ASSET 137 - 2014

ISSUE 137

Advice a matter of ethics

How active is your management?

Put your head in the clouds

LEAD STORY

UP FRONT

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04 EDITORIAL Is it time for a review?

08 PEOPLE New appointments

10 NEWS FROM NEW ZEALAND 11 NEWS FROM AUSTRALIA

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Financial advice is in for another shake up as the Financial Advisers Act goes up for review next year.

Philip Macalister looks at the changes that may be looming.

{INDUSTRY STALWART TAKES ON EDUCATION CHALLENGE.}

REGULARS

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18

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{OPEN TO QUESTION} { INVESTMENT }

{ INSURANCE }

{ ASSET ADVISER }

06 Should advisers’ qualification requirements be higher?

24 New products and updates

18 Harness the power of the cloud 20 Get involved in regulation review 22 Get set for 2015

26 Active management takes on the passive approach 30 Advising in plain English

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UP FRONT

{ FROM THE EDITOR }

LET’S MANDATE SOME OF THAT GOOD ADVICE

I’VE BEEN TALKING TO, TALKING ABOUT and writing about financial advisers for a couple of years now. I started with this magazine and Good Returns just after financial adviser regulation really kicked in.

It took me a while to get my head around the different types of adviser, the category one and two products, the disclosure rules and the disputes resolutions schemes.

I remember thinking a year or so into it that it would be good for everyone when we could move on from writing about the hard work of regulation and get back to the business of advising again.

But we’re now at the end of 2014 and there’s no let-up in sight. In fact, regulation is going to be front and centre again through 2015 and 2016 as the Financial Advisers Act is reviewed.

On one hand, this is probably a good thing. Some aspects of the Act have clearly not had the results they were intended to.

It seems to have become harder for consumers to access good advice and I doubt many members of the public can work out the difference between an authorised and a registered financial adviser without having someone talk them through it.

At the risk of alienating RFA friends, it seems to me that some sort of qualification should be required of those advisers.

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I doubt many members of the public can work out the difference between an authorised and a registered financial adviser without having someone talk them through it.

Perhaps it could be applied purely to those entering the industry – existing advisers could prove their experience is a suitable substitute for a qualification.

Mortgage and risk advisers deal with very important products and big financial decisions. While most RFAs are clearly professional people who put their clients first, know what they’re doing and act with integrity, it might help their reputation in the eyes of the public if some of that was mandated.

Conversely, wouldn’t it be good to have a break from new rules for a while?

The Act is being reviewed now because that’s what legislation requires. It might be a more effective review if the industry had another year or two to focus on delivering results for consumers – undoubtedly the most effective way to shore up confidence in the sector – before tangling with the law again.

Susan Edmunds Editor

HEAD OFFICE 1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: editor @assetmagazine.co.nz PUBLISHER Philip Macalister EDITOR Susan Edmunds CONTRIBUTORS Helen Twose, Russell Hutchinson, Michael Dowling, Clayton Coplestone, Ben Brinkerhoff.

DESIGN Jonathan Harding ADVERTISING SALES 07 349 1920 027 437 7527 SUBSCRIPTIONS Dianne Gordon P: 0800 345 675 E: subs@assetmagazine.co.nz ASSET is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and The NZ Mortgage Mag All contents of ASSET magazine are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.

ISSN 1175-9585

OPINION

OPEN TO QUESTION

Not surprising to me is that many of the people wanting to have a degree minimum qualification are people tied up with the education and training industries.

Australia does not require degree level education.

Now I know that overseas private parties require their members or employees to hold higher qualifications.

FPA in Australia is going for degree. CFP in USA requires a bachelor’s degree, but that can be attained in any discipline and at any time before or up to five years after passing the CFP exams.

Some employers are saying they will require degree qualifications for their employees.

But all that is really just product differentiation.

professionalism that would be a natural shift or something to aim for.

From a customer perspective to have someone who’s got that level of insight or information, an education is something you’d expect.

You wouldn’t want to do it straight away, but start transitioning it. As the review goes forward there’ll be submissions and discussion on that topic.

That would be a natural assumption, in years to come that will be the minimum requirement as you’d expect if you want to grow an industry.

MURRAY WEATHERSTON FINANCIAL FOCUS

DO YOU THINK ADVISER QUALIFICATION REQUIREMENTS SHOULD BE HIGHER? A number of people are clamouring for a degree entry qualification. I suspect some will run that pretty hard in the Financial Advisers Act Review. Maybe the result will be the Code Committee will lose its independence and have dictated to it what is the new proper minimum education level.

I was only half joking when I stated a while ago on a Good Returns blog that I thought that by the year 2050, a PhD would be required. I have since gone further, in a private conversation suggesting that in 100 years, maybe even a PhD won't be enough.

There is this growing mantra that the minimum educational level is too low and should be raised.

This despite the fact that no degree course is currently offered at any University, and as far as I am aware, only Massey now offers a diploma course as an endorsement of its Business Studies Diploma.

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JANINE SCOTT

DIRECTOR OF FINANCIAL PLANNING AT MASSEY UNIVERSITY

DAVID BOYLE

COMMISSION FOR FINANCIAL LITERACY AND RETIREMENT INCOME

DO YOU THINK ADVISER QUALIFICATION REQUIREMENTS SHOULD BE HIGHER? In my early days, the qualification that many financial planners and investment advisers were working towards was the CFP which was a diploma, and essentially very close to a degree of sorts.

I think there will be a transition, [but] if you’re seeking to get a level of

DO YOU THINK ADVISER QUALIFICATION REQUIREMENTS SHOULD BE HIGHER? I don’t think having six months of training is adequate for one to say, “I am a financial adviser”. I am biased when it comes to education because I have done nine years but it’s part of promoting the profession. I’m not saying that advisers aren’t already competent to do their jobs. It’s just ensuring that there’s a level; playing field and consumers can trust what is behind the adviser’s name. .

OPINION

ASIC takes aim New Zealand commissions could come in for attention after scathing Australian report.

Dr Michael Naylor

A

SIC’S RECENT REVIEW OF RETAIL LIFE insurance advice is interesting and is sure to be a strong influence on FMA policy. The report focuses only on the quality of insurance advice given by authorised advisers.

As a background, it is useful to note that personal risk insurance is regulated as a complex product in Australia and can thus only be sold directly, or via super schemes, or by what we call AFAs. Australian regulation is quite prescriptive, yet the “duty of care” to clients’ requirement is poorly defined.

The report had two interesting lessons for New Zealand personal risk insurance advisers; the first was around upfront commission, the second was what regulators regard as “quality advice”.

The first part of the report examined the personal risk insurance industry. The most interesting finding was that policy lapse rates for stepped policies peaked just after commission claw-back periods had ended, and that polices sold via upfront commissions had 40% higher lapse rates than those sold via level commissions.

These lapses occurred before insurers had had a chance to recover upfront costs and were thus a serious drain on insurer profit.

Based on this, the ASIC suggested that upfront commissions are inducing advisers to churn policies and distorts the market.

External The main part of the report was based on the analysis of 202 client files from 12 larger advisers, by ASIC staff, audited by external consultants. While the sample size is small,

the results seem to be robust enough to be influential. Of the post reform files only 67% had advice were judged as being of adequate quality to pass the regulation.

The main headline is thus that 33% of the most qualified type of insurance advisers gave inadequate advice. While the headline figure is bad, another 41 files were rejected because the files were so incomplete that advice quality could not be judged. Including those would give only 52% of files passing over both periods.

The Future of Finance Advice reforms can be judged a success as the pass rate rose from 59% pre-regulation to 67% post.

The secondary headline is that only 55% of files from advisers who are paid by upfront commissions passed, versus 93% of files by advisers paid by other commission structures.

No relationship between the cost or complexity of advice and the remuneration received was found.

Given that the average upfront in Australia is 110%, well below NZ rates, and very few NZ insurance advisers use other commission structures, the FMA is likely to conclude that the NZ situation is likely to be worse, and thus upfront commissions are definitely one area the FMA will look at. Those arguing in favour of current NZ commission structure are going to need some strong new evidence.

Assumptions ASIC made it clear what its expectations were around ‘high-quality’ personal risk insurance advice. These standards will be second nature to a well-educated NZ adviser, but could be a shock to others in the industry. They stated that “given that life advisers are paid considerably above the industry benchmark for general financial advisers”, clients should expect advice equal to the financial adviser standard.

The Australian regulator emphasised: ➊ “Strategic advice” is essential – this is the process of identification and prioritising the need and objectives of clients. This has to include analysis and recommendations around the client’s current financial position including cashflow and how affordable and prioritised the insurance recommendations are. ➋ Insurance recommendations have to explicitly “scaled” to be affordable within the broad range of demands on the client’s income.

There has to be explicit discussions with clients

around the sum insured and premiums and how the recommendations match client needs and objectives. ➌ Insurance advice always has to include spouses or business partners or other key parties. ➍ Basing advice on current year premiums is inappropriate. ➎ Stepped v. level cover needs to be explicitly compared. ➏ More than two policies need to be compared. For replacement it is not appropriate to just compare one new policy with the existing policy. ➐ The rationale for product replacement needs to be tied to client objectives. ➑ Insurance premiums need to be linked to changes to superannuation investment flows. ➒ There needs to be explicit warnings around client disclosure and discussion of the implications of is in relation to policy replacement. ➓ Differences in policy terms need to be explicitly discussed during policy replacement.

The implication of these expectations is that personal risk advice cannot be given if full financial and personal information is not collected and analysed. A quick sales pitch will not do.

It is vital to add that these expectations were just enough to earn a ‘pass mark’. ASIC expectations around ‘high quality advice’ are higher than this, though they do not make explicit what these differences are.

My own reading is that ASIC expectation are quite low, and well below that expected of a CFP or CLU holder. The issues I have with ASIC expectations are, they do not: ➜ Discuss client liquidity or data. ➜Require PV of future premiums. ➜ Link premiums to liquidity to investments to surplus income. ➜ Link premium changes to retirement. ➜Link insurance sums to asset levels. ➜Talk about asset/debt liquidity structure. ➜ Properly assess the implications of differing asset/debt structures on insurance needs ➜ Adequately link insurance sums to partners needs. ➜ Question wait times, or link these to liquidity – as they don’t know liquidity. ➜ Mention need for advice on wills/ POA. ➜ Mention dependency levels of children or elders. ➜ Mention the need to analyse the capacity to work while injured or disabled. ➜ Mention the need to analyse occupational flexibility.

All are quite basic, and would be expected of graduates from my courses. At the level of CFP/ CLU quality, I would fail 75% of the samples ASIC looked at. Basically, ASIC did not seem to be aware of the concept and process of creating a client insurance risk profile.

For NZ insurance advisers, the implications of the ASIC report are that it gives a clear idea of the likely expectations of the FMA around insurance advice quality.

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UP FRONT

a new appointment email details { PEOPLE } Ifandyoua have picture to editor@goodreturns.co.nz “Planet is not about number of members but more about maintaining synergies and long-term consistency,” Schwarz said. “After a probationary period, members are invited to become equal shareholders in the 100% member-owned group so it is very important to us that there is the right synergy with the rest of our members.”

EX ONEPATH HEAD IN RETIREMENT JOB

PLANET EXPANDS Planet Financial Services has accepted applications for three new brokers, including one in Nelson/Blenheim.

It is the first time Planet has had a presence in that area.

Steve Maley, the director of Trinity Insurance, has his principal office in Blenheim. He has more than 10 years’ experience in the risk sector.

The addition of Steve Cox in Christchurch increases the number of advisers in the area to 11.

The third new addition is Adrian Schwarz, an AFA based in Wellington.

He re-establishes Planet’s presence in the capital after Straas Holdings moved to Wairarapa. Schwarz has been in the industry since 1986.

Planet said it had declined a number of other applications because they were not the right fit for the group.

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FORMER AXA MAN JOINS STHN CROSS Southern Cross Health Society has appointed Chris Watney as Head of Product and Marketing.

Watney joins Southern Cross from Genesis Energy, where he was General Manager of Marketing. Previously, he was Head of Marketing with AXA New Zealand and held senior marketing positions with the Royal Bank of Scotland and Churchill and Privilege Insurance.

He will lead the society’s product and marketing teams, and will continue to build on the not-for-profit insurer’s strong brand and value proposition.

Jeremy Nicol

Jeremy Nicol, who was managing director at ING Insurance, before it became OnePath Life, and was also a general manger at ANZ Wealth, has been appointed chief financial officer at Arvida Group.

Arvida is a new national retirement village group of 17 villages and aged care facilities which is looking to raise up to $80 million in a share market offering.

“Jason will be a great support in this area as we continue to work through the requirements of the FMC Act to thoroughly understand what it means for us as a business.”

Jason Clifton

NEW SOVEREIGN CFO Sovereign has appointed Jason Clifton as its chief financial officer.

He joins Sovereign from Commonwealth Bank where he was CFO at BankWest for four years before taking on the role of Executive General Manager Property, Corporate and Private Banking.

Sovereign Chief Executive Officer Symon Brewis-Weston said his diverse financial services and leadership background would enable him to make a significant contribution to the company.

“Jason’s demonstrated track record as a successful CFO and business leader made him the perfect candidate to step into this important role on our leadership team,” Brewis-Weston says. “As well as providing insight and analysis to our leadership team, Jason will lead key initiatives in finance that support our overall strategic goals.”

Brewis-Weston said another important area of Jason’s role would be to support the business through regulation.

David Whyte

NEW ADVISORY COUNCIL FOR FDRS A new advisory council has been appointed for the Financial Disputes Resolution Scheme The council members are Stephen Ward, senior partner Simpson Grierson [chair]; Dr Pushpa Wood, Director, Massey University’s Financial Education and Research Centre and Bill Bevan, founding partner Gault Bevan Law [consumer representatives]; Justin Kerr, Chief Executive of the Retail Credit

UP FRONT

LENDNAL MOVES ON

Association New Zealand Inc and David Whyte, managing director of DCW Management Limited and Innovative Product Design Limited [industry representatives].

The council is an independent body charged with advising the scheme's owner and operator, FairWay Resolution Ltd, on the functionality and operation of the scheme, considering recommendations from the scheme on matters relating to systemic issues, membership, compliance, consumer interests and convening interest forums and reviews.

Grosvenor's long-serving marketing manager Andrew Lendnal has resigned.

Lendnal has been with the firm for more than 10 years and has been Head of Marketing and Innovation.

He is leaving the company and moving to the United States for family reasons.

Ross Collett

KEPA HEAD OF OPS LEAVES Kepa chief executive Jeff Page says Suzanne Baldwin is leaving the group.

Baldwin has been with the group for just on three years, initially starting with TNP in the role of Special Projects Manager which included adviser IT development and support. Very soon after starting that she was promoted to the position of General Manager Operations and IT. When TNP and Ginger Group merged, Baldwin was appointed to the position of Head of Operations and IT. She has "made a huge impact on our business in a very short space of time," Page says.

Baldwin has decided that it’s time to take a break and spend more time with her family, he says.

Peter Rickards

TWO NEW BOARD MEMBERS AT PLUS4 Plus4 Insurance Solutions has appointed two new directors to its board.

Peter Rickards from Nelson and Timaru-based Ross Collett replace Alan Bradnock and Roger Adams, who remain members of the group. The other board members are directors Grant Uridge and

Jason Hennessey.

Rickards is a certified financial planner with more than 20 years’ experience in the financial industry. His experience includes working for Louis Dreyfus managing their Australian farming operations and as a director of a large merchant bank, before going into business himself. In 2002, he returned to the financial services industry and purchased a successful brokerage company in Nelson.

Collett is a registered financial adviser providing personal insurance advice and is principal of Sorted for Life Insurance, which he established in 2008. He began his financial services career in Christchurch in 1987 as an independent insurance representative. He has been growing his practice in South Canterbury since 1990 and has established a well-known and trusted brand. He is a member of the Professional Advisers Association Inc (PAA) and has qualified for membership of the Million Dollar Round Table since 2000.

“PROVIDING BUSINESS ADVICE FOR YOUR ADVISER BUSINESS” Are you keen to jump to the next level with your business but you’re unsure how to proceed ?

Are you frustrated that things aren’t going as well as they should be?

David Pine BBS CLU Director 021 610 083

WE VISIT YOU AT YOUR WORK PLACE : TOTAL CONFIDENTIALITY: ONE-TO-ONE ADVICE For details of our services and charges, please visit our websiteTrevor www.pinefinancial.co.nz Slater holds a Masters in Conflict Resolution (La Trobe University) and is general manager of OR phone us as above, or email david@ownboss.co.nz or margaret@ownboss.co.nz Financial Services Complaints Limited.

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{ NEWS FROM NEW ZEALAND }

Rob Everett

Adviser legislation 'tricky’ Changes to DIMS regulation have been more complicated and less satisfactory to the financial services sector than those who crafted the Financial Markets Conduct Act first thought, the Financial Markets Authority’s chief executive Rob Everett says.

The second phase of the new law has taken effect and includes licensing provisions that extend to several hundred further businesses, and a major shift in the quality of investor disclosure for financial products.

Those who will have to comply with DIMS licensing requirements under the Act have an extension until the middle of next year.

Everett said the legislation had been well drafted and the policy settings made sense.

The introduction of the FMCA does not mean the end of legislative overhaul. The Financial Advisers Act is to be reviewed next year,

ANZ research shows: KiwiSaver members 40% ofsurveyed plan to invest

for implementation in 2016.

Everett said the FMA and MBIE wanted to take a comprehensive approach to the review. “It’s not necessarily that we expect everything to be changed and rewritten… but the instinct is not to do a narrow, selective review but a much broader look at it right across the piece,” Everett said.

It was important to keep the end user in mind. The initial version of the FAA had made assumptions about what would benefit users that had not been borne out, he said.

in term deposits when they reach 65.

Another 28% plan to leave their money in KiwiSaver and draw it down from there.

Do Kiwis know where KiwiSaver invested?

Small funds ‘forced out’

Requiring KiwiSaver default schemes to invest responsibly would likely bring them morally into line with the investment philosophy of most New Zealanders, an academic says.

Dr Matheson Russell, a senior lecturer in philosophy at the University of Auckland, spoke at the 2014 New Zealand Responsible Investment Briefing in December last year.

He said he would conduct research over the next six to 12 months to find out what New Zealanders thought about responsible investing, and whether they would rather their KiwiSaver investments were not in tobacco, arms, labour exploitation, nuclear energy, gambling, pornography and fossil fuel extraction.

At present, about $45 million of the $22 billion in KiwiSaver is in socially responsible funds.

“Responsible investing is seen as a fringe thing in the investment industry at large,” Russell said.

“Mum and dad investors, the ordinary workers who now have money in managed funds through KiwiSaver, think about their investment portfolios differently to investors.

“I have a sense that a lot of New Zealanders would feel uncomfortable about their money being invested in, for example, tobacco, pornography or gambling. They may be surprised that they have investments in these things through KiwiSaver.”

Requiring default schemes to be responsibly invested would have a number of benefits, Russell said.

“You’re not auto-enrolling people in investments they may not be comfortable with. From a public policy point of view, it’s in our interests not to channel large amounts of new capital to industries that are causing harm.”

over 20% want to 20% Just use their KiwiSaver

money to pay off debt.

37%

will use it for travel or leisure activities.

16%

Just 16% planned to invest the money in shares and 21% of those would look to a managed fund.

It appears small fund managers are being squeezed out by the increasing cost of regulation.

Norman Stacey, of Diversified Investment Strategies, said the fixed costs of a small fund have risen from about $40,000 per annum to closer to $120,000 over recent years. “Fund manager licensing will be another impost,” Stacey said.

He said, assuming that 0.5% went to fund management, the minimum viable size for a small fund had risen from about $8 million to $60m.

Several small funds such as 36South had closed or relocated offshore, he said.

Stacey said the landscape of the industry was changing and investors were being forced to go offshore to include adequate diversity and innovation in their portfolios.

Returns ‘overestimated’ Advisers are chronically overestimating future portfolio returns to the potential detriment of their clients, one commentator says.

Brent Sheather, of Private Asset Management, said too many New Zealand financial advisers were relying on historic returns when discussing how portfolios might be expected to fare in future.

That could have a negative effect on clients as they tried to work out how much they would need to save for their retirements, he said.

“If you overestimate returns, they won’t save enough and they will have the wrong idea about how much they can draw down.”

It was misleading to suggest that returns would be as high in future as they were in the past, he said.

UP FRONT

{ NEWS FROM AUSTRALIA }

Call for higher standards in Australia Higher competency standards for financial advisers are among the recommendations of Australia’s Financial System Inquiry.

The inquiry, which delivered its final report in December last year, is intended to establish a direction for the future of Australia’s financial system.

It says the Government should continue the current process to raise the minimum competency standards for financial advisers.

It said the minimum standards for

those advising on Tier 1 products – personalised advice – should include a relevant tertiary degree, competence in specialised areas and ongoing professional development.

Minimum training standards that were too low given the complexity of many financial products affected confidence and trust in the sector, it said.

The inquiry also called for a register of advisers.

It acknowledged the requirement for higher education standards might cause some advisers to leave the industry and deter some from entering, potentially causing an “advice gap” but suggested transitional arrangements could help.

Association of Superannuation Funds of Australia chief executive Pauline Vamos said: “More and more, when we look at the regime around advice, how it’s delivered and how we can ensure that consumers are brought along the journey will be very, very important. Receiving a 100-page Statement of Advice that maps out your financial life is often not the best way to go for people. They need to be coached through their financial decision making. As we lift our standards and as we professionalise the industry, we will find we have an industry that generates new advisers coming through with a range of different levels of qualifications that provide the depth

and breadth of advice that is required.”

She said a large cross section of financial advisers had not been tertiary educated because they had been in the industry a long time.

“What we are talking about are minimum standards to entry.

There needs to be a way that we can recognise existing, qualified advisers, but this is about raising the standards and qualifications over the next few years.”

Planning ‘appalling’

Australia’s financial planning industry has been described as “absolutely appalling” by the Australian Securities and Investments Commission chairman.

Greg Medcraft said the ramifications of financial planners’ actions had “absolutely broken my heart to see what financial advisers have done and what they continue to do to people”.

Medcraft said the financial planning sector — which has been closely involved in the vast majority of major company collapses over the past decade — had repeatedly ignored pressure from ASIC to lift its standard.

“With the financial planning industry, we keep nudging them but we don’t get confidence – there have been nudges,” he said.

“Australians want advice they can trust; it’s absolutely appalling!”

PROFILE

TRANSITIONING FOR RETIREMENT Nearing 50, David Boyle says he is in perfect position as New Zealanders at this age have one eye on retirement, writes Susan Edmunds.

H

e might now work for the Commission for Financial Literacy and Retirement Income, but don’t mention the word “retirement” to David Boyle.

After 17-and-a-half years in funds management, from a role as business development manager at Armstrong Jones through to most recently being the general manager of funds distribution at ANZ, Boyle is now general manager of investment education at the commission.

“Anyone who knows me in the industry knows I’ve always had a particular interest, fascination or passion more appropriately around helping New Zealanders get a little bit better off than where they are today around saving and investing,” Boyle says.

“When Diane [Maxwell, Retirement Commissioner] asked me to look at this particular role, the timing was really good. I’d transitioned, worked up the ladder to the point where I’d got to a stage where I could genuinely do something more on a national basis rather than just for a company. It’s certainly a really good opportunity to make quite a lot of difference.”

He says he wants to achieve a framework so that people who reach the point where they want to move from paid income to retirement income know how to do it.

But “retirement” in the traditional sense of the word may be on its way out.

“I hate the word retirement,” Boyle says.

“More and more people are not choosing to retire and stop working; they’re choosing to do different things as they get older. Some of that will require income. My goal is that those that choose to or physically need to retire are better positioned than they are today.”

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The big challenge is New Zealanders’ understanding the value of advice and ultimately paying for it as well.

- David Boyle -

Challenge He’s raring to tackle the challenge and says there’s an urgent need for more support for New Zealanders facing the prospect of giving up paid work.

He says: “It’s something to get excited about, thinking about how we can help New Zealanders transition from paid income to investing income. We need tools and resources to support them making good decisions because as you get older there’s less chance to make up any bad decisions you make. It’s really important to think about that.”

Boyle is well-known to many advisers from his years in the fund management industry.

He started working with advisers at the end of 1993 when he was a business development manager for UDC Finance, promoting debentures through financial planners, who used them in the fixed interest components of investor portfolios.

“That was a long time ago,” Boyle says. “It was at a time when the independent adviser market was really growing. Their access to product and other markets and solutions were being developed.

“What we’ve seen in the industry as a whole is a rationalisation of solutions, simplifying products, genuinely providing transparency for investors to see what they’re paying for, investing into, and what the costs are. But there’s still a very important role for good quality financial advice in the market.”

His career started behind the tellers’ desk at the Post Office Savings Bank in Ashburton in 1982, when Boyle was 17. He worked his way up to becoming a branch manager before he was seconded to UDC in 1993. He moved to Wellington with UDC in 1995 and joined Armstrong Jones in 1997 before moving to OnePath, which became ANZ Wealth.

Boyle is married to Moira and has two adult children and a new puppy, Ruby.

He blames his new hairstyle on the $10,500 he raised shaving his head for the charity Play It Strange. “The good news is my hair is starting to grow back, which is cool.”

Age group His focus at the commission is on the 50-plus age group. Boyle jokes that he was selected for the role because he was almost in that age group. “I’m turning 50 next year; it’s very front and centre for me as well,” he says. “The reason I’m looking at that age group is that is when people start seriously thinking retirement is not that far off. I kind of want to get the message out that it’s never too late to save but they also need to think realistically about what they want when they reach that next life stage.”

Many New Zealanders don’t start seriously saving until they get to about 50 because it takes some time to pay off debt, such as on the family home.

Boyle says: “I genuinely believe that for this age group, they need to have a good plan and a good process to develop a framework to work out what they need and what they’re able to save to get them through an enjoyable retirement remembering people are living a lot longer as well. I think people will be choosing to

work longer or work in areas they enjoy more and transition that way.”

He expects KiwiSaver to be a driver of significant change in the financial services industry, as it starts to show people the benefits of long-term savings.

“Lots of people would genuinely still be quite surprised at the amount they’ve saved.”

But he says the industry needs to get better at explaining things in plain English. “We need to invest quite a bit of time and effort in getting that information out. Lots of people don’t know what investing is but are investing via KiwiSaver in markets they’re not even aware of.”

Advisers have a big role to play but he says the advice sector is at a crossroads. Increasing regulatory requirements, such as the looming DIMS changes, will force some advisers to decide it’s no longer worth being in the industry and sell up, or align themselves with a bigger provider, Boyle says.

But he said there would also be a genuine area of growth in independent advisers with no alignment to any provider, delivering advice either face-to-face or over the internet.

“The big challenge is New Zealanders understanding the value of advice and ultimately paying for it as well, and to get more people involved in providing advice because it’s not growing, the industry is getting smaller. We need to ensure there is good quality advice.

“A lot of New Zealanders need somewhere to go to understand the basics … investment advisers tend to kick in as people build up an asset or a substantial amount of money.”

Framework “Going to be running some discussion sessions put out a submission document around this with interested parties to see what we need to do and what framework can be developed to encourage that if there’s a genuine need. Most people say KiwiSaver will be the catalyst to this … the problem probably isn’t here today but probably will be in the future.”

The commission is supportive of people getting advice should they need it, Boyle says. He can also see a potential role for advisers in the literacy programmes it is developing. Advisers could work as facilitators and presenters of the employee education programmes on offer.

The response to the announcement of Boyle’s new role was immediate. Messages of support from across the industry, including from many advisers, flooded in. Boyle says it was encouraging.

“You never make a decision 100% and it is a

massive change. But I think I can bring some background from a corporate provider industry perspective into the commission and connect better with both internal and external groups. I’m really looking forward to the opportunity. I know I’ll be able to make some pretty good improvements over the next few years.”

But he says the advice industry needs to be willing to help itself.

“I recently spoke to about 100 advisers as a representative for the commission. I was asked what we’re doing for advisers and I turned it around and asked what is the advice industry going to be able to offer, going forward, for New Zealanders?

“I think it’s got a lot to offer but people need to understand the value of advice, that’s their role. We’re there to be a kind of signpost to people if they need good quality advice, to help them find it.”

Balances When KiwiSaver balances are bigger, it will be vital that people get advice on how they deal with their balances at retirement, Boyle says.

“Balances will get bigger and they will get a larger amount of money than ever had before in retirement and will need a plan. At the moment they could just blow it. There’s a genuine need for good quality financial advice. But the advice industry needs to show the benefits of it as well and start promoting it.”

Part of Boyle’s role is to look at retirement income strategies. “As you near retirement, you are initially in the honeymoon, go-go years, doing a lot of things, travelling or spending more time with family and you tend to spend a bit more because you’re enjoying really good health. Those are the fun years. But over time, as you get older and lose a bit of health or confidence, you’re going to be spending less, thinking about where you’re going to be living … then as you do get a lot older, the increasing cost is going to come from medical or health costs. It’s about thinking about that and plotting your position as you go through.”

He will develop a paper on annuities after meeting with interested parties and industry players – although annuities is another word he doesn’t like because of the historical connotations it carries. “I really don’t like the word annuities even though everyone can relate to it.”

But Boyle says having a framework to develop and grow income products will be important because people want certainty in their retirement.

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{{REGULATION} XXXXXXXXXX }

CHANGE IS INEVITABLE There will be one big topic this year – the review of the Financial Advisers Act. Philip Macalister explains what this means and some of the issues that will shape the debate.

T

he review of the Financial Advisers Act shows how advisers are at the sharp end of changes to New Zealand’s financial markets.

Changes and disruption have been forced on advisers since the introduction of regulation three years ago and now their regulatory world is already up for review.

Meanwhile the regulatory burden which has been heaped on the advice sector is just beginning, or in early stages, for fund managers and other players in financial services.

The whole thrust of the FAA was to: ➤ Promote the sound and efficient delivery of financial adviser and broking services. ➤ Encourage public confidence in the professionalism and integrity of financial advisers and brokers.

When I look over what has been happening some things are clear. Firstly, there is no major problem with consumers getting bad financial advice, especially when you look at the investment area.

The FMA has devoted considerable resources and millions of dollars of taxpayer money monitoring the AFA sector.

It has worked hard to look for bad advice and poor planning practices. A widely-held view is that former FMA chief executive Sean Hughes wanted to get some scalps. That hasn’t happened.

This is well illustrated by the small number of cases that have made their way to the Financial Advisers Disciplinary Committee.

The main case it has dealt with was David Ross. Interestingly this was straight out fraud

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Everyone who sells or distributes financial products must put the customer first. and theft, rather than something which comes under the umbrella of conflicted advice and incentives – two of the areas considered high risk by regulators.

To further reinforce the health of the sector you just have to look at the work done by the external disputes resolution schemes. They have been pretty quiet and at the moment appear to be trying to drum up business and get consumers to make more complaints.

The work of the EDRs is one area which should come up for review in this process.

We are getting an increasing amount of feedback on the behavior of the EDRs and how they operate.

A question raised by SiFA member Murray Weatherston is whether EDRs are the appropriate bodies to enforce some of the rules advisers face.

The FAA had a difficult birth The new framework came into effect fully on July 1, 2011, having been delayed as a result of industry input about the unworkability of the FAA and the companion Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA) in their original form.

This feedback culminated in a substantial reworking of the FAA and FSPA prior to commencement in the shape of the Financial Service Providers (Pre-Implementation Adjustments) Bill (which was eventually split into two acts amending the FAA and FSPA).

To get the FAA up and running required several Supplementary Order Papers and a highly unusual 11th hour “Pre-Implementation Adjustments Bill”.

“The result was a workable regime,” Chapman Tripp says, “but one which reflected a slightly muddled policy underpinning – a mixture of both investor protection and occupational regulation. This has led to some challenges, which the review will provide a one-off opportunity to address.”

Partly in acknowledgement of the risks implicit in such a process, a clause was inserted into the Act promising a review within the act’s first five years.

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Understanding how the review works There appears to be a view that the FMA has a lead role in the review, however it is just a stakeholder, just like advisers and many other people.

The key people in this review are the Minister of Commerce, Paul Goldsmith, and the Ministry of Business, Innovation and Employment (MoBIE).

Everyone else has to make their case to the ministry and it is up to them to write the review.

The way I look at this is whether MoBIE has big ears to listen to everything and little hands to decipher what they hear, or will it have little ears and big hands and just make decisions without understanding the sector and issues?

At this point it is too early to say. We have still to hear anything from the minister and the first appearances of MoBIE officials at open industry events has been less than compelling.

One issue that has been raised among the leaders of the financial advice sector is that the people running this review are young with little or no experience of what financial advisers do.

To counter that it is heartening to hear that the IFA has organised for some of the MoBIE people to meet some advisers at the coalface and learn more about the work they do and the issues they face.

It has also been reassuring to hear the IFA and SiFA talking about how important it is that advisers work hard to be heard, be part of the debate and not let the review get captured by the big, corporate end of town like when the FAA was written.

Another of the risks financial advisers face in the review is the likely use of consumer surveys to find out about how well financial advisers are doing their job.

This is pointless as not many members of the the public use financial advisers or have had experience of the services on offer.

It is also likely to bring some of these so-called “consumer representatives” into the picture who have little understanding of the sector and seem to have a dislike for something they don’t think of too favourably.

One example which springs to mind is a high profile person who often tells me she can’t trust investment advisers as they take commission as part of their remuneration package.

The only “trustworthy” ones are the fee-only advisers, she says.

I often challenge her to show me how a consumer has been hurt or been given bad advice by someone who has been paid a commission. She can’t.

The number one requirement This should be an inarguable change in any review. Everyone who sells or distributes financial products must put the customer first.

You really struggle to understand how such a large section of the industry isn’t bound by this core requirement.

This statement from Everett says it all: “Personally I believe - very strongly - that starting the Code with a statement that requires AFAs to put the clients’ interest first, and to act with integrity, was absolutely the right thing to do.

“I believe just as strongly that those within the big banks and fund managers that deal with retail money - and those that sell financial products to retail consumers should have the same obligation.

“This is not to treat FAs differently, but to ensure that all of those who provide financial products or services to individual consumers do so with that standard flying proudly above their door.”

Code Committee chairman David Ireland says that putting the client first is a “critical ethical behavior stake in the ground”.

Remuneration You can be sure the issue of remuneration will come up as part of this review, whether it should or not. The group that is likely to come into sharp relief are registered financial advisers, particularly those operating in the life insurance space.

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{REGULATION} The FMA has highlighted this area in its strategic risk analysis which it released in December.

The two areas it talks about are sale and advice and conflicted conduct.

In the sales and advice part of its analysis it talks about whether consumers are treated fairly.

This issue probably goes further and should look at vertically-integrated distribution models where manufacturers distribute their own products through their networks.

There could well be an argument for legal separation between the different parts of the business. It’s happened overseas and we have seen it happen in New Zealand in areas like telecommunications and energy.

Designations One area which is undoubtedly broken is around how the act categorises the different types of advisers, namely AFAs, RFAs and QFE advisers.

There is no better way of illustrating this than recounting the story told by FMA chief executive Rob Everett. Everett is a smart man who knows a bit about financial services.

However when he got out here from the UK it took him quite some time to get his head around these designations. As he tells the story it had to be explained to him a number of times before he fully understood it.

If it takes him that long, what hope is there that the average Mum and Dad consumer will

get their minds around these concepts?

He talked about the issue at the Grosvenor conference: “One question that I think everyone accepts we will have to consider in the review is the three-way divide between AFA, RFAs and QFE advisers. We have to ask: Does the threeway divide produce unnecessary complexity, both for the sector and for consumers?

“Indeed, I wonder if those who use – or might use – financial advice are sometimes forgotten in looking at the detailed set-up of the sector.

Reducing complexity like this might help.

I have said repeatedly that the current structure is too complicated for users, too complicated for you all, and - frankly - too complicated for regulators as well. But while that issue needs to be addressed before we can confidently direct investors to the sector, reducing complexity is not the solution in itself.”

I think it is absolutely clear that the status of RFAs will be very different following this review.

After all, their world hardly changed when the FAA came into force. Sure, they had to become registered and join and external disputes resolution scheme but not a lot else changed.

One option for the review is that all RFAs have to belong to an organisation, maybe a dealer group, and that organisation essentially treats its members as a QFE would do with its staff.

There will be a lot of noise and teeth, gnashing from this sector over the next couple

Philip Macalister One area which is undoubtedly broken is around how the act categorises the different types of advisers, namely AFAs.

of years – just like there has been from the AFA sector in the past couple of years.

But the message is simple. There will be change. Be prepared.

Education Another given is that educational requirements for anyone wanting to be a financial adviser will not just raise its head, they will rise.

It had always been made clear that the standards set when the FAA was introduced were relatively low and they would increase over time.

The FAA review is bound to push up the educational requirements.

Code Committee chairman David Ireland raises CPD requirements as one of four areas to address.

He says they need to be “meaningful, yet flexible”.

Everett acknowledges “some people are calling for mandatory, relevant tertiary or degree-level qualifications for advisers”.

The mood in Australia is shifting to raising the formal qualifications of advisers, and imposing

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further professional development. The Financial Services Council there is calling for a new sectorwide regulator and new professional standards.

He says the competence standards in the Code in New Zealand were always intended to be a starting point. Not a destination.

“I’d argue the sector has to ask itself – in the near-future - whether it’s ready to raise the bar, and advocate for higher qualifications and CPD requirements,” Everett says.

“Is it a profession – with professional standards – or a sector with a low bar to entry and a reliance on good old-fashioned integrity and some part-defined notion of competence?”

Timeline While the review will, in all likelihood, dominate discussions next year, the consultation isn’t due to be completed until July 2016.

Once that happens there is a whole process of deciding what changes to implement and then getting them through Parliament.

The reality is that changes won’t happen for a number of years.

But changes will continue. A good example is the comment Everett made about churn and commissions in the life insurance sector.

"We are not going to wait until the review [of the Financial Advisers Act]," he says. "We are going to look at RFAs."

Conclusion In some ways it would good to throw the regulation out and start all over again. But that’s not an option as such a high level of disruption would destroy the advice sector.

It’s better to work on trying to fix the issues which have come up.

Law firm Chapman Tripp says this is an opportunity to tidy up an act which, as says, “had a difficult birth”. “This is an important chance to drive change in those parts of the FAA regime which have caused confusion or frustration.”

Why the cost of regulation is worth it Advisers may grizzle about the cost of regulation. In a speech to the Grosvenor conference last year FMA chief executive Rob Everett provided his view.

FMA chief executive Rob Everett acknowledges the cost of regulation is an issue as it is regularly raised with him. However, he says advisers need to be aware the cost of not being regulated might be an issue, too. Here is what he said.

I argue that the cost of not being regulated - or being too loosely regulated - is twofold.

Let’s take a hypothetical case where advisers aren’t regulated.

Firstly, those of you who deal directly with consumers and investors would face questions about whether consumers should continue to be confident in your profession.

Indeed, that was one of the reasons for the original decision to regulate when the Advisers Act was passed in 2008. To raise consumer confidence in the professionalism and integrity of financial advisers.

Without comprehensive regulation, consumers would be entitled to say: most other professions, where we expect people to exercise highlydeveloped skills, are regulated and they must meet comprehensive standards of conduct.

Say, for example, lawyers, architects, medical professionals.

So why isn’t your one?

Some of you may have noticed – following the Christchurch earthquake – the pressure on the engineering profession, as a result of the shortcomings that are apparent in the regulation

of engineers.

That’s led to the Government legislating to improve regulation of engineers.

That’s the type of pressure that is exerted when a profession lacks carefully-considered regulation, or where regulation fails to keep pace with the dynamics of business.

Secondly, without regulation it would become harder and harder for New Zealand to remain a part of the global economy.

Indeed, without a credible regulatory regime, we’d struggle to continue to be recognised as an economy where you can do business confidently.

I say that quality regulation raises the value of the profession – including as it is perceived by the people who are its clients – rather than imposing cost.

That’s not to dismiss the extra load that regulation imposes on you.

Absolutely not. As I said before, the FMA recognises that load.

You can be reassured that we constantly try to assess whether we -and the legislation we operate - over-burden you with demands.

But confidence and quality regulation go hand in hand.

Generally, good regulation – provided it is carefully applied by the regulator - is good for business.

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TECHNOLOGY

Cloud computing silver lining for future Could your business save time or money by taking more processes off-site?

S

mall businesses may have the most to gain from moving their IT systems to the cloud, experts say.

Put simply, cloud computing refers to storing your information on the internet, rather than your computer’s hard drive or a server in your office.

Embracing a shift to the cloud could transform your business.

As well as cutting costs, cloud-based IT services may also provide adviser businesses with much more flexibility, ease of operation and productivity improvements.

Whether you know it or not, it is likely that you already use at least some cloud-based services, perhaps backing up your iPad or iPhone or using services such as Gmail that store emails offsite.

Steve Corbett, chief executive of Massey University’s business incubator e-centre, said the use of cloud technology was global and accelerating, which was opening New Zealand business’ access to the world. “That is a fantastic thing for New Zealand,” Corbett said.

Cloud computing fits into three main categories.

The first, and most commonly thought of, is the software-as-a-service solution. Customers subscribe to a service to use as and when they need it, such as Salesforce or Xero. This is likely the most useful application of cloud computing for small businesses.

Platform-as-a-service solutions offer businesses a platform to create and deploy custom apps, databases and business services integrated into one platform. A good example of this is the Google App Engine.

The third main use is to take over from services that would traditionally have been provided by office hardware. If you want to use the cloud for things such as backup, extra storage space or firewalls, you’ll be looking for infrastructure-as-a-service providers.

Research from analysts IDC found 100% of New Zealand organisations that responded to its survey intended to invest in some form of cloudbased service over the next 12 to 18 months.

One of the big advantages of moving business systems to cloud-based services is flexibility.

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If you are a small business, it can be hard to get away from the office. Cloud-based software services will enable you to take your work with you and log in via your smartphone, even if you are having a week at the beach. It’s also easy to collaborate with business partners or advisers such as accountants without having to be in the same room.

Another common reason to move to the cloud is for security of storage. Instead of using an in-office server to back up client records, advisers could use cloud storage. Should a natural disaster strike the office, or an IT meltdown, that would mean records would not be lost. This helps ensure business continuity.

You could consider cloud computing to save money.

Cloud systems are often cheaper because, particularly with infrastructure-as-a-service solutions, such as cloud-based storage, businesses only pay for what they use rather than having to purchase large-scale servers that might end up being too big for their requirements or need to be replaced and updated as technology improves.

Vodafone head of enterprise solutions Ben Green said infrastructure had traditionally been a big cost for New Zealand businesses. Cloud services could replace that. “The two main [benefits] are productivity and cost savings,” Green says.

Individuals’ productivity should improve because the cloud systems would save time and offer information at their fingertips when they needed it, he said.

Frost & Sullivan research showed 63% of businesses using cloud solutions planned to increase their budget for them. Email, storage and office productivity solutions were the most commonly accessed via the cloud. They also favoured cloud services because of the cost reduction, reduced risk of IT disruption from such events as natural disasters or floods and greater business agility.

It showed the main challenges in adopting cloud-based services included data/security threats and the problems of integrating existing systems and legacy applications with cloud data.

But Corbett said security of cloud services was constantly improving. “The cloud could be better than in your home,” Corbett said.

Jeff Herbert, of Ao Cloud, said most smallto-medium businesses would go to overseas providers for cloud services because local offers could not compete on price. “Things such as Microsoft’s Office 365 and Google Office don’t cost very much but provide a lot of value to small businesses,” Herbert said. “That’s more

The two main [benefits] are productivity and cost savings – Ben Green

Cloud storage options Justcloud.com: A small desktop application backs up all your computers to the cloud. They can then be accessed from any device. An unlimited plan is US$6.95 per month.

Google Drive: Access Google Drive via app or

what financial advisers are after.

They take care of back-ups and file storage.”

He said financial advisers could also benefit from such devices as Dropbox, Google Drive, and cloud-based CRM systems that would talk to other software solutions. It is worth shopping around because prices, and the ease of use of the systems, can vary a lot.

Bigger firms would use local cloud solutions for their online back-up needs. “A larger business could have hundreds of gigabytes to back up every day and not enough time to back up via the internet, they have to a direct connection because speed is so important.”

Herbert said he used Dropbox for his own personal storage, because he could get a terabyte of cloud-based data for $120 a year. “It’s way more reliable than keeping it on your own system.

You just have to watch that you don’t get hacked because someone can delete everything.”

That was a risk, he said, because cloud systems such as Microsoft 360 or Dropbox rely on a username/password combination.

He said most people used similar usernames and passwords for all their software programmes, which communicated with each other. If one was breached, every account could be at risk. “Companies are doing something about it and recognise that’s a problem.”

FMA spokesman Andrew Park said the regulator saw cloud computing as the way of the future.

He said it was possible that advisers could use cloud computing as a way to help with record-keeping. Code standard 13 requires that records are maintained for seven years.

Advisers also have an obligation to enable the regulator to monitor their records under the terms and conditions of their licence.

He said: “It’s probably best for financial advisers to take a cautiously optimistic approach. We note that any provider should seek independent expert advice for their own business needs. We believe that cloud offers many benefits, and particularly for financial advisers in facilitating better records

your browser. Google Drive makes it easy to share files and allow others to edit them. Up to 15GB of storage is free. Pay US$10/month for unlimited storage.

Dropbox: Anything you add to Dropbox automatically turns up on all your computers, your smartphone, and the Dropbox website.

It makes it easy to share files. Dropbox folders appear as a drive in your computer, which makes it easy to move files in and out. Free for up to 2GB. US$15/month for five users with a terabyte of space each. US$10/month for one terabyte for one person.

iCloud: If you have an iPhone or iPad, you’re probably already backing up to iCloud. It’s now possible to store any file in the iCloud Drive, access them from a PC, and some apps create their own folders. No app for Windows Phone or Android. Free up to 5GB then NZ$1.29 a month for 20GB, NZ$4.99/month for 200GB, $12.99/ month for 500GB and $24.99/month for 1TB. Livedrive: Online file storage and sharing that is suitable for businesses of all sizes, offering cloud backup for office PCs and allow employees their own storage space with complete central administrator control. £22/month for three users and two terabytes of space.

management and backups. But these benefits need to be tempered with a good risk-based approach to the decision to go into the cloud. In many cases, for smaller operations, the cloud will be better and more secure than the applications on the computer running under your desk, or the paper sitting on top of it, but for larger organisations due diligence is required. And remember, not all cloud services are equal.”

Cathy Olifiers, of Private Asset Management, said the firm planned to move to cloud-based back-ups of all records once it had access to ultrafast broadband. “It takes the risk away from having to do manual backups, having to rotate the discs and take them out of the building,” Olifiers said.

She said the firm had been approached by providers but had not yet made a decision about which it would choose.

INSURANCE PRODUCTS

{ REGULATION }

Review will be a balancing act Advisers need to engage with rule-setters and lobby for the good their work can do.

{ RUSSELL HUTCHINSON }

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I

recently attended the “meet the regulators” function hosted by the Institute of Financial Advisers and the Professional Advisers Association. In listening to the different points of view, I was struck by the degree of divergence in views, and how they diverge, and why.

There were representatives from three main bodies responsible [with different roles] for aspects of the regulatory structure. For policy analysis and performance review was the Ministry of Business, Innovation, and Enterprise, representative Ian Southall who is manager, corporate law. Presenting the regulator’s viewpoint for the Financial Markets Authority [FMA] was chief executive Rob Everett. For the Code Committee, representing the standardssetting component was committee chairperson, David Ireland.

Each participant presented, essentially, a review of their current priorities and an explanation why these are priorities. David Ireland’s presentation was more focused on being descriptive of the "journey" in regulation, but still finished with a description of issues, and covered in one final slide the "hand-brakes and driver distractions" which I understood to mean "balancing interests".

These are vital, and often misunderstood by people with more extreme views. For example, the ultimate in consumer protection might mean no affordable private sector advice services, and possibly, a much more limited provision of financial services, than we, as a nation, would choose. No regulation would surely, at some stage, see a great deal of financial harm done to consumers as standards and confidence fall in a descending spiral. Both must be avoided.

A robust financial services sector is vital for the health of the wider economy.

Statement Rob Everett cited several examples of the areas of concern for the FMA. If you want to look at these in more detail then you should read his speech and then the FMA statement of intent, both of which are available on the FMA website. However, it was heartening to hear them said again.

Comments supporting the giving of advice and in support of customer need for more professional advice are all gratefully received.

Conversations with colleagues afterwards highlighted these. There are definitely four corners to the view of the financial services market. When questions were raised about the usefulness of offer documents Everett was also able to make empathetic remarks off the cuff, both on their construction [he was a lawyer, he explained] and his concerns about how often they are read or understood.

Ian Southall spoke about the five-year review of the Financial Advisers Act [FAA]. Contrary to those who believe this opportunity has been brought about by the problems with the

Financial advisers are just as valid as a pathway to customers as customer organisations are. current regime, this review has been long in the planning. It was scheduled because of the scale of revisions in the law made at the time of its implementation. I was encouraged to hear that legislative change may not be required – that should not be considered a probability, but it remains a possibility. Possibly only code and regulatory changes are required. If you look at the baseline review document that Susan Edmunds highlighted recently in Good Returns then you will see the bar against which the current level of performance will be measured.

Southall and Ireland focused on the customer.

Ireland noted that it was easy to get input from customer organisations, but not customers – a telling admission. I was delighted that after a particularly pugnacious question from the floor, Southall directed his staff to get the adviser’s details and spend some time with them.

Customer There is a genuine willingness right now to learn more, and financial advisers are just as valid as a pathway to customers as customer organisations are. Advisers interested in having input into the process should familiarise themselves with the review process [which will be detailed early next year] and focus on putting their views on the FAA review in the context of customer benefit.

It also occurred to me that customer input is highly specific to different product areas.

Finance company investors have a view, property owners in Christchurch have a view, owners of life insurance policies and home loans have a view. Those views differ a lot. Users of different channels have a view.

While there was no customer representation at this meeting, their spirit was present in the passionate questions from at least three advisers. Additionally, I can recall several recent articles and two recent calls from journalists, who both reflect and to some extent shape customer opinion. News headlines are written to be catchy, but the reality is that financial services are complex and the problems we have seen are complex too. One oversimplification I

have heard too often is the supposed influence of commission on the advice process. Many examples on the harm caused by conflicted behaviour are given. I want to balance that with an example of the value of commissions.

Overwhelmingly, if a customer set out to buy a trauma insurance policy direct [by telephone, or online, or over the counter] to ‘cut out the middleman’ they would typically come away with a product that was between 25% and 50% worse than the typical trauma product sold by an adviser paid commission, for a premium that is about the same or more expensive [based on the research we publish at www.quotemonster. co.nz]. Put more simply, in the insurance sector, the conflicted behaviour seems to be paying dividends to consumers in at least some areas.

Asserting But customers aren’t convinced. If you scroll back through updates in the New Zealand Herald blog by David Chaplin you will find an article about customers not telling their insurers the truth. Read the comments and you will find many angry customers asserting that this cannot happen and it is unfair insurance companies that are the source of all the problems. That lack of balance means that an unfortunate argument, such as the desire to "ban commission", could take hold in the public consciousness, or be picked up by an unscrupulous politician or commentator.

The division between the four corners of regulator, product provider, adviser, and customer is sometimes a genuine gap in understanding. Sometimes it is more, laced with some preconceptions about the “other side”. For example: we may feel exasperated by officials for not sharing our experiences as self-employed financial services professionals – and I do mean "we" because I have been self-employed for 14 years, and ran an advisory business for five of them. However, we must be cautious with such criticism. Don’t jump to conclusions – there are quite a number of people with advisory experience at the FMA. Also, we have to remember that these are public servants: they take that role because the big "we" meaning "New Zealand" asks them to.

On the other hand, any regulators reading this should give their own consciences a shake to try to get rid of pre-conceptions about advisers.

We know that some of you have them.

What many advisers want to hear is that the FMA recognises the connections between three big themes: that financial advice is important, that QFEs enforcement will be prioritised, and that the boundary will be better policed to prevent too much activity that ‘looks-like-advice-but-isn’t.’

If we want those things to happen, though, it is up to us to tell our stories better. We must tell them with patience and good humour to all the stakeholders in the review of the Financial Advisers Act.

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PAA NEWS

{ PAA }

AS 2014 COMES TO AN END...

What have been this year's highlights and successes? What lies ahead for 2015?

W

hen the quiet of the end-of-year break settles in, what will you remember most about 2014? What have been the big changes, challenges and opportunities to have either shaped new directions or consolidated existing strategies?

Even when operating in the same market, challenges and opportunities can be vastly different depending on your specific business – how long you have been operating, your client base and target market, and your proposition.

We spoke to a number of advisers and asked them about their 2014 experience and the key take outs of the year for their business.

What were the big stories for you?

On the challenges “We do investment property, managed funds and KiwiSaver, and an area we’ve had some challenges in this year is managed funds.

People have been focused on investment property and very much led by the media, so if I had to say one challenge this year in terms of the investment world, it would be about educating people towards the idea of building a portfolio in diversified managed funds.”

Daniel Carney Good Life Advice “One of the key challenges for our business this year has been an issue of supply. About a third of our clients purchase investment property, and the market has been quite active, but the property listings have been scarce. For about the last six months the business we work with that finds suitable investment properties has struggled with a lack of listings and that has slowed things up for our clients.”

John Schell Get Sure

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“I’m relatively new to the insurance industry, so for me the key challenge this year has been getting my head around the sheer volume of information and understanding what my role is as an adviser. It’s also been a challenge having my eyes opened to just how many New Zealanders are suffering from different illnesses and conditions, and how this impacts the type of insurance they can get.”

Mark Wadman Insurance People

On the positives “The key positives for this year is that we’ve seen a real flood of inbound traffic from multiple sources as a result of several marketing strategies we’ve put in place. We’re seeing a lot more leads from the Internet as well as the network of professionals we have relationships with. This is great for us; it means we're not putting all our eggs in one basket as to where our client base is coming from.”

Daniel Carney “One of the most positive aspects of 2014 has been that we’re attracting a higher calibre of client. The people we’re working with are wealthier and have increasingly higher incomes. I think this is because the longer the business has been around the more referrals we are receiving from other professionals, and the calibre of these referrals is really high.This doesn’t mean we’ve been changing much of what we do, it's that the advice we give works for these people very, very well. Because we’ve built up relationships over time, accountants and other financial professionals are now say: I have seen what SurePlan has done for a handful of their clients and think you would benefit from talking to them.”

John Schell

{ MARK WADMAN }

{ JOHN SCHELL } “The real positive from this year is how passionate I’ve become about helping New Zealand families protect themselves. I think that’s the key driver of the whole business.

Giving people an impartial opinion as to what cover they can get, and to educate them on who the best options so that they can make an informed decision about their insurance.”

Mark Wadman

PAA NEWS

really well – you can put yourself in a better financial position while enjoying the lifestyle of living in an area that you wouldn't be able to as an owner occupier otherwise.”

John Schell

{ REAGAN BAX }

“One of the key things I’ve noticed in 2014 is the increase in social media and TV advertising. I don't know how many times I go onto Facebook and see a sponsored post – always some type of broker – and it seems like every time you turn on the news there’ll be an advertisement for health insurance in the ad break. I think that it’s good because it drives awareness so it's in people's minds. Off the back of this, I’ve spent a lot of time over the past 12 months increasing my online and social media presence. People are going to look for you online and by posting blogs which are actually read and valued means you stay top-of-mind, so when they come to setting up insurance they’re going to pick up the phone and you’ll get that call.”

Reagan Bax NZ Advice Group

On the predictions

{ DANIEL CARNEY } Next year is going to be awesome for us because we'll be able to say we learned a lot and we’re not tied down to one particular avenue of lead generation.

-Daniel CarneyOn the trends “One thing in the market we’ve seen much more of during 2014 is clients approaching us wanting to rent their homes where they want to live and buy investment properties instead.

People come to us now saying, 'I can't afford to live in Ellerslie or Westmere, but I want my kids to go to school there. Can I sell my house, take the money and invest in property so I've still got a foot in the market but then I'll just go rent where I want to live?' And if you're not attached to the house you live in, it can be a much better option financially. It can work

“Next year is going to be awesome for us because we'll be able to say we learned a lot and we’re not tied down to one particular avenue of lead generation. We know now that we can head into 2015 really confident that we've got a diversified approach to how we get people through our door.”

Daniel Carney “My prediction for 2015? Well the FMA has said they're making a movement towards consultation and improving the industry as opposed to policing. I think this is great and a positive sign that the regulations put in place have lifted the standard of advice available to consumers. My hope would be that the industry and the FMA can work together to make consumers more aware of the value of professional advice. If successful this should benefit the industry while creating a better experience for the consumer.”

John Schell “In 2015, in terms of my own business and my role in insurance, I'm looking to expand on the knowledge that I've built up over the year and to expand on my self generating network of people that I'm working with to get more referrals and hopefully more business so I can help more NZ families insure themselves.”

Mark Wadman What have been the positives, the challenges and the trends that you’ll remember 2014 for? And what’s in store for your business in 2015. A little food for thought over the break.

023

INSURANCE PRODUCTS

{ SPECIAL REPORT }

OPTIONS FOR KIWIS TO MANAGE PERSONAL HEALTH Preventative screenings to shift focus to proactive treatment offered by Sovereign.

S

overeign has launched

a new health insurance product, Private Health Plus*, giving Kiwis the opportunity to manage their health through routine screening.

Introduced to encourage New Zealanders to adopt a more proactive approach to managing their health, the scheme includes cover for the screening of some of the country’s most prevalent forms of cancer, including breast, skin, bowel and cervical.

The insurers chief medical officer, Dr John Mayhew, said screening was an important health measure that assists in the detection and treatment of health problems, in particular cancer.

“Most people tend to think of health insurance as something that will help us only when we get sick, or need specialist treatment,” Dr Mayhew says. “But we actively advocate Kiwis use their health cover before they really need it by taking advantage of the screening benefit.

FUTURE HEALTH

“Screening is for people who are, as far as they know, completely well. It is one of the most important steps we can take to look after our future health. Detected early, people may be offered treatment to halt the spread of serious illness.”

With Breast Cancer Awareness month returning this October, Dr John Mayhew says he welcomes further discussion and

SMARTCARE+ PLUS Health insurer changes key wording in policy

I

n September, SmartCare+ altered

key policy wordings. The most notable change, referred in italics below, with other changes further along in the article also in italics included, was:

Private hospital medical admission – excess applies To a maximum aggregated cover of $200,000 per person per policy year.

Non-surgical cancer treatment is limited to a maximum of $25,000 per course of treatment, up to a maximum cover of $65,000 per person per policy year.

We removed the non-surgical cancer restriction and changed the wording to:

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Private hospital medical admission – excess applies To a maximum aggregated cover of $200,000 per person per policy year.

Changing this wording affects SmartCare+’s non-Pharmac benefit where the non-Pharmac cancer treatment was limited by this wording.

Now the non-Pharmac benefit is up to the benefit maximums, which has increased non-Pharmac subsidised drugs for cancer to $200,000 per policy year (wording below).

Non-PHARMAC subsidised drugs Non-PHARMAC subsidised drugs are included within the benefit maximums that apply to the

awareness around the importance of screenings.

“Breast cancer is the most common cancer in New Zealand women - we know that early detection and treatment improves long-term survival,” he says.

DETECTED

According to the New Zealand Breast Cancer Foundation, New Zealand women have a 95% chance of surviving breast cancer for five years or longer if their cancer is detected through screening.

Should a diagnosis of cancer be made as a result of screening, Sovereign's plan covers cancer care at every stage including diagnostic imaging and tests, surgery, chemotherapy with non-Pharmac approved drugs, prostate brachytherapy, and breast reconstruction.

It also provides $500 per year towards post-cancer care treatment for such as nutritional advice, wigs and other support items.

surgical and non-surgical benefits, whichever is applicable for the required treatment.

Covers the costs of reasonable and customary charges associated with accessing the most effective treatment available, irrespective of whether that treatment qualifies for a government (or quasi-government) subsidy, such as PHARMAC funding.

Reimburses the costs of all drugs registered by Medsafe for use in New Zealand where: • the treatment is prescribed by a specialist as the appropriate medical treatment for the condition, and • the treatment and/or condition are not excluded elsewhere in this policy document, and • the drug is being prescribed within the guidelines set by Medsafe.

Covers the costs of these drugs over and above any government (or quasigovernment) subsidy. All costs under the non-PHARMAC drugs benefit are included within the benefit maximums of the Hospital and Surgical+ base plan.

INSURANCE PRODUCTS

StaffCare+ (group) In September StaffCare+ changed its policy wordings. The most notable change was to the non–Pharmac chemotherapy drugs where we removed the 50% restriction. The benefit is now up to $10,000, rather than 50% of the cost up to a maximum of $10,000. The company changed the wording from: Non-PHARMAC chemotherapy drugs – excess applies

Non-PHARMAC subsidised drugs are included within the private hospital medical admission benefit, non-surgical cancer treatment maximum. The benefit is limited to payment of 50% of the cost (up to a maximum of $10,000 per person per claims year) for non-PHARMAC approved chemotherapy drugs.

Non-PHARMAC chemotherapy drugs – excess applies

Non-PHARMAC subsidised drugs are included within the private hospital medical admission benefit, non-surgical cancer treatment maximum. The benefit is limited to a maximum payment of $10,000 per person per claims year for non-PHARMAC approved chemotherapy drugs

FASTER ACCESS TO OPTIONS Sovereign says it is set to shake up New Zealand health insurance sector

T

wo new health products have been

launched by insurance company Sovereign.

The new products, private health cover and private health plus, deliver modern healthcare treatment options for Kiwis. They are designed to allow customers fast access to such private treatments as diagnostic scans, surgical treatment, hospitalisation or on-going help with recovery.

Sovereign’s Chief Officer Health Business, Joyce Au-Yeung, says the new products are the result of a major Sovereign review into New Zealand’s health insurance market which canvassed customers and advisers for their feedback as to what New Zealanders really want from private health cover.

“New Zealanders we spoke to told

us they wanted simplicity, value and access to affordable health cover,” AuYeung says. “As a result, private health cover and private health plus have been developed to [allow] access to affordable health insurance for the long term.

“Customers can choose from a wider range of excess levels and with private health plus there are long-term loyalty benefits.”

Flexibility in treatment option was a key feature of the new products, with customers choosing treatment in Australia if preferred; anywhere in the world if the wait for treatment in private practice in New Zealand exceeds six months; or $30,000 per annum towards treatment overseas if the same treatment is not available in New Zealand.

A wide range of cancer care, including cover for chemotherapy using non-Pharmac approved MedSafe

indicated drugs and an allowance towards post-cancer treatment care, is available. Private health plus offers long-term loyalty benefits including a $750 per annum contribution to pregnancy, maternity or infertility care after three years, and $500 for the customer’s choice of health screening after three years and every three years subsequently.

Au-Yeung hints at further health initiatives with a focus on encouraging New Zealanders to live healthy lifestyles.

“Long-term, our aim is to encourage healthy lifestyles and help New Zealanders achieve a better quality of life,” Au-Yeung says. “It’s a logical approach and the outcomes will benefit not only our customers and our communities but ensure we can continue to offer New Zealanders at every life stage affordable health cover options.”

FASTER ONLINE GOLDEN APPLICATIONS LIFE NOW AVAILABLE IN E-APP

F

idelity Life has upgraded its online application

system (e-App) to speed up and simplify the assessment of cardiovascular risk clients.

The update utilises improvements to the built-in underwriting engine with more intuitive questioning and system logic that covers hypertension, high cholesterol and diabetes. It lets advisers enter client information on insulin usage, hbA1c reading, urine test results, blood pressure and cholesterol readings. It is now possible to obtain more automated decisions without underwriter involvement, delivering faster assessments – especially if the client has the relevant medical information on hand.

F

idelity Life’s simple, level-premium, Golden Life

product is now available as part of its electronic application process. Clients can apply for a Golden Life plan online to satisfy three simple questions to qualify for basic life cover. There are no intrusive health questions, no medicals and only a simple declaration, allowing an option for people who have been declined cover, have heavily loaded cover, or feel particularly anxious about answering medical questionnaires.

The latest enhancements result from adviser feedback received at such events as Golden Life’s national conference and adviser seminars. These adviser-directed enhancements were designed to improve the company’s products or technology solutions.

025

PRACTICE MANAGEMENT

{ INVESTMENT }

Active v passive – is the debate is over?

The active-passive fund debate may never end. Evidence shows ‘small’ is best. by Ben Brinkerhoff

A

t Consilium, we believe a growing body of evidence has moved us past the traditional active v. passive debate.

The traditional debate contrasts an index fund, representing the passive camp, and an active equity or hedge fund, representing the active camp.

A widely publicised wager between Warren Buffett and a hedge fund manager called Protégé Partners illustrates the point.

Buffett bet that that the Vanguard S&P 500 would beat a selected group of hedge funds over a 10-year time horizon. So far the Vanguard fund is up 43.8%, compared with the hedge fund’s gain of just 12.5% since the bet was made.

Buffett’s backing of the S&P 500 was primarily an argument about the significance of cost minimisation not philosophy.

In his 2014 Berkshire Hathaway letter to shareholders, Buffett said he had instructed his estate to put 90% of his funds into the Vanguard S&P 500 and 10% in cash.

Here’s his rationale: “Both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal…”

This observation, from one of the greatest stock pickers in history, suggests that one does not necessarily need to agree with a passive investment philosophy to observe the weight of the evidence. The evidence shows, overwhelmingly, that investors are not rewarded by the high costs of active investment management.

When Russell Kinnel, director of research at Morningstar, attempted to identify the No 1 predictor of performance for investment managers, his findings also made a compelling argument in favour of low cost investing.

“If there’s anything in the whole world of

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mutual funds that you can take to the banks, it’s that expense ratios help you make a better decision. In every single time period and data point tested, low cost funds beat high cost funds…Investors should make expense ratios a primary test in fund selection.

They are still the most dependable predictor of performance.”

The second part of the debate focuses on persistence in performance. Every study of the persistence of active managers to deliver outperformance [and there have been plenty] shows that once you control for risk there is no statistically meaningful performance persistence.

To illustrate simply, Vanguard conducted a study in which they ranked all US equity funds in terms of excess return versus their stated benchmark over the five years ending 2008. They divided the funds into quintiles, separating out the top 20% of funds.

Persistence They then tracked the performance of those top 20% of funds over the following five years through December 2013 to check for persistence. If the top quintile funds displayed any meaningful performance persistence, we would expect a significant majority to remain in the top 20% five years later. A random outcome would result in about 20% of the funds dispersed evenly across the five quintiles.

The results were close to random. Only 12% of funds repeated a top quintile performance, while 28% moved to the bottom quintile.

If costs really matter and performance persistence by active managers cannot be counted on, is there a reliable way outperform markets?

This is where we depart from the traditional passive v. active discussion. Considerable research shows that low cost shares [based on a combination of fundamental ratios], small company shares and profitable company shares exhibit higher returns than

the market over long periods of time.

The figure below compares long term value, small cap, growth and total market indices for various markets.

Both value and small cap segments of the market outperform total market and growth.

The implications of this are that not every share has the same expected return. This is probably because shares incorporate unique systematic risks, for which prices and market capitalisation are merely a proxy. And there are other proxies beyond just these two.

Costless benefit The question is how to invest in shares with a higher expected return. Do we pay a manager to pick what he believes are the best of the bunch? Two problems arise with this approach – the manager’s fee [evidence shows this is not money well spent] and also that we lose some of the virtually costless benefits of diversification.

Passive investors can defeat both of these problems. They can use very low cost and highly diversified funds to access these sources of higher expected returns in a way that adds long term value over broad market benchmarks and peers.

In everything we do, the core of the argument is always evidence. We want to see evidence – evidence that has some statistical relevance; evidence that is persistent across time periods, pervasive across markets and has a sound economic rationale to it.

We want to see evidence that ideas don’t work merely in theory or on paper, but can produce results after considering the costs of management, transactions and taxes.

The problem with active management as it’s traditionally described is that the evidence simply doesn’t stack up.

As for the debate about active vs. passive…

If purely an argument based on conjecture and opinion, it will probably never end. If evidence counts for anything, however, we think this debate was settled a long time ago.

PRACTICE MANAGEMENT

Case for active management International market volatility has inflamed the passive v. active debate, reasons Clayton Coplestone

A

round this time of the market cycle passive-investment zealots emerge armed with historic reasons at how active management fails to deliver.

However, it is exactly this time of the market cycle when volatility increases, that active managers earn their fees – exploiting investment inefficiencies whilst individual investor emotions and the weight of money create mis-pricings.

The debate about the merits of active v. passive investment management has been inflamed following the Global Financial Crisis (GFC) and the failings of outdated portfolio construction theories to preserve client wealth.

The increased volatility in financial markets that followed the GFC crisis exposed the frailties of many investment approaches which failed to preserve investor wealth, and in many cases, amplified portfolio risks.

The euphoria of the pre-GFC environment, coupled with inadequate research, excessive borrowing, and a poor understanding of the

financial instruments being promoted were also contributing factors impacting upon investor’s expectations in active investing.

Appropriate While the reaction of many investors to the turmoil in financial markets and innovation, to flee to the perceived safe-haven of passive investing to fulfill their various investment objectives was appropriate, they have mistaken that ‘passive’ investment approaches would have been effective in avoiding the mayhem.

Unfortunately, the findings of studies commissioned to consider the case for an active versus a passive approach have been muddied by the use of skewed statistics, questionable association of outcomes and causes, and disingenuous extrapolation of past events. The inability of passiveenthusiasts to effectively argue against market inefficiencies, has forced them to focus on the price benefits of passive investments.

The adoption of passive discussions by the advisory community, demonstrates a systemic issue of an industry that has

difficulty in defining its value proposition.

The end result is that intermediation soon becomes irrelevant to the consumer, if the main differentiator is price.

While a passive approach may be appropriate for the circumstances of some, a strong case exists for most investors to employ a proven active approach as they pursue their investment objectives.

Concentration The concept of ‘market efficiency’ is erroneous, with passive investments failing to ‘neutralise’ risk, and introducing significant ‘concentration risk’ and benchmark risk [and, in relation to exchange-traded funds, counterparty risk] to investors.

Active management allows ‘risk’ to be managed appropriately in the context of investors’ specific objectives.

Clayton Coplestone, with a background in share broking, money markets, financial planning and asset management, has been working in the financial services industry since 1984.

027

PRACTICE MANAGEMENT

{ ETHICS }

CLIENT FIRST,

STUPID! Maintaining and improving your competency is an instrinsic part of your business ethics. Michael Dowling, president of the IFA

T

he New Zealand financial services sector finds itself at an interesting crossroad.

We are working through the effects of major financial scandals, collapses and market failures both local and international.

Lately this included institutional failure to act ethically, with issues evolving out of Australia. This is of specific interest to NZ as the majority of the banks working here either work or are owned in Australia.

NZ legislation has been enacted and compliance regimes have responded to the serious loss of public confidence however we are yet see an appreciable lift in the public trust of the sector. Richard Sexton, of PwC, UK, is quoted saying, “You cannot simply

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WWW.GOODRETURNS.CO.NZ

How does keeping a professional development plan and undertaking professional training to maintain my status?

regulate your way to trust. Instead, it has to be earned through behaviour based on sound principles of honesty and integrity.”(1) The financial advisers, as a profession, are at the start of a journey for the wider industry to rebuild trust in the financial sector.

Client's interests I would like to explore, in a series of articles over the coming months, what a good adviser does to place the client’s interest first; some of which you may find you are doing, but had not considered as part of placing the client’s interests first; some of which you may find you are not doing, in which case I hope to provide you with a mechanism to comply easily.

I have started at the back of the Code of

PRACTICE MANAGEMENT

can persuade even the most ethical and compassionate people to betray their own values.”

At times, people may allow the wrong the things to happen when they are under pressure. That may be pressure from such external sources as employers, colleagues, targets, home, or from time or emotion.

Acting ethically requires courage and discipline, both of which can be developed through practice.

Practicing dealing with ethical problems allows an adviser to develop his/her skill in recognising and dealing with situations of ethical risk. Training allows you to test ethical examples relatively free from pressure, to understand the subtle steps that may take you across ethical boundaries. By thinking through decisions processes with your peers we are able to make the better decisions under normal work and life pressure.

Documentation

Professional Conduct for Financial Advisers 2014, and will work forward to the front.

Looking at section F Minimum Standards for continuing Professional Training are code standards 17 and 18, the question I have asked myself is how does keeping a professional development plan and undertaking professional training to maintain my status place the client’s interests first?

The latest version of the Code of Professional Conduct re-states the “paramount” importance of placing the interests of your client first. It’s the overarching principle – similar to the medical profession’s Hippocratic principle of “do no harm”.

I find most financial advisers have no

problem placing a client’s interest first.

The problem they have is demonstrating how they do it.

Embedded Most are doing activities on a daily basis that demonstrate this principle. However, the activity is so embedded in their process they have not considered it as an activity that puts the client first.

Ethics at its most basic is: ➤ Knowing the right thing. ➤ Knowing how to do the right thing, and ➤ Doing the right thing.

Phil Zimbardo, Ph.D, founder of HIP and social psychologist who conducted the famous Stanford prison experiment 1971, said: “Decades of evidence shows that situations

I have found that observing myself and reflecting on my practices, processes and documentation while undergoing training, allows me to test my practice in relation to best practice (which is putting the client first). As a result of most training I come up with changes in my business where I have observed the opportunity for improvement.

One of the points I picked up lately was to highlight to my clients is how much training I do in a year. By undertaking training we are exposing ourselves to new or better ways of doing our work, thereby providing clients with a benefit.

By sharing ideas with others and discussing best practise in training I am placing my client first. From a client perspective it is of interest how much time I spend in a year improving the advice I can offer, as it makes me better in my role for them.

Having a training plan and sharing how much training I do is of interest to a client who wants to pay for the best advice.

Relationship The Institute of Financial Advisers (IFA) has a formal relationship with the Institute of Business Ethics (IBE).

The IFA is reassessing its training offers and the need to expose advisers to a range of ethical issues relevant to them and the NZ context.

Further, it recognises the need for practical tools, procedures, guidelines and skills for practitioners to competently and ethically respond in ways that engender trust with their clients and the wider NZ public.

029

Sandra Quemba

Triumphing

OVER FINANCIAL LANGUAGE BARRIER Dealing in financial advice amid different cultural background has diversified Sandra Quemba’s time with Craigs Investment Partners. by Helen Twose

S

If you or a colleague want to be profiled in this column please contact Helen Twose helentwose@gmail.com

andra Quemba has a bit of an edge when it comes to translating financial jargon into everyday language for her clients.

Colombian-born and raised Quemba, an investment adviser with Craigs Investment Partners in Auckland, knows what it’s like to encounter a new and unfamiliar culture.

“I kind of relate to a client who doesn’t understand what I’m talking about,” Quemba says.

“From the beginning, I’m aware of that fact and I’ve found that clients feel really comfortable with me because the way I explain things to them in just basic terms and the way, in a methodical way, I go through a process where I’m trying to understand what they want to achieve and then I basically tell them what to do in simple terms.”

Quemba’s empathy with those new to the language of investing is put into practice not only with her own clients but at her local BNI business networking group.

Interacting with businesspeople from different social, cultural, educational and career backgrounds means careful planning for the group’s weekly 60 second presentations, Quemba says.

“It has made me find new ways of explaining what my business is to get their attention.

“I’ve found that quite challenging but it is a work in progress.”

Quemba says she has been lucky to connect with smart people who are keen on not only growing the group but also the businesses of each member.

After a year of membership Quemba says

As an adviser, I guess you get to own your business and grow it at your own speed.

she is starting to get traction and build referral business through the connections she’s made.

Added to her BNI networking Quemba runs seminars on investing basics and women’s wealth management.

“All those events are part of me being present in the investment community.”

Quemba hails from an engineering background, having trained as an industrial engineer in her native Columbia.

Working for the German multi-national Siemens made her realise she didn’t enjoy engineering so she began working in a broking firm as a risk analyst.

After several years she started dealing with advisers working for the institution clients and loved it so much she focused her career on becoming an institutional adviser before specialising as a fixed-income trader.

KIWISAVER

By this point, Quemba had also set her sights across the Pacific, looking to expand her knowledge and skills in a new market.

“It took me a while to find a job in finance when I arrived,” Quemba says.

“Obviously my accent is quite strong.

“People are quite, not reluctant, but they want to ensure that the people really know what they’re doing, what they’re talking about.”

While looking for work, Quemba joined the Chartered Financial Analyst programme to gain some globally recognised credentials.

“It just confirms or proves that you do have some ethical background and due diligence and knowledge of what investment and portfolio management is about.”

She joined Craigs Investment Partners three years ago, initially covering a maternity leave position as an associate adviser to Richard Towers, an investment adviser with 30 years of experience under his belt.

“Initially it was a job for 12 months and then I just ended up staying here.”

Quemba says the work reviewing portfolios, preparing recommendations and other background work gave her a chance to get to know Towers and his clients.

“The relationship evolved to the point where he was comfortable with me moving to be his business partner.”

The partnership was rounded out 18 months ago by James Twiss, who brings experience in London and Australia to the mix.

“And I’ve come from the industry but from an emerging market economy so we bring in different backgrounds, which is helpful because we have a lot of ideas.”

Each of their retail clients has different needs but at a macro level there is a common view across Craigs of what is going on in New Zealand and offshore in terms of what stocks and fixed-income products to buy, she says.

“So we have to work closely together to have a clear view then filter that down and reflect that in each of our individual portfolios.”

So what has the jump from engineering to finance been like for Quemba?

“I guess you do have the numerical and analytical skills,” she says.

“I’ve met a few advisers here who have had a background in engineering and consulting.

“Probably, they just wanted something more, not relaxed, but something you own.

“As an adviser, I guess you get to own your business and grow it at your own speed.

“It does give you some independence within the firm and all the things that it provides for you.”

Quemba has also needed to adjust her advisory style after moving from dealing with institutional investors to her current retail client-base.

“It is a different space; it requires different skills, that’s what I’ve learned.

“When you deal with an institutional client those people are sophisticated investors and they know what they are talking about.

“When I would pitch a sale or purchase to

Craigs Investment Partners Source: Fundsource, 31 Aug 2014

Assets (NZ$m)

Performance % p.a 1 year

2 year

3 year

4 year

5 year

KiwiSTART NZ Equity

2

13.42

17.15

14.99

-

KiwiSTART Aust Equity

1

10.97

8.16

9.67

-

KiwiSTART Equity

8

9.97

11.99

11.36

-

KiwiSTART Growth

62

8.56

9.88

9.54

6.82

KiwiSTART Bal SRI

11

8.53

10.08

9.59

6.28

KiwiSTART Balanced

45

8.00

8.89

8.69

6.70

KiwiSTART Conservative

15

5.77

5.78

5.85

5.38

KiwiSTART Fixed Int

2

4.78

3.70

4.30

-

Sandra Quemba’s home country of Colombia in the northwest of South America, sharing borders with Panama, Venezuela, Brazil, Ecuador and Peru.

The 47.5m locals speak Spanish, drive on the right and pay for goods in the peso.

One New Zealand dollar would get you roughly $1600 Colombian peso and a 500ml bottle of local beer would cost around Col$2500, with a 330ml bottle of imported beer costing about twice that amount.

It is one of the world’s 17 “mega diverse” countries, a group of countries said to hold the majority of the world’s species, with Columbia considered to be the most mega diverse per square km.

Colombia, the third largest economy in Latin America, is part of the CIVETS group of six leading emerging markets [Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa] and is an accessing member to the OECD. Local industries range from oil, mining, chemicals, health related products, food processing, and agricultural products to textile and fabrics, garments, forest products, machinery, electronics, military products, metal products, home and office material, construction equipment and materials, banking, financial services, software, IT services and the automotive industry. [Sources: Wikipedia; Numbeo]

them it would be a strategy for them.”

Quemba says advising retail clients is much more about creating relationship, getting to understand their aims and risk profiles and making them feel comfortable working with you to achieve their financial goals.

“It’s a different skill in the sense that you are dealing with someone who probably doesn’t even understand what you are talking about and the client has to rely on your advice,” she says.

“Because I don’t speak your language, because I grew up in a different culture, I’m much more aware of things that are not understandable in an easy way.”

The trio provide advice for clients at any stage of the investment journey but based on funds under management 91% is in managed portfolios, with the balance in KiwiSaver, myStart managed funds or transfers from UK pension funds.

Based on clients numbers, around double are smaller investors with money in KiwiSaver and MyStart rather than large portfolio holdings.

Quemba says it doesn’t matter if a person has $200,000 to invest or is just contributing $100 a month, advisers have a duty of care to any client to provide advice on a similar basis by understanding their needs, risk profile, stage in life and goals.

“There really is no small client,” she says.

“If a client starts with a small amount it can become a large amount in the future.

“You never know what will happen to them, if they will inherit an amount or they will sell their house, downsize.

“There are always things happening so regardless of the initial amount it’s just you as an adviser being their voice and their help within that process.”

Even though the vast majority of her clients’ funds are in managed portfolios KiwiSaver is always an important part of the overall investment strategy, she says.

“One of the key things Craigs differentiates itself from other KiwiSaver providers is in the fact that we have a scheme that allows clients to personalise their portfolio.”

Craigs kiwiStart Select gives KiwiSaver investors the option to choose to invest directly in their choice of securities, including stocks.

“If they are someone who is relatively knowledgeable and likes to be engaged and to read the research and to be more informed and make probably more proactive decisions with their investments then that’s where the selfselect option kicks in.”

While Quemba has some clients with a high level of interest in their KiwiSaver investments, others still aren’t aware of the sweeteners offered by the government.

She has even come across those investors, mainly self-employed, who have opened up an account but never set up a contributions plan.

But paying attention to what’s happening across her clients’ investments is part of her role, says Quemba.

ASSET ADVISER

{ MANAGED FUND PERFORMANCE TABLES } Name

Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price %

New Zealand Insurance Fund Cash AMP KiwiSaver Cash Fund 1.3719 2.98 2.82 2.99 AMP Prem PSS OnePath NZ Cash 1.4731 3.12 2.94 3.03 AMP PSS Select Cash 1.3957 2.94 2.67 2.71 ANZ KiwiSaver-Cash 1.2188 3.45 3.06 2.95 Aon KiwiSaver OnePath Cash 14.236 2.81 2.62 2.72 Aon KiwiSaver Tyndall Cash 13.1735 3.22 3.26 3.34 ASB KiwiSaver Scheme's NZ Cash 1.3204 3.39 2.90 2.78 Asteron Rtrmnt Savings Plan Deposit 10.1926 3.38 3.37 3.28 Asteron Super Yield Deposit Fund 10.2176 3.38 3.37 3.28 Asteron Superplan 2000 Capital Fund 2.1453 3.62 3.48 3.42 Asteron Superplan Capital Fund 2.5557 3.09 2.95 2.89 FC KiwiSaver Scheme's NZ Cash 1.3201 3.48 2.92 2.78 Grosvenor KiwiSaver Enhanced 1.3953 3.46 3.27 3.43 Income Fund Mercer KiwiSaver Cash -3.33 3.09 3.46 Mercer Super Trust KiwiSaver Cash -3.28 3.07 3.41 ANZ Default KiwiSaver Scheme-Cash 1.3097 3.42 3.09 3.04 SIL 60s + Sup Cash Fund 2.0404 2.73 2.43 2.52 SIL Cash Plus 2.0404 2.73 2.43 2.52 OneAnswer KiwiSaver-Cash Fund 1.2695 3.37 2.93 2.79 Staples Rodway KiwiSaver Conservative -3.75 3.27 3.08 Fisher TWO KiwiSaver Scheme-Presv 2637.06426 3.36 3.25 3.17 Westpac KiwiSaver-Cash Fund 1.2761 3.29 3.00 2.90 New Zealand Insurance Fund Cash Non-PIE Fidelity Life Cash Portfolio 3.1539 1.66 1.73 1.74 New Zealand Insurance Fund Equity Region Asia Pacific SIL 60s + Sup Pacific Basin Share 1.8384 1.49 6.37 4.07 SIL P/R Pacific Basin Fund 1.8384 1.49 6.37 4.07 New Zealand Insurance Fund Equity Region Australasia Aon KiwiSaver Milford 2.4331 13.40 19.82 13.94 Asteron Superplan 2000 Trans Tasman 3.3071 14.47 18.45 11.66 Fund Asteron Superplan Trans Tasman Fund 4.2079 13.91 17.71 10.95 Grosvenor KiwiSaver Socially Rsp Inv Gr 1.3359 7.92 10.15 -Grosvenor KiwiSaver Trs-Tasm Sm 1.1136 1.38 3.75 -Coms Shr Mercer Super Trust KiwiSaver Shares -15.00 18.56 11.88 Mercer Super Trust KiwiSaver -15.60 20.54 13.34 TransTasman Milford Active Growth KiwiSaver 2.4207 13.53 20.01 14.05 NZ Guardian Trust GIFs - Small Companies 4.2087 4.12 13.24 6.79 OneAnswer KiwiSaver-Australasian Share 1.3785 18.07 20.28 13.41 Smartshares Smartkiwi Growth Fund 1.03824 13.11 12.90 7.98 New Zealand Insurance Fund Equity Region Emerging Markets Fisher FreedomPlan - Emerg Mkts 2.37787 7.36 3.81 0.39 Fisher FuturePlan - Emerg Mkts 2.37787 7.36 3.81 0.39 New Zealand Insurance Fund Equity Region Europe Asteron Superplan 2000 European Fund 2.0797 4.13 18.99 7.87 Asteron Superplan European Fund 2.4537 3.40 18.18 7.13 New Zealand Insurance Fund Equity Region North America Asteron Superplan 2000 Nth Amrn Fd 2.1874 16.90 19.48 12.44 Asteron Superplan North American Fund 3.1144 16.27 18.72 11.70 New Zealand Insurance Fund Equity Region Australasia AMP Prem PSS OnePath NZ Shares 1.9084 16.93 17.72 12.61 New Zealand Insurance Fund Equity Region NZ Asteron Rtrmnt Savings Plan NZ Equity 3.128 14.71 18.25 11.53 SIL 60s + Sup NZ Share Fund 4.3319 16.98 19.99 13.38 New Zealand Insurance Fund Equity Region NZ Non-PIE Fidelity Life NZ Shares Portfolio 4.8203 9.72 11.38 5.91 New Zealand Insurance Fund Equity Region World AMP Prem PSS FD Intl Share Fund 1 Value 1.0412 10.17 13.90 6.14 AMP Prem PSS FD Intl Share Fund 1.0848 11.21 14.03 6.81 3 Growth Asteron Rtrmnt Savings Plan Intl Eqty 2.3254 10.96 15.56 8.32 Asteron Superplan 2000 Aggressive Fund 1.7089 8.63 10.73 6.49 Asteron Superplan 2000 Global Fund 1.8889 10.33 15.06 8.16 Asteron Superplan Aggressive Fund 1.614 8.00 9.98 5.81 Asteron Superplan Global Fund 2.2326 9.64 14.15 7.32 FC KiwiSaver Scheme's Active High 1.259 13.58 16.18 9.18 Growth FC KiwiSaver Scheme's Global Sustain 1.8852 15.95 19.30 11.29 Grosvenor KiwiSaver International Share 1.4744 11.37 14.11 -Mercer Super Trust KiwiSaver Global -14.37 17.42 11.02 NZ Guardian Trust GIFs - Global Equity 1.6974 8.37 15.11 8.46 SIL 60s + Sup International Share Fund 2.5761 11.90 16.46 9.74

032

WWW.GOODRETURNS.CO.NZ

65.38 4.44 1.58 196.09 3.22 1.46 291.50 3.62 4.35 3.62 24.83 8.80

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18.19

--

9.43 2.10 1.84 1.05 1.56 21.69 21.17 23.45 231.03

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4.03

--

0.18 3.09

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89.29  5.91



25.31  11.19  4.18



2.16



2.52  308.76   8.95 19.53  24.51  1.82 22.32

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1.72 14.23

---

1.76 14.85

---

4.72



1.61  2.16  2.41



5.60



5.39



4.01 0.58 3.11 5.09 30.37

    

3.00



6.63  5.74  2.21  5.62  0.80 

Name

Latest Transaction Exit Price 2.5761 1.3425

1 Yr Return % 11.90 12.61

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 16.46 9.74 11.96  17.10 10.31 28.84 

SIL International Share OneAnswer KiwiSaver-Intl Share OneAnswer KiwiSaver-Sustainable 1.3786 10.91 13.75 6.73 Growth Fisher FreedomPlan - Intl Coms 2.56137 11.76 14.08 8.82 Fisher FuturePlan - Intl Coms 2.56137 11.76 14.08 8.82 Fisher TWO KiwiSaver Scheme-Eq 3420.72301 12.94 15.01 8.97 New Zealand Insurance Fund Equity Region World Non-PIE Fidelity Life Aggressive 2.8186 10.82 11.12 4.14 Fidelity Life International 2.0846 10.44 12.56 5.34 New Zealand Insurance Fund Equity Sector Global - Real Estate Mercer Super Trust KiwiSaver Real Assets -12.94 12.28 10.37 OneAnswer KiwiSaver-Intl Property 1.2131 27.92 19.67 16.92 New Zealand Insurance Fund Equity Sector NZ - Real Estate MFL Property Fund 3.192 15.12 18.08 14.10 OneAnswer KiwiSaver-Australasian Prpty 1.4028 16.77 17.38 13.94 New Zealand Insurance Fund Global Bond AMP Prem PSS Blackrock Global Fixed Int 1.7788 8.80 7.16 6.01 AMP Prem PSS PIMCO Global Fixed 2.0753 11.96 9.00 8.86 Interest AMP Prem PSS SSgA Global Fixed 1.7677 8.59 6.43 5.82 Int Index Asteron Rtrmnt Savings Plan Intl Fx Int 3.0619 8.39 6.47 6.09 Asteron Superplan 2000 Global Bond Fund 2.7358 8.02 6.08 6.01 Asteron Superplan Global Bond Fund 2.5872 8.01 6.07 5.99 Mercer Super Trust KiwiSaver Fixed Intr -7.69 5.93 5.91 OneAnswer KiwiSaver-Intl Fxd Int 1.5192 8.35 5.80 5.62 New Zealand Insurance Fund Miscellaneous Westpac KiwiSaver-Capital Protect Plan 1 1.8364 14.44 16.34 10.86 Westpac KiwiSaver-Capital Protect Plan 2 1.6488 14.47 16.34 10.86 Westpac KiwiSaver-Capital Protect Plan 2 1.509 16.12 16.61 -New Zealand Insurance Fund Miscellaneous Non-PIE Fidelity Life Options Portfolio 4.0295 4.66 7.59 4.60 New Zealand Insurance Fund Mortgages Non-PIE Fidelity Life Mortgage 3.7213 3.18 2.89 2.95 New Zealand Insurance Fund Multisector - Aggressive AMP KiwiSaver LS Aggressive Fund 1.2411 11.92 15.74 8.92 AMP PSS DynamicMkts Growth 1.5804 11.25 14.08 8.53 AMP PSS Select Growth 1.4912 11.35 14.27 8.68 Aon KiwiSaver Russell Lifepoints 2045 6.7062 12.66 18.31 11.34 Fisher Funds Growth KiwiSaver Fund 1.5467 6.79 13.45 8.93 Grosvenor KiwiSaver Geared Growth Fund 1.5516 11.87 12.55 6.87 Grosvenor KiwiSaver High Growth Fund 1.2034 10.08 11.96 6.41 Mercer KiwiSaver High Growth -12.90 14.95 10.35 Mercer Super Trust KiwiSaver High -12.92 15.02 10.30 Growth Fisher FreedomPlan - Growth 2.37732 10.33 12.59 7.45 Fisher FuturePlan - Growth 2.37732 10.33 12.59 7.45 New Zealand Insurance Fund Multisector - Aggressive Non-PIE AMP PRP Dynamic 1.8151 9.92 12.74 6.80 New Zealand Insurance Fund Multisector - Balanced AMP KiwiSaver LS Balanced Fund 1.3903 9.91 11.75 7.79 AMP KiwiSaver LS Moderate Balanced 1.39 9.17 10.32 7.11 Fund AMP KiwiSaver Fisher TWO Balanced 1.4504 10.28 11.13 7.91 AMP PSS DynamicMkts Balanced 1.639 9.16 10.43 7.27 AMP PSS Lifesteps Consolidation 1.5809 8.50 9.20 6.61 AMP PSS Lifesteps Progression 1.6557 9.20 10.56 7.34 AMP PSS Select Balanced 1.5884 9.29 10.59 7.35 ANZ KiwiSaver-Balanced 1.4811 11.23 12.42 9.67 Aon KiwiSaver OnePath Balanced 20.4198 11.12 13.42 10.25 Aon KiwiSaver Russell Lifepoints 2025 7.3368 11.15 13.98 9.98 Aon KiwiSaver Russell Lifepoints Bal 7.246 11.92 15.45 10.51 ASB KiwiSaver Scheme's Balanced 1.4022 10.40 11.39 8.68 Asteron Rtrmnt Savings Plan Mgd Neutral 2.7505 10.34 11.89 8.48 Asteron Super Yield Managed Fund 13.932 10.26 12.01 8.52 Asteron Superplan 2000 Balanced Fund 2.1855 9.65 11.47 8.15 Asteron Superplan Balanced Fund 2.7926 8.90 10.66 7.28 FC KiwiSaver Scheme's Active Balanced 1.389 11.04 11.56 7.96 FirstChoice KiwiSaver Scheme's Balanced 1.3995 10.43 11.40 8.67 Grosvenor KiwiSaver Balanced Fund 1.4263 8.90 8.19 6.17 Mercer Super Trust KiwiSaver Moderate -10.15 10.59 8.06 Milford KiwiSaver Balanced 1.6055 13.60 15.99 -ANZ Default KiwiSaver Scheme-Balanced 1.4209 11.23 11.68 9.00 OneAnswer KiwiSaver-Balanced 1.4985 11.41 12.54 9.75 Smartshares Smartkiwi Balanced Fund 1.19388 9.22 8.90 6.13

2.80



3.26  29.41  49.89  3.82 2.91

 

1.20  6.61  477.12  10.25  2.30



2.57  8.69



1.26  1.02  1.53  0.98   2.35 11.35 9.69 8.92

----

22.46

--

2.28

--

196.19  3.96  33.48  9.19  839.50  4.16  115.88  62.42  11.19  7.97 77.53

 

109.53



545.02  343.39



21.26  3.25  7.91  3.56  50.04  902.55  18.96  11.46  40.03  517.58  15.57  20.21  9.39  65.30  24.17  33.19  260.11  48.44  55.89  39.07  311.94   7.90

Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price %  Fisher FreedomPlan - Balanced Fund 3.34261 9.16 10.09 7.00 11.92 Fisher FuturePlan - Balanced 3.34261 9.16 10.09 7.00 137.09  Fisher TWO KiwiSaver Scheme-Bal 3987.55857 10.16 11.03 8.03 428.66  Westpac KiwiSaver-Balanced Fund 1.4186 10.88 11.39 8.84 727.90  Westpac Retirement Plan - Balanced Port 3.0381 9.67 10.16 7.60 98.75  New Zealand Insurance Fund Multisector - Balanced Non-PIE Fidelity Life Balanced 3.7764 7.62 8.38 5.55 108.05  Fidelity Life Ethical Portfolio 2.6659 6.94 9.69 6.29 0.91  New Zealand Insurance Fund Multisector - Conservative AMP KiwiSaver Default (Default) 1.408 6.82 6.54 5.17 1238.50  AMP PSS Select Income 1.6106 5.32 3.11 4.39 2.20  ANZ KiwiSaver-Conservative 1.4461 8.37 7.63 6.82 393.41  Aon KiwiSaver Russell Lifepoints Cnsrv 8.0968 10.19 10.55 9.01 71.04  ASB KiwiSaver Scheme's Cnsrv (Default) 1.4555 7.16 6.43 5.84 2326.60  FirstChoice KiwiSaver Scheme's Conserv 1.4532 7.17 6.43 5.83 95.33  Fisher Funds Conservative KiwiSaver Fund 1.3355 6.60 7.61 5.91 277.41  Mercer KiwiSaver Conservative (Default) -8.46 8.07 6.81 872.19  ANZ Default KiwiSaver Scheme Cnsrv(Dflt) 1.4656 8.57 7.65 6.91 824.07  OneAnswer KiwiSaver-Conservative 1.4595 8.35 7.68 6.88 311.39  Smartshares Smartkiwi Conservative Fund 1.38183 5.95 6.86 5.20 3.49  Fisher FuturePlan - Capital Prot 1.16665 1.49 1.65 1.80 30.27  Fisher TWO KiwiSaver Cash 1.45674 7.85 6.92 6.00 548.38  Enhanced(Dflt) New Zealand Insurance Fund Multisector - Conservative Non-PIE Fidelity Life Conservative 3.961 6.09 6.04 4.84 61.87 -New Zealand Insurance Fund Multisector - Growth AMP KiwiSaver LS Growth Fund 1.2904 11.22 14.11 8.47 428.83  AMP KiwiSaver ANZ Balanced Plus 1.6072 12.02 14.65 10.54 120.36  AMP KiwiSaver Tyndall Balanced Fund 1.3887 10.72 11.71 8.29 17.01  AMP PSS Lifesteps Growth 1.5862 10.64 12.75 8.13 0.93  ANZ KiwiSaver-Balanced Growth 1.4793 12.55 14.77 10.96 738.72  ANZ KiwiSaver-Growth 1.466 13.80 17.06 12.17 1306.72  Aon KiwiSaver Russell Lifepoints 2035 7.0507 12.01 16.25 10.71 9.73  Aon KiwiSaver Russell Lifepoints Growth 7.0198 12.56 17.40 11.17 19.56  Aon KiwiSaver Tyndall Balanced 14.235 10.60 11.94 8.34 4.67  ASB KiwiSaver Scheme's Growth 1.3431 11.43 13.62 9.62 512.11  Asteron Rtrmnt Savings Plan Mgd Growth 2.7219 11.26 13.71 9.03 27.88  Asteron Superplan 2000 Dynamic Fund 2.128 10.43 12.98 8.53 2.31  Asteron Superplan Dynamic Fund 2.4299 9.65 12.39 7.83 19.36  FC KiwiSaver Scheme's Active Growth 1.3478 12.42 13.99 8.79 26.10  FirstChoice KiwiSaver Scheme's Growth 1.34 11.46 13.63 9.61 29.77  Forsyth Barr KiwiSaver Balanced Port 1.3245 7.41 7.75 4.94 11.81  Grosvenor KiwiSaver Balanced Growth 1.3651 9.57 10.03 -- 120.56  Mercer KiwiSaver Balanced -10.69 11.71 8.80 69.56  Mercer Super Trust KiwiSaver Active Bal -10.80 11.77 8.78 60.30  Mercer Super Trust KiwiSaver Growth -11.71 13.09 9.36 7.08  ANZ Default KiwiSaver Scheme1.395 12.41 13.74 9.98 45.05  Balanced Gr ANZ Default KiwiSaver Scheme-Growth 1.3681 13.61 15.80 10.96 39.06  SIL 60s + Sup Balanced Fund 3.4388 11.84 13.71 10.38 17.98  SIL Balanced Plus 3.4388 11.84 13.71 10.38 78.96  OneAnswer KiwiSaver-Balanced Growth 1.4999 12.78 14.91 11.08 285.80  OneAnswer KiwiSaver-Growth Fund 1.4816 13.96 17.13 12.26 207.47  Staples Rodway KiwiSaver Balanced -12.48 14.03 10.65 20.41  Staples Rodway KiwiSaver Growth -11.33 12.32 8.85 9.97  Westpac KiwiSaver-Growth Fund 1.419 12.20 13.44 10.07 448.04  Westpac Retirement Plan - Dynamic Port 3.3417 11.06 12.28 9.01 103.49  New Zealand Insurance Fund Multisector - Growth Non-PIE Fidelity Life Growth 3.5455 9.02 10.34 5.99 38.31  New Zealand Insurance Fund Multisector - Moderate AMP KiwiSaver LS Conservative Fund 1.5111 7.42 6.92 5.95 208.71  AMP KiwiSaver LS Moderate Fund 1.4365 8.45 8.74 6.60 233.75  AMP PSS DynamicMkts Conservative 1.6351 6.48 5.93 5.22 1.08  AMP PSS Lifesteps Maturity 1.5596 6.54 5.95 5.22 2.96  AMP PSS Lifesteps Stability 1.6219 7.66 7.68 6.03 5.49  AMP PSS Select Conservative 1.626 6.62 5.99 5.26 10.81  ANZ KiwiSaver-Conservative Balanced 1.4711 9.87 10.09 8.34 437.13  Aon KiwiSaver Russell Lifepoints 2015 7.7253 10.29 11.47 9.17 4.81  Aon KiwiSaver Russell Lifepoints Mod 7.7656 11.07 12.95 9.78 12.35  ASB KiwiSaver Scheme's Moderate 1.4422 8.96 8.85 7.38 701.46  Asteron Rtrmnt Savings Plan Mgd Conserv 2.6769 8.66 8.75 7.40 2.37  Asteron Superplan 2000 Conservative Fund 2.1829 8.19 8.34 7.06 2.66  Asteron Superplan Conservative Fund 2.4218 7.27 7.47 6.19 6.01  FC KiwiSaver Scheme's Active Cnsrv 1.4469 7.47 7.96 6.39 6.12  FirstChoice KiwiSaver Scheme's 1.4312 9.01 8.86 7.37 24.56  Moderate

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Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price % Grosvenor KiwiSaver Conservative Fund 1.4372 7.42 5.80 5.86 95.99  Mercer Super Trust KiwiSaver Conserv -7.84 7.61 6.47 2.85  ANZ Default KiwiSaver Scheme-Cnsrv Bal 1.4478 9.93 9.65 7.98 13.29  OneAnswer KiwiSaver-Conservative Bal 1.4856 9.91 10.15 8.42 103.38  Fisher TWO KiwiSaver Scheme-Cnsrv 1.51034 8.12 7.85 6.75 94.49  Westpac KiwiSaver-Conservative Fund 1.4255 8.15 7.51 6.65 1475.46  New Zealand Insurance Fund NZ Bonds AMP Prem PSS OnePath NZ Fixed Interest 1.6647 6.28 3.49 5.81 2.25  Asteron Rtrmnt Savings Plan NZ Fixed Int 2.8765 6.53 4.71 6.56 1.39  Asteron Superplan 2000 NZ Bond Fund 2.4885 6.40 4.44 6.14 1.38  Asteron Superplan NZ Bond Fund 3.1767 6.37 4.45 6.16 6.54  SIL 60s + Sup NZ Fixed Interest 2.6006 6.04 3.22 5.46 3.35  OneAnswer KiwiSaver-NZ Fixed Interest 1.4579 6.68 3.77 5.97 5.23  SIL NZ Fixed Interest 2.6006 6.04 3.22 5.46 5.93  Westpac Retirement Plan - Accum Port 3.0835 4.57 3.09 3.17 19.80  New Zealand Insurance Fund NZ Bonds Non-PIE Fidelity Life NZ Fixed Interest 3.6783 4.38 3.49 3.87 0.56  New Zealand Insurance Fund Unlisted and Direct Property - NZ Asteron Rtrmnt Savings Plan NZ Property 3.9591 ---- 1.04 -Fisher FreedomPlan - Property Fund 4.05643 6.18 7.40 6.22 0.90 -Fisher FuturePlan - Property 4.05643 6.18 7.40 6.22 7.65 -New Zealand OE Cash AMP Capital Cash Advantage Fund 1.34071 3.51 3.46 3.52 239.54 -AMP Capital NZ Cash Fund 1.6141 3.50 3.32 3.46 3883.08 -AMP Prem PUT OnePath NZ Cash 1.3063 3.12 2.87 2.95 3.63 -AMP PUT Select Cash 1.2572 2.89 2.60 2.65 3.77 -ASB Cash Fund -3.29 3.18 3.24 389.40 -Fisher Cash Fund 1.2216 2.72 2.48 2.58 22.54 -Westpac Cash Plus Trust 1.2738 3.08 3.06 3.12 40.42 -New Zealand OE Cash Non-PIE AMP UT NZ Cash 1.7504 1.77 1.70 1.89 1.78 -New Zealand OE Equity Region Asia Pacific Non-PIE AMP UT Asian Shares 1.6392 8.28 11.97 5.36 1.37 -New Zealand OE Equity Region Australasia Devon Alpha Fund 1.494 15.68 21.23 -- 89.67  Devon Trans-Tasman Fund 3.1633 12.81 17.09 9.76 91.40  Harbour Australasian Equity 1.6625 10.35 19.19 -- 94.69  Milford Active Growth 2.414 13.38 19.88 13.98 698.47  Milford Trans-Tasman 1.7682 6.71 17.77 12.64 269.84  Mint Australia NZ Active Equity 1.8699 15.75 22.33 15.09 43.34  OneAnswer SAC Equity Selection 1.9357 15.91 16.88 11.84 20.03  Blueprint Australasian Shares 0.0862 12.75 15.51 -- 1.00  Pie Australasian Growth Fund 3.6057 8.31 26.62 23.13 58.32  Nikko AM Concentrated Equity 1.4417 16.25 16.94 9.93 1.38   Nikko AM Australasian Small Companies 1.5028 4.74 13.53 7.50 0.62 New Zealand OE Equity Region Australia AMP Capital Australian Share Fund 2.20571 4.53 7.83 4.38 32.87  Devon Australian 1.2131 6.15 11.06 -- 34.64  Fisher Funds Australian Growth Fund 2.6465 -5.05 7.23 5.27 61.36  Fisher Funds Premium Australian Fund 1.1562 -5.07 7.62 5.54 43.07  OneAnswer SAC Australian Share 3.6098 -0.96 8.26 4.02 41.39  New Zealand OE Equity Region Australia Non-PIE AMP UT Australian Shares 2.3557 2.90 6.76 2.69 1.55 -New Zealand OE Equity Region NZ AMP Capital NZ Shares Fund 2.27709 18.57 19.93 13.02 493.34  AMP Capital Strategic NZ Shares Fund 2.04053 19.66 20.15 12.43 199.27  Fisher Funds NZ Growth Fund 5.7048 11.16 20.16 14.95 132.64  Fisher Funds Premium New Zealand Fund 1.3339 11.40 20.31 15.10 52.31  OneAnswer SAC NZ Share 3.3629 17.37 20.18 13.68 93.83  Fisher Trans Tasman Equity Trust 3.7787 12.83 17.55 10.97 44.88  Nikko AM Core Equity 1.4618 15.26 19.31 -- 17.02  New Zealand OE Equity Region NZ Non-PIE AMP UT NZ Shares 2.7408 15.45 17.23 10.65 2.84  New Zealand OE Equity Region World AMP Capital Core Global Shares Fund 1.08195 13.06 16.38 8.22 930.54  AMP Capital Core Hedged Global 1.183 16.76 23.37 15.06 580.61  Shares Fd AMP Capital Emerging Markets Share 0.93735 7.33 7.28 3.91 95.92  AMP Capital Global Shares Fund 2.15467 14.06 19.32 11.76 152.03  AMP Capital Resp Invest Leaders Gl Sh 1.34096 14.04 18.68 11.48 34.62   AMP Prem PUT FD Intl Share Fund 1 Value 1.0886 10.19 13.89 5.97 2.31 AMP Prem PUT FD Intl Share Fund  1.1175 10.97 13.97 6.66 1.95 3 Growth AMP Prem PUT SSgA Global Shares Index 1.4159 12.32 15.28 8.39 3.65  Name

Name

Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price %

AMP Prem PUT SSgA Global Shares 1.846 15.86 IndexHdg ASB EasyFund World Shares Fund 1.2155 12.65 Elevation Capital Value Fund 1.3903 6.17 Fisher Funds International Growth Fund 1.4297 5.62 Fisher Funds Premium International Fund 1.4711 6.33 OneAnswer SAC International Share 1.5377 14.36 Fisher Global Fund 4.4216 12.35 New Zealand OE Equity Sector Global - Real Estate AMP Capital Global Propty Securities Fd 1.39504 26.77 ASB EasyFund Global Property Fund 1.1474 23.45 New Zealand OE Equity Sector NZ - Real Estate AMP Capital Listed Property Secs Fd 2.0472 16.54 ASB NZ Property Trust 1.2553 16.83 Mint Australia NZ Real Estate Investment 1.4425 17.44 OneAnswer SAC Property Securities 2.4687 16.40 New Zealand OE Global Bond AMP Capital Hdgd Gbl Fixed Intrst Fund 2.11867 8.93 AMP Prem PUT Blackrock Global Fixed Int 1.6548 8.48 AMP Prem PUT PIMCO Global Fixed 2.0812 11.82 Interest AMP Prem PUT SSgA Global Fixed 1.6431 8.66 Int Index ASB EasyFund World Fixed Interest Trust 1.0655 6.59 Fisher Bond Fund 1.9615 10.38 New Zealand OE Miscellaneous Fisher Funds Property and Infrastructure 1.7372 20.09 Pathfinder Commodity Plus Fund 0.9327 -0.83 Nikko AM Income 1.1835 6.62 New Zealand OE Mortgages Westpac Home Loan Trust 1 2.78 Westpac Mortgage Investment Fund 1 2.95 New Zealand OE Mortgages Non-PIE AMP PMF - Mortgage Investment 137.9116 -9.25 New Zealand OE Multisector - Aggressive AMP Capital Growth Fund 2.20148 12.19 AMP PUT DynamicMkts Growth 1.6103 11.18 AMP PUT Select Growth 1.429 11.30 New Zealand OE Multisector - Aggressive Non-PIE AMP UT Dynamic 1.9298 10.93 New Zealand OE Multisector - Balanced AMP Capital Balanced Fund 2.24354 10.07 AMP PUT DynamicMkts Balanced 1.6224 9.10 AMP PUT Select Balanced 1.5308 9.14 ANZ Invmt Fds Balanced 1.4591 10.91 ASB EasyFund Balanced 1.3 9.77 Milford Balanced 1.5883 12.75 Westpac Active Balanced Trust 1.8061 9.94 New Zealand OE Multisector - Balanced Non-PIE AMP UT Balanced 2.0487 8.89 AMP UT Balanced - Other 1.7739 8.83 New Zealand OE Multisector - Conservative AMP PUT Select Income 1.5017 5.28 ANZ Invmt Fds Conservative 1.3231 8.06 ASB EasyFund Defensive 1.3814 6.51 New Zealand OE Multisector - Growth ANZ Invmt Fds Balanced Growth 1.5364 12.19 ANZ Invmt Fds Growth 1.5926 13.35 ASB EasyFund Growth 1.2302 10.70 OneAnswer SAC Balanced 2.4553 11.86 Fisher Multi Sector Fund 2.678 9.36 Westpac Active Growth Trust 1.7159 11.11 New Zealand OE Multisector - Growth Non-PIE AMP PMF - Active Growth 2.0291 7.51 AMP UT Legg Mason Balanced 1.5144 5.71 New Zealand OE Multisector - Moderate AMP Capital Conservative Fund NZ 2.13867 7.10 AMP PUT DynamicMkts Conservative 1.5888 6.37 AMP PUT Select Conservative 1.6023 6.59 ANZ Invmt Fds Conservative Balanced 1.3927 9.55 ASB EasyFund Conservative 1.3522 7.60 ASB EasyFund Moderate 1.3443 8.36 Milford Income 1.3976 14.15

21.73 14.05 5.14  15.38 9.99 10.99 11.48 19.26 18.13

9.96 6.77 5.40 5.65 12.35 9.79

169.53  13.90  24.79  44.84  106.11  88.09 

23.27 17.81 130.80  15.74 12.87 79.93  16.51 10.32 16.04 17.07

13.87 5.55 12.42 14.00

17.84   1.47 37.70  103.77 

6.80 6.96

6.79 158.44  5.87 1.28 

9.07

8.88

2.98 

6.43

5.79

4.03

4.55 8.57

-- 16.06  8.83 123.23 



15.23 11.36 44.61 -3.57 -2.01 50.58 6.98 7.17 4.80

----

2.41 2.54

2.43 109.40 2.51 154.76

---

-3.50 -2.51 4.18

--

14.60 9.16 5.59  14.03 8.54 3.38  14.13 8.58 13.51  13.94 8.12

9.27 

11.38 10.40 10.42 12.17 10.76 15.57 11.14

22.62  4.69  36.18  66.36  93.71  192.81  126.00 

8.09 7.20 7.23 -8.06 -8.20

Latest 1 Yr 3 Yr Transaction Return Return Exit Price % Westpac Active Conservative Trust 1.6417 7.08 6.77 New Zealand OE Multisector - Moderate Non-PIE AMP PMF - Balanced 2.3356 6.06 6.56 AMP UT Conservative 1.9783 6.29 5.60 New Zealand OE NZ Bonds AMP Capital NZ Fixed Interest Fund 1.59376 7.45 4.26 AMP Capital NZ Short Duration 1.22012 4.97 4.20 AMP Prem PUT OnePath NZ Fixed Interest 1.5569 6.27 3.44 Harbour NZ Corporate Bond 1.0378 5.67 5.02 OneAnswer SAC NZ Fixed Interest 1.4643 6.34 3.27 Nikko AM NZ Corporate Bond 1.1173 6.87 5.78 New Zealand OE NZ Bonds Non-PIE AMP UT NZ Fixed Interest 1.7821 4.63 2.32 New Zealand OE Unlisted and Direct Property - NZ AMP UT NZ Fixed Interest 1.7821 4.63 2.32 New Zealand OE Unlisted and Direct Property - NZ Non-PIE AMP UT NZ Property 1.4659 8.12 8.48 Name

5 Yr Size Morningstar Rating Return $M Overall 5.61 108.73  4.55 34.52  4.82 0.86  6.07 4.39 5.73 5.58 5.46 6.93

1691.93  188.84  1.97  183.09  8.06  83.70 

3.68

0.64 

3.68

0.64 

1.85

1.77

--

Returns are calculated to 30/11/14 Returns are calculated before tax and after fees, except for the non-PIE categories, which are after tax and after fees. For more information about this table and the methodology behind the data, contact helpdesk.nz@morningstar.com or go to www.morningstar.co.nz © 2014 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution.

To the extent that any of this information constitutes advice, it is general advice and has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 and/or Morningstar Research Limited (subsidiaries of Morningstar, Inc.) without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant Product Disclosure Statement (in respect of Australian products) or Investment Statement (in respect of New Zealand products) before making any decision to invest. Neither Morningstar, nor Morningstar’s subsidiaries, nor Morningstar’s employees can provide you with personalised financial advice. To obtain advice tailored to your particular circumstances, please contact a professional financial adviser.

Please refer to our Financial Services Guide (FSG) for more information www.morningstar.com.au/fsg.asp

10.20 6.84 14.91  10.15 6.81 0.81  3.05 7.40 5.79

 4.36 3.44 -- 22.80  5.23 115.64 

14.59 16.72 12.91 13.87 11.95 13.08

--8.90 10.54 8.33 9.36

8.44 8.48

5.20 17.06 4.83 1.60

6.51 5.82 5.94 9.73 6.96 8.25 15.30

5.81 5.13 5.23 -6.01 6.78 --

78.38 25.07 23.45 45.98 11.58 52.59

       

11.05  1.80  14.97  58.85  348.22  143.31  976.29 

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