Founded by rural experienced bankers more than three years ago, NZAB has grown to 13 staff members in four locations with further plans for both recruitment and geographic expansion.
Co-founder Scott Wishart says the global financial crisis and the dairying downturn had brought about increased regulatory scrutiny of the way rural banking was conducted.
“The standard model was based on rural bankers who were also financial advisors and the regulators said that could lead to a conflict of interest,” he said.
“Rural bankers were putting forward loan propositions on behalf of their clients, while being also charged with growing bank business and revenue.
“There was an implied bias towards making sure the numbers supported the loan request.
“That conflict of interest has been a theoretical risk, in my experience, but the regulators were looking for changes to the model.”
Whereas in the past the interest rates and terms available from all rural lenders were quite similar, now the range of potential banking outcomes in prices, rates, terms and even loan appetites have widened.
“Earlier there might have been half of one percent that covered the field, now the differences could be 3%,” he said.
Wishart got together with Nathan Henry, Andrew Laming and Brendan Clare to form NZAB to improve how farmers access and maintain debt.
The advisory service now has more than $2 billion under active management with ongoing relationships with clients.
They charge advisory fees to the clients and receive no brokerage from the banks.
“We work with all the banks and our preferred lender is by-and-large the current lender,” he said.
Wishart says NZAB was not working only with difficult lending propositions, although there were some in that category, and the numbers of farmers who changed their lenders was still small.
“Rural banking is harder than it used to be and we believe specialist advisors are now required,” he said.
“Even simple lending requests are becoming harder to get approved.
“Often the farmer will only get one shot at a successful loan appraisal, so it makes a well-researched, well-presented application vital.
“Farmers have a propensity to attempt something themselves before they will seek help and that carries a risk.
“If a credit manager sees a proposition they don’t like the look of, even if it has been misrepresented, they have a tendency to say they don’t want to see it again.”
NZAB employed experienced rural bankers with agricultural qualifications to carry out a full strategic review of the farm or orchard, including the assets and historic performance, before drawing up the application for finance.
Wishart says the opportunities are identified, the resources scoped and a plan put together with the aim of ensuring the farmer gets what they deserve from the process.
“We aim to get alignment between the client and the financier and the feedback from the banks is that we are making it easier for them to do their job,” he said.
“Rural banking has evolved and it is more important that farmers have the advisors and the ability to put forward their strengths and weaknesses, their risks, strategies, people and assets.”
NZAB continues to work with the clients after financing to make regular reports on the execution of strategies that may take several years.
NZAB advisors keep up-to-date with rules and requirements and have a keen interest in the Reserve Bank financial stability and monetary policy statements.
Wishart was quick to explain the differences between home loan mortgage broking and the NZAB services.
“Commercial banking is all about integrity, track record, performance and execution of the things you say you are going to do,” he said.
“Our business is about illustrating to the bank that this is a sound farming business to support.”
