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Naomi Ballantyne

The lay of the land

Good Returns TV sat down with Naomi Ballantyne, well-known founder of Partners Life, to get her take on what’s happening in adviser land.

Ι I’d like your picture in terms of what you see happening in adviser land. At the moment, it seems there's a lot of advisers leaving the market. And if we look across at Australia, it seems like an industry in turmoil.

It's interesting, isn't it? Lots of unintended consequences, I think, happening in Australia.

I'm pretty sure that when they set out to change commissions, respond to the Trowbridge report and regulate advisers, it wasn't anyone's view that there'd be mass exodus and consumers left with no advice.

But that's what is playing out.

Ι What's your take on things here in New Zealand?

The same thing will play out in New Zealand as well if we if we're not careful.

So far the regulations as they stand haven't done that, which I think is testament to New Zealand actually seeing what's happened in Australia and considering it, but we haven't reached full licensing yet.

The industry certainly threw a lot of money and effort and time into trying to get advisers through the provisional licensing piece, to at least think about what their options might be, and to consider how they might play in the new world.

However, I think we are starting to see people going, “Thanks for getting me through that. But that was the easy part and the rest of it is too big, too hard.”

Especially if they were already nearing retirement age, they’re thinking, “Maybe now's the time to go.” So there is a concern.

Ι What are you seeing at your own company?

At Partner's Life, we’re not seeing large numbers of our advisers [leave], but we've always represented a younger demographic - largely because we brought a lot of new advisers into the industry through our training programmes. That brings fresh blood.

We also have our fair share of women advisers, who tend to be younger, probably because it’s a company led by a woman, so we haven't really seen much of an exodus.

You know, there's always been people in our industry who retire, and there's always been people who pass away while they're in the job! That hasn't changed.

You can feel very heightened because of the environment we’re in, but that's been life the whole time I've been in it.

I am concerned about two things when we get to full licensing: you'll see some people exit, but you'll also see a lot more people consolidated within larger FAPs.

From a cost and process point of view, you then have a completely different risk than when you have a whole lot of individual advisers.

‘I am concerned about two things when we get to full licensing: you'll see some people exit, but you'll also see a lot more people consolidated within larger FAPs’

Ι What is that ‘different risk’?

It's concentration risk: the decisions are made at the corporate level, rather than individual advisers making their own decisions in terms of what they want to see.

It's not necessarily a bad thing, but from a product-provider's point of view, it puts leverage in the hands of a few instead of the many. And they might make decisions that say, “Partners Life's not right.” So we lose distribution.

Ι Do you think that the FAPs in the future, and for licensing, will have more sway? More pressure to bear on insurance companies and other providers?

I don't know. We've always had a degree of sway. And without regulations, the pressure comes from what I would maybe consider something of an unreasonable position.

It’s just volume-based – “got to use this volume to leverage stuff out of you” - which I don't think is going to happen with the new regulations.

But you still run the risk that you end up not being on the preferredproduct-providers list.

And then it's not two or three advisers that you potentially are cut out from. in terms of distribution, it's all of them. So that's a different kind of risk.

Ι I guess the FAPs are going to be different to those dealer groups we had in the past though; a lot of those groups aren't around anymore. Is that a plus?

I think it's positive. Not that those groups are just not around, they’re not around because they didn't adapt to the new environment.

So the ones that have morphed have changed their businesses completely, in recognition of what is required of a corporate FAP. The risk and the liabilities that they have now didn't exist in the old dealer-group space.

Ι There's probably not the same old baggage either - “we lost out and are still grumpy about that” and so on. That's going to come into play, isn't it?

That's true. But remuneration is always going to be an issue.

New Zealand is a small market, and New Zealanders don't go seeking this stuff. So that cost balance is still there: you have to spend a lot, and invest a lot, before you make a dollar.

So those dollars that you make, when you make them, need to be big enough to compensate for that.

That's the risk to them: that the remuneration structure reflects the cost of doing business.

Ι Do you think that most of the advisers who come into full licensing will be sitting within bigger FAPs rather than having the current …….?

I'm not sure if it'll happen exactly when full licensing comes, but I think it will evolve over time.

Ι So that's probably not good. That's what happened in Australia, and now they've gone to unwind it all. Surely that can't be a good outcome?

Yeah, I would never think too much concentration is a good idea.

And New Zealand is a small market, so you have even more concentration than you want in a bigger market. We have more FAPs.

It's going to be interesting to see how it plays out. A

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