The interest rates charged by business lenders are significantly higher than the amount considered reasonable in the housing market, said Mr Raiss.
But financial planners who are forced to put their house up as security are stuck with the comparatively higher interest rate – along with the risk of losing their home if their business fails.
“It should just be like a normal home loan if you’re going to give your home as security. [Instead], you pay business interest rates and you’re slugged with having to give a home as security,” said Mr Raiss.
In addition, interest rates are higher than they ought to be in the current environment and there is a contraction of the number of lenders in the market, he said.
“The [only] people who seem to be lending are the majors, who are looking to further increase their concentration into the market,” said Mr Raiss, adding that the big institutions are lending as a “defensive” move in order to “protect their base”.
These types of lender typically offer more generous terms, lower interest rates and more time for the principal to be paid back – but borrowers are expected to sell their products in return, said Mr Raiss.
“The little capacity for lending that’s out there is being used to concentrate the market further and further,” he said. “The consumer’s getting hit in a number of ways, and financial planners are getting hit as well.”
Chan & Naylor is looking to purchase both accounting and financial planning books and, according to Mr Raiss, it is currently easier to source funding for accounting acquisitions.
“It hasn’t been as flexible in the financial planning space. And the people who want to lend to us are the people who want us to push all our work into their products and services,” he said. “We want to remain fairly independent, which has reduced the amount of institutions we can borrow from.”
