NEWS

UP FRONT | NEWS

Pathfinder big winner

FNZ numbers revealed

Pathfinder Asset Management won, for the second year running, the Most Ethical KiwiSaver provider and Best Retail investment provider.

Mindful Money founder Barry Coates says Pathfinder continues to push the boundaries of good practice. “The judges were impressed by the way that ethical/ responsible investment is at the core of Pathfinder’s business model, and investment policies and practices are aligned with that approach.”

“Their positive impact approach includes investment in sustainable themes, private equity, venture capital and support for social enterprises.”

The Best Ethical Financial Adviser went to Peter Lee’s Ethical Investing NZ business with former winner Rodger Spiller of Money Matters being Highly Commended.

Despite not winning the judges praised Spiller and were were “impressed at the way that Money Matters continues to innovate, providing high-quality bespoke solutions for clients.”

“Rodger Spiller continues to provide thought leadership on financial advice, including a deep exploration of ethical values. His engagement and influence extend far beyond his client base, providing leadership on ethical issues across the financial advice sector.”

With regards to Lee’s business the judges “were impressed by the way that ethical approaches had been used as a basis for their client-centred approach. Ethical Investing Group provides in-depth information to clients accompanied by support to enhance their understanding of ethical and financial choices.”

“There is a high standard of transparency, particularly around fees, so that clients are given full information about costs at the start of engagements.”

The Best New Ethical Fund award was awarded to Devon’s Global Sustainability Fund. This new global equity fund launched into the New Zealand market recently, with a strong track record of ethical practice. There are a number of welcome features to the fund, such as the inclusion of emerging market investments, strong stewardship systems, and alignment to EU reporting standards.

The Best Overseas Fund award was a new addition to the Mindful Money Awards. The judges were looking for overseas investment funds, actively marketed within New Zealand, which are able to demonstrate the best ethical investment outcomes. The award went to Pengana WHEB Sustainable Impact Fund.

The judges were impressed by the thought leadership that Pengana WHEB has shown over many years. They recognised that the fund looks beyond investments in companies that create positive impact to also seek out companies that can catalyse change. The judges also commended the WHEB fund on its strong analytical approach to engagement and voting, along with excellent communications to financial advisers and clients.

Price FNZ paid for Hatch revealed along with funds under administration numbers.

Accounts filed in the Companies Office reveal that investment platform FNZ Holdings (NZ) Ltd paid $40.1 million to acquire Hatch Invest from Kiwi Wealth in November last year.

The deal included $10.5 million of net assets and $29.5 million of goodwill.

Hatch, a direct-to-consumer digital investment platform that gives New Zealanders cheap and easy access to US listed shares and more than 50 ETFs, was launched in 2018 and since then has attracted more than 130,000 investors.

Rather than offering managed funds, Hatch users manage their own investments (in a similar way to Sharesies and Stake).

When the FNZ acquisition was announced (for an undisclosed price) last year, Hatch said it now had the back-end capability and global reach to upscale its business. For its part, FNZ said the Hatch purchase gave it direct entry into the New Zealand retail market.

FNZ provides backend systems for banks, insurers and asset managers globally. In the notes to its accounts last week, FNZ said it had the resources, appetite and global footprint “to take Hatch to the next level” and would prioritise expansion in the New Zealand market.

For the year ending 31 December 2021, assets under administration increased by $3.94 billion. Net profit for the year was $0.20 million, slightly down on the previous year’s $0.25million. FNZ attributes the flat result in part to significant investment in technology.

FNZ was founded in Wellington in the early 2000s. In 2005 it expanded to the UK, initially partnering with Standard Life Aberdeen and setting up shop in Edinburgh. It became the top technology platform by market share, with clients such as Barclays, Generali, HSBC, Lloyd’s Bank, Mercer and UBS.

On 2018 FNZ was acquired by a joint venture between Generation Investment Management, owned by former US vice president and environment activist Al Gore, and Canadian asset manager CDPQ. The deal was worth US$2.16 billion.

New Code Committee members finally revealed

The financial advice Code Committee, which has been operating in breach of its enabling legislation with insufficient members, now has a full complement of members. According to Commerce and Affairs Minister David Clark, the appointments were made in mid-April, after the committee had been operating unlawfully for almost a year with less than the statutory minimum number of members.

However, the names were only revealed and the code website updated in June, after numerous enquiries from Good Returns and financial adviser.

The minister is required by law to appoint new members when their number falls below seven. Since July last year, the committee has been operating with only six.

The two new members are Karen Coutts and Erin Jurgeleit.

Coutts is one of two consumer affairs representatives on the committee. She is experienced in iwi and pan-Maori governance with a special interest in Maori economic development. Coutts affiliates to Ngai Tahu and Te Aitanga-a-Mahaki.

Jurgeleit is a product development, risk management and regulatory compliance consultant. She was previously head of insurance product at Next Insurance and was a senior leader in Pay Pal’s product engineering team.

Their terms expire in April 2025.

Clark, however, has another problem on his hands. While the committee now has eight members, the terms of three of them expire at the end of next month. So, to maintain the statutory minimum, Clark has just over a month to find and appoint two new members.

Why rapid advances in medicine and technology are pushing up premiums for life and health cover

Major advances in medical technology and therapeutics over the past 20 years are impacting on life and health insurers, with underwriters struggling to keep pace with the speed of change.

AIA New Zealand chief underwriter, Stephen Potter, says it’s an issue right across the business, from needing to rethink product design and underwriting guidelines to claims management philosophy and pricing.

And because consumers now have access to information and treatment options on an unprecedented level, insurers need to meet community expectations around products and services, Potter said.

“With all that information comes an expectation from people who purchase our products and services that we do more and do better while trying to keep the price relatively stable. That community expectation, and what is demanded of us, is increasing.”

For example, community expectation, along with more advanced treatments, forced AIA to update its definition of a heart attack. The old definition required a full blockage of the coronary artery, leading to disputes between insurers, policyholders and cardiologists as the insurance definition differed from the medical definition.

“From a product perspective, in an effort to meet community expectations and in an effort to remove what was at the time a lot of disagreement around a doctor telling person he’d had heart attack and the insurer saying it wasn’t severe enough, we’ve altered the definition,” Potter says.

AIA now pays for a partial blockage of the main artery or a full blockage of a minor artery.

“But the law of unintended consequences [means] we’re paying fairly high sums assured in some areas for events that are no longer as severe as they were historically,” Potter says.

“So, the severity of the heart attack is less, the length of time in hospital is less but the financial reward for being there, when trauma in this market [is] funded up to $2 million, has not changed. So, we have this mismatch which is putting enormous pressure on trauma rates right across the industry.”

Nobody wants to put premiums up, Potter says, “but the pace of change and the unintended consequences of the pace of medical advances have led to these sorts of issues”.

Another bone of contention is PSA screening for prostate cancer. Despite increased testing, mortality has decreased only marginally, Potter says. While men with a level above 4 “probably do need some sort of urological review”, in his view screening should begin no earlier than 50 and stop at 75, although family history and other genetic predispositions need to be considered.

Because an elevated PSA is common, dealing with it poses a big question for underwriters.

For those with trauma cover, and the expectation that a raised PSA could lead to cancer, “maybe we’ve got to exclude prostate cancer from the contract, notwithstanding that there is no formal diagnosis.

“All we’ve got is the elevation which could be something else. A

Searching for responsibly invested, actively managed funds? Let us do the work.

Mint Asset Managment Diligent research for profitable investment decisions.

Mint Asset Management is the issuer of the Mint Asset Management Funds. Download a copy of the product disclosure statement at mintasset.co.nz