Faced with the prospect of further interest rate reductions after the latest Official Cash Rate (OCR) announcement, those looking to maximise gains – whether that be on interest rate returns on deposits or by reduced interest rates on their mortgage – are wise to seek independent, expert advice to ensure their financial decisions are sound says Simon Manning, CEO of Wealthpoint Limited – one of New Zealand’s largest independent financial advice networks.

Manning says “while many will look at different rates available at their bank, or maybe compare rates between banks, those who are serious about maximising gains in the long term can benefit from working with a qualified, independent financial adviser who knows the market”. He adds “your own bank is not going to tell you if their competitor might have a better option. One clear advantage of working with an independent financial adviser is they’re not limited to working with products from just one provider and can often offer solutions not available through banks and ‘in-house’ advisers”.

Manning continues “Interest rate reductions are also affecting savers. We’re seeing an increasing number of people seeking alternatives to term deposits as interest earnings fall and other suitable investments continue to perform well. Inflows into our model portfolio investment products, that feature well known and proven investment managers, have increased markedly this year and we now have around $160m invested – a 16% increase since the Reserve Bank started lowering the OCR on 14 August”. The Wealthpoint network has $3.5 billion in Funds Under Advice, and of the 150 independent financial advisers in the Wealthpoint network, many are reporting increased enquiries from people looking at our investment fund options as a way to generate better returns than what’s currently available on term deposit.

“We’re definitely seeing this in our business” says Brendon White, Investment Adviser and Director of Certus Financial Advisers (a member of the Wealthpoint network). “Lately, the after-tax returns on term deposits have not been keeping up with inflation, and interest rates have reduced. This means – in real terms – some term deposits are going backwards and this is driving people to look for better performing options”. “Today’s investment funds offer something for most people – whether you’re looking to grow your nest egg while earning a return to top-up superannuation or KiwiSaver, or you’re prepared for more short term volatility for higher long term returns, an investment adviser can work with your unique circumstances, goals, and timeframes – they also have access to a wide range of products and providers”.

In this market, borrowers are also wise to consider seeking independent financial advice to optimise the pricing and structure of their lending – which can save tens of thousands of dollars and take years off your mortgage. Rachael Thompson, Mortgage Adviser with Genesis Advice (a member of the Wealthpoint network) says “The clear advantage of working with a Mortgage Adviser (a financial adviser specialising in lending) is that they will shop around for you, comparing rates and terms offered by various providers – including banks and other lenders – and help you tailor your lending to your budget and your longer term goals.

“A Mortgage Adviser can look at your entire financial situation and suggest ways to make borrowing more affordable – including accessing KiwiSaver, and how to restructure or consolidate borrowing, so you can pay it off faster. We don’t just ‘set and forget’ either. I regularly review my clients’ arrangements and proactively offer advice to them”. Thompson says Mortgage Advisers can help with complex lending applications – including for young people with low equity trying to get into their first home. “Often low equity applications will involve contributions from parents or will have additional requirements from lenders. A qualified Mortgage Adviser will understand the different requirements each lender has and can help match the client with the appropriate lender – saving them time and effort”.

Thompson says helping debunk some common misconceptions people have about mortgages is another advantage of seeking professional financial advice. “A lot of people wouldn’t consider breaking a fixed term loan, thinking the cost would outweigh the benefit, but I’ve seen situations where, even with break costs factored in, this has saved clients in the long term. People also tend to look for fixed term loans with the lowest interest rate – but for some people this may not be the best option. Sometimes a slightly higher interest rate over a longer term might be a good option to provide greater certainty over the ongoing repayment cost”.

At a recent Wealthpoint professional development seminar for their mortgage advisers, most advisers agreed that activity in the lending market is picking up as the impact of higher interest rates and living costs gradually eases for some. Manning says “increased activity amongst Mortgage Advisers in our network is good to see. Customers working solely with one lender may miss out on what a financial adviser can offer in terms of product, pricing, provider and in structuring their mortgage – small gains make a big difference over the term of a mortgage”.

With further reductions foreshadowed by the Reserve Bank during the November OCR announcement, what’s one piece of advice for those with mortgages and term deposits? “Talk to a specialist Financial Adviser” says Manning. “Whether you are saving, looking to get into the property market, or looking to pay off debt faster. My wife and I each have thirty years’ experience working in financial services and we’re continually learning from our financial adviser – I wouldn’t be without one”.