice is Given to be directly managed within Trail.
Important things to consider:
Suitability of Advice: Advisers need to provide advice that meets clients’ needs and circumstances through sufficient needs analysis, product research, and rational explanations for recommendations.
Prioritising Clients’ Goals & Objectives: Advisers should recommend products that provide clear benefits to clients.
Ensuring Clients Understand Advice: Advisers should take reasonable steps to ensure clients understand the advice given and inform clients about the risks and consequences associated with the advice.
Note containing a summary of a conversation with the client
In your initial discussion with the client, make sure to listen and record sufficient qualitative information about the client’s situation relevant to the scope of the financial advice that may impact on their needs. Consider their views and respond to their concerns and preferences. Document all insights gained during the initial meeting, regardless of whether it was conducted face-to-face or via a phone/video call. These notes are kept private and serve as a record of any concerns raised, along with the steps taken to address or resolve potential issues, and any challenges related to a vulnerable client in the application process. The notes should include the scope of advice given as well. The notes can be used to complete the Client Interview section in Trail. This section provides advisers with spaces for basic questions to give you a better understanding of your client and their Goal, Plan, Challenges and Timing. Any information entered into this section is not visible to the client, and will not display on any reports or documents produced by Trail.
What to include in your initial meeting notes:
Initial meeting in person or via phone/video call – include the time and date of the meeting, source;
Provide a summary of the client conversation to include enough details to fill out the Client Interview section,
Any action taken ie. client completed the fact-find before the meeting, requested for supporting documents (see samples here);
Next steps ie., send the email invite to complete fact-find, send A & D, call BDM, etc; and additionally –
Confirm if the nature and scope of advice were explained.
If opting to put a short summary note on timeline, you can also add: “Check out the client interview notes for more details on the conversation during the meeting.”
QA Checklist:
Was there a note containing a summary of a conversation with the client?
Have the client’s goals and objectives been identified?
Resources:
The Mortgage Process (Steps 3 to 5)
Mortgage Disclosure Process
https://intercom.help/gettrail/en/articles/4999681-mortgage-disclosure-process
Trail Disclosure Settings
https://intercom.help/gettrail/en/articles/8203993-trail-disclosure-settings#h_eb0ce35da0
Adding a Profile to Trail
https://intercom.help/gettrail/en/articles/2741811-adding-a-profile-to-trail
Adding an Opportunity to Trail
https://intercom.help/gettrail/en/articles/2722090-adding-an-opportunity-to-trail
Adding Notes/Comments to Activities and through the Pipeline
Mortgage application for multiple participants
https://intercom.help/gettrail/en/articles/6837544-mortgage-application-for-multiple-participants
Pathfinder Program – Mortgage Advice & Servicing
https://intercom.help/gettrail/en/articles/7045678-pathfinder-program-mortgage-advice-servicing
Compliance Evidencing with KAN
https://intercom.help/gettrail/en/articles/6602920-compliance-evidencing-with-kan
STAGE 2 – Gather Data
In the data-gathering phase, advisers must collect relevant client information and define clear goals and objectives for your client. Goals should be expressed using the “SMART” acronym: specific, measurable, achievable, realistic, and time-bound.
Evidence must include:
An email confirming the Fact Find with the client
Nature & Scope document
Clients need to complete a fact-find (statement of position / SOP). If you’re not sending the fact-find invitation email and getting them to fill it out or if you’re filling it out for them, the liability can be on you.
If the fact find is sent from the system for the client to complete, we don’t need customer confirmation. However, if the fact find is completed manually or paper-based, this will then need to be sent to the client to confirm the detail is correct and saved in the timeline.
Suppose you have a client that’s technically challenged, and you’re doing a fact find for them. In that case, you need to send them a copy to say (for example), “As discussed (or based on the information you provided me in our meeting), please read through, make sure the information on that is accurate and reflects your situation, and confirm that everything is good?”
Key points:
– client filling out their statement of position in Trail
– completed by the client, or
– the client confirming the Fact Find in writing (by reply to email) if the adviser completed it on behalf of the client.
– Any adjustments to the original fact-find must be sighted by the client and confirmed in writing by reply to email.
Nature & Scope document – At this stage, you should have the Nature and Scope of Advice and Stage 2 Disclosure sent and received (signed or agreement and understanding replied via email). Not sending a Nature and Scope of Advice is an automatic fail of an application review.
QA Checklist
Was there an email confirming the Fact Find with the client
Was there a Nature and Scope document
Has the Nature and Scope of Advice been agreed to & does the client have a copy?
Has the declaration been signed?
Has the fact-find been completed?
Have the client’s goals and objectives been identified?
Resources:
The Mortgage Process (Steps 6 to 8)
Sending Your Client a Fact Find Invitation
https://intercom.help/gettrail/en/articles/2890786-sending-your-client-a-fact-find-invitation
How a Client Completes a Mortgage Fact Find
https://intercom.help/gettrail/en/articles/2292001-how-a-client-completes-a-mortgage-fact-find
How to complete the Mortgage Fact Find
https://intercom.help/gettrail/en/articles/2309666-how-to-complete-the-mortgage-fact-find
How to send multiple Fact Find invitation links within one profile
Customising Emails Sent to Clients Through Trail
https://intercom.help/gettrail/en/articles/3063322-customising-emails-sent-to-clients-through-trail
Reviewing Client Documents
https://intercom.help/gettrail/en/articles/2287780-reviewing-client-documents
Using the Documents Page
https://intercom.help/gettrail/en/articles/2332178-using-the-documents-page
Add Client Documents on Their Behalf
https://intercom.help/gettrail/en/articles/2545901-adding-client-documents-on-their-behalf
How to Download All Documents from a Profile
https://intercom.help/gettrail/en/articles/6724014-how-to-download-all-documents-from-a-profile
STAGE 3 – Analyse and Evaluate
During this stage, you should ensure that the client file contains enough evidence to show what research has been undertaken (a thorough analysis and evaluation of the gathered data) to ensure the suitability of the advice provided.
Evidence must include:
A note stating any documented assumptions that were made
Document of independent research reports
Diary notes
Diary notes are likely to be the first thing that an assessor reads. It should contain all the important information on the client and what they are trying to achieve. It should be in an easy-to-read format. Lenders make several assumptions to assess affordability, eligibility, and risk profile.
After reading a diary note, anyone should have a full understanding of what the application is for and how much, who the clients are, any unusual aspects of the deal, and how you have mitigated these unusual aspects. Do not rely on the data in the application or supplementary documents to highlight issues. Make them known in the diary note and you will have an assessor that is on your side.
Note down your assumptions based on the following:
Income stability – employment history, job stability, and future earning potential.
Affordability – can afford the mortgage payments calculated based on income, existing debts, and monthly expenses.
Creditworthiness – include a good credit score, responsible credit usage, and timely bill payments.
Property value – appraisals and market data.
Property usage – primary residence or for investment purposes
Deciding which bank is best for your client
Although banks pay a variety of commissions to brokers, we do not encourage making the decision of which bank to send your client to based on commission rates. As well as being plain wrong, it inevitably leads to clients wondering why their wishes are ignored which then often leads to higher clawback rates.
The process for deciding which banks are suitable are:
Which banks can we immediately rule out with the client’s situation? Eg, if they are buying a small apartment then bank A and B may be ruled out leaving only Bank C and D as options.
Of the banks that have policies that are suitable for the client, which does the client prefer? Alternatively, does the client have a particular hate on any banks? (This happens more often than you’d expect).
If there is a strong client preference for a bank (eg a Kiwi owned bank or a bank with a particular product such as offset accounts), is there a strong compelling reason why the brokers may suggest an alternative bank? If not, then go with the best bank for the client that has the correct criteria for the application.
Make sure you always explain to your client which bank you think is best for them and the reasons why. Many clients are frustrated when the broker appears to just submit an application to Bank A without explanation.
Some points to explain are:
the difference in policies between the banks.
how banks calculate servicing rates differently.
how the bank you have chosen will work with their future plans.
Documents of independent research reports
For independent research reports or whatever type of activity we do to support our research such as:
supporting documents
email query to BDMs and responses received
CMA report, property valuation / RVR
notes on clients’ affordability or lack of it
latest lending policy, interest rates/specials, cash back, LVR, new build program, etc
workshop and notes from query raised on Slack and useful advice taken
Note that, when you receive client-related emails from lenders or other third parties, make sure to ‘Copy to timeline’ these add the emails client’s Timeline in Trail.
QA Checklist:
Was there a note stating any documented assumptions that were made?
Was there a document of independent research reports?
Was there a copy of the mortgage application to Trail?
Have you provided reasoning for the bank chosen over others?
Does the client file contain sufficient evidence of the research conducted?
Is there reasonable grounds for the advice given?
Resources:
The Mortgage Process (Steps 6 to 8)
Sending Your Client a Fact Find Invitation
https://intercom.help/gettrail/en/articles/2890786-sending-your-client-a-fact-find-invitation
How a Client Completes a Mortgage Fact Find
https://intercom.help/gettrail/en/articles/2292001-how-a-client-completes-a-mortgage-fact-find
How to complete the Mortgage Fact Find
https://intercom.help/gettrail/en/articles/2309666-how-to-complete-the-mortgage-fact-find
How to send multiple Fact Find invitation links within one profile
Customising Emails Sent to Clients Through Trail
https://intercom.help/gettrail/en/articles/3063322-customising-emails-sent-to-clients-through-trail
Reviewing Client Documents
https://intercom.help/gettrail/en/articles/2287780-reviewing-client-documents
Using the Documents Page
https://intercom.help/gettrail/en/articles/2332178-using-the-documents-page
Add Client Documents on Their Behalf
https://intercom.help/gettrail/en/articles/2545901-adding-client-documents-on-their-behalf
How to Download All Documents from a Profile
https://intercom.help/gettrail/en/articles/6724014-how-to-download-all-documents-from-a-profile
Using RESOURCES Info in Trail (KAN)
https://intranet.mauricetrapp.com/knowledgebase/using-resources-info-in-trail-kan/
STAGE 4 – Recommendation and Presentation
During this stage, you should be presenting the client with a recommendation that is clear, concise, and effective. The advice should align with the initial scope and be likely to achieve the client’s goals. Enough information should be provided so that a reasonable person could make an informed decision.
Evidence must include:
An email to the client containing a Mortgage Recommendation or Statement of Advice
A transcript of a conversation with the client where advice was given
Structure meetings
The goals of the structure meeting is:
Confirm and finalise the structure in Trail.
Have all documents signed including the foreign tax forms.
Have the structure signed and emailed.
Additionally, the client must have an understanding of:
The reasons for the structure.
Payment choice of monthly / fortnightly/weekly (Check PoliSense) for which banks will allow various repayment options).
Potential break costs.
Timeline of the documentation.
Cash contribution criteria (repayment requirements if discharged).
ID requirements at the bank.
Each structure will be relevant to the client but it often helps to start with some basic structures and tailor them to the client from there.
The most important thing to come from a mortgage structure meeting:
The client understands why the structure is in place, and
There are sufficient notes in Trail around all your discussions. Why did the client fix it for that period? Do they understand their ability to make payments and the concept of break fees?
The most likely complaint to be made about a broker is when a client goes to change their rate, make extra payments or sell their house and is hit with a large break fee. Only high-quality notes on the discussion with the client will protect the broker.
Watch the video Mortgage Structure Training.
Common mortgage structures
Below are some common mortgage structures which an adviser can use to begin client discussions with. There is no one right structure and depends a lot on your client’s needs. Make sure you listen to them to find out what will suits them best.
Check PoliSense for how each bank handles additional payments on fixed term accounts (some allow lump sum payments, some can increase their payments etc).
One fixed term
Some clients, particularly first home buyers want their mortgage to be simple and it doesn’t get more simple than fixing the mortgage for one term (eg; entire mortgage fixed for 1 year at x%)
Pros of this strategy:
Nice and simple for the clients to understand. Only one payment goes out.
Cons of this strategy:
Making extra payments can be difficult (no Revolving Credit account)
When the rate matures, the full mortgage is exposed to the new rate. If interest rates have gone up significantly, the entire mortgage payment will go up.
Multiple fixed terms
Most clients fix for at least two different terms. This means when the interest rate matures, only part of the mortgage is exposed to the new rate. If the rates have jumped up significantly, this reduces the price shock.
Pros of this strategy:
that there is less risk
Cons of this strategy:
it is more expensive.
Revolving credits
Revolving credits are good for making extra payments on the mortgage without any penalty. Typically, revolving credits are kept small, e.g., $20,000. Lots of revolving credits have a monthly fee from the banks. Some banks will remove this fee for a year. It is worth creating a template to ask for the revolving credit fee to be waived.
The revolving credit can be used for savings however some people feel the temptation to spend this available money week by week. A good strategy to counteract this is to use a different bank for their spending and keep the revolving credit account out-of-sight.
Offset accounts
Offset accounts work similar to revolving credits however rather than being one account with the money going in against the debt, an offset account has a debt and matches several other accounts against that debt. As an example, a person may have one $50,000 offset account debt and two savings accounts with $10,000 each in them. This would mean they only pay interest on $30,000.
An offset account can be a good point of difference for which bank to use. If a client loves the concept, that may indicate that Westpac or BNZ is a good bank for them.
How to get transcript of a conversation with the client where advice was given?
Advisers can send a voice note with the subject “Mortgage Recommendation” to ai@mortgagelab.co.nz . This will transcribe and prepare a mortgage recommendation note under the 3 headings:
“Conflicts of Interest”,
“Fees and Expenses” and
“Additional Notes”.
The other headings in the Mortgage Recommendation are fairly templated (“Commissions and Incentives”, “Duties” etc).
Recommendations:
Provide an overview of the mortgage structure in relation to the client’s goals.
Make a commentary on the reason for the length of the mortgage.
Make a comparison of alternative banks and why the current bank was chosen.
Make a commentary on the bank’s facility fees, break fees, LMI fees.
Make a commentary on the client’s health insurance status.
Make a commentary on client affordability.
Comment on any conflicts of interest.
Resources:
The Mortgage Process (Steps 12 to 14)
Your Mortgage Recommendation
https://intercom.help/gettrail/en/articles/6681326-your-mortgage-recommendation
Presenting your Recommendations to your Client
https://intercom.help/gettrail/en/articles/2287770-presenting-your-recommendations-to-your-client
Mortgage Recommendation template
https://intranet.mauricetrapp.com/knowledgebase/mortgage-recommendation-template/
STAGE 5 – Implementation
During this stage, the advice and any variations are agreed to and noted. The process to implement the advice is clearly explained to the client when proceeding.
Evidence may include:
Email thread of discussion between adviser and client
Note containing a transcript of a phone call/in-person meeting with a client
A completed activity where a phone call/in-person meeting was held with the client
QA Checklist
Has the client confirmed the loan structure?
If the structure differs from the recommendation, is there evidence of this decision?
Has the Adviser followed through with the recommendation?
STAGE 6 – Monitor and Review
During this stage, you should decide with the client how ongoing monitoring will occur and what the client should expect in the future. It should be clear what the respective responsibilities are between the client and yourself.
Evidence may include:
An email to the client explaining what they should expect
A scheduled activity to contact the client in one year
Settlement
Once the mortgage structure is complete and accepted by the bank, the majority of your service is done. However, it pays to make contact with your client a couple of times prior to and after the settlement day.
Mainly this checks that they have done all the necessary steps such as meeting with their lawyer, arranging their KiwiSaver etc. It also gives you a chance to share in the excitement that they are feeling.
We recommend contacting your client:
1-2 days prior to them settling to make sure everything is arranged for the big day.
On the day to congratulate them on their new purchase.
A week or so after the settlement to make sure the mortgage accounts came up in their online banking as they expected. This is another chance to make sure they understand the structure and intention of their mortgage. It is also a great opportunity to give them a gift if you make a habit of that.
Resources:
Getting Notifications for Important Events
https://intercom.help/gettrail/en/articles/2291919-getting-notifications-for-important-events