ASSET JULY 2020

Susan Edmunds on insurance 'non-disclosure' Profiling adviser Shaun Vining – how he helped brother Blair Drowning in compliance?

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KiwiSaver Round Table: Taking the pulse of the sector

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Contents | July 2020

14

22

ASSET Annual KiwiSaver Round Table Key industry minds joined us in discussing Covid fund switching, robo-advice, membership compulsion and rated the scheme out of 10.

Insurance Susan Edmunds looks into how and why non-disclosure happens; how big an issue it is; and how it can be prevented?

UP FRONT 04

EDITORIAL

05

KIWISAVER

08

10

FEATURES 06

Don't mess with KiwiSaver.

Fees and costs of share brokers within KiwiSaver.

12

NEWS Declined claim divides industry; adviser stops scam; active management alive but "not well".

PEOPLE Fidelity Life promotion; new leader for Westpac's BT FM; new directors at MMC.

24

26

STRATEGI No need to drown in compliance says Dave Greenslade.

GRTV Mint’s David Boyle on the central themes from our round table.

REGULARS 28

KiwiSaver annual membership statements: a good measure of success?

30

ADVISER PROFILE

PRACTICE MANAGEMENT Russell Hutchinson talks expected mortality rates post Covid.

NIKKO AM Nikko AM’s new 3% Income Fund: income and flexibility.

INVESTMENT COMMENTARY

32

MORNINGSTAR Morningstar data.

Shaun Vining’s journey into advising and how that helped brother Blair.

WWW.GOODRETURNS.CO.NZ | 03

UP FRONT | EDITORIAL

I

Leave KiwiSaver alone

t’s that time of the political cycle, when politicians roll out a wide array of promises and hope that we won’t remember the ones they don’t get around to keeping.

For the financial services sector, one of the most attention-grabbing this year has been National’s proposal to allow people to withdraw money from their KiwiSaver accounts to fund a small business startup, if they find themselves unemployed.

It appeals to people who like the idea of the jobless hauling themselves out of their financial doldrums through a new enterprise.

But it’s not the sort of policy that the KiwiSaver sector needs.

It’s taken a decade for talk to die down about the potential for the Government to help itself to people’s retirement savings. People are starting to understand how the scheme works – and its aims.

Politicians need to leave the settings alone. Every time it changes, and people have to understand another aspect of the scheme, it shakes confidence.

Right now, we need people to have faith in the prospect of KiwiSaver as a longterm retirement savings vehicle. That faith and confidence will be grown by having clear rules, clear expectations and clear communication around the scheme and how it works – and then encouraging

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people to understand and engage with it until it’s as familiar to them as any other financial product.

Politicians need to stop thinking of it as the quick-fix solution to whatever ails the economy or financial system, otherwise there’s a real risk that the public will decide it’s just too unreliable to bank on as a solution for retirement savings.

The scheme has achieved great momentum and reach over its decade in existence and the worst thing that could happen now would be for it to be knocked off course.

Susan Edmunds Editor

ASSET is published by Tarawera Publishing Ltd (TPL).

TPL also publishes online money management magazine Good Returns GoodReturns.co.nz and TMM – The Mortgage Mag. All contents of ASSET Magazine are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited.

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UP FRONT | KIWISAVER

SPONSORED CONTENT

Where are the brokers’ fees?

Michael Lang takes a look at the fees and costs of share brokers.

I

n New Zealand, on the front page of the Financial Markets Authority’s (FMA) website, you will find an orange box titled “How much of your KiwiSaver return is made up of fees?”. It sits just under the tagline “Promoting fair, efficient and transparent financial markets”. What you will not find is anything on how much a share broker charges to manage your retirement savings.

Fees, or how much a client is charged to have their money managed, is an important ingredient to consider if New Zealanders are to make informed investment decisions. Fortunately, fees are also one of the few variables in finance which are relatively certain (performance fees are of course an exception).

For many years New Zealand was the ‘wild west’ of fee calculations and disclosure. Even if investment organisations had wanted to disclose what they were charging their clients, there was no single set of rules which others were obligated to follow. This made comparing managers’ fees and costs an exasperating and ultimately futile exercise. And without ‘transparent’ there can be little chance of ‘efficient’.

Fortunately, in 2013 one of the first things the new regulator did was establish a single set of rules for disclosing fees and costs. The measure labelled ‘Total Annual Fund Charges’ covers managers’ base fees, performance fees, portfolio expenses, underlying manager costs and many more factors besides. It does not take entry and exit fees, brokerage or currency translation ‘mark-ups’ into account. But as all managers must now follow the same set of rules, it does for the first time in New Zealand’s history allow for an ‘apples to apples’ comparison of the costs of having your money managed. Well, almost.

Missing from New Zealand’s regulatory regime is the multi-billion-dollar share broker industry. New Zealand’s share brokers have long since evolved from promoting individual shares to managing sophisticated, highly diversified

investment accounts which contain local and international shares, bonds, ETFs and managed funds. Many also include alternative assets like private equity and hedge funds. In short, exactly the same investments a fund manager provides, but without the obligation to calculate fees and expenses using the same set of rules everyone else in the market follows.

Sooner or later every financial adviser, whether they work for a broker or fund manager, will be asked by a client to review either their managed fund or broker-built investment portfolio.

Without forensic analysis the adviser will find comparing the costs of two – almost identical – investment portfolios impossible. How then can the adviser provide their client with an informed investment recommendation?

They just can’t.

To illustrate the problem, NZ Funds analysed the secondary disclosure statements of the five major share brokers. The results are shown below.

Unlike managed funds, there is no consistency and the disclosures are difficult to understand, even for a market participant. There is also no example of the likely costs an investor may pay. In some client reports, NZ Funds found the estimated fees and costs to be higher

than the fees and costs disclosed in the report.

One area that was not disclosed in some client reports was the costs associated with investing in ETFs. This was not surprising as there is currently no requirement to disclose the fees of the underlying managers of ETFs, listed funds, managed funds, and private equity.

The share broking industry advises on an estimated $50 billion of New Zealanders’ savings. It is directly comparable to the managed funds industry, providing access to exactly the same underlying investments. At the age of 65, the billions accumulated in KiwiSaver will become eligible for withdrawal and re-investment into what may appear to be cheaper share broker accounts.

The regulator has already done the hard work of designing a single set of rules for fee and cost disclosure. Now, all that remains to be done to facilitate “fair, efficient and transparent financial markets”, is to ensure it is applied equally to the share broking industry in New Zealand, as it already is in Australia. A Michael Lang is Chief Executive of NZ Funds and his comments are of a general nature.

WWW.GOODRETURNS.CO.NZ | 05

FEATURES | SPONSORED CONTENT

No need for advisers to drown in compliance The doomsayers predict that small financial advisory businesses will drown in compliance once we move to the new advice regime on March 15, 2021.

But David Greenslade, founder and executive director at Strategi, believes this is not the case – if a few fundamentals are in place.

W

hile it is common for advisers in the UK and Australia to spend about half a day per week on compliance-related tasks, this is unlikely to be the case here in New Zealand, David Greenslade says.

“Those regimes have a prescriptive approach to compliance that requires a lot more input. New Zealand has a more enlightened regulator (the Financial Markets Authority (FMA)) which promotes a more principles-based approach,” he says.

Greenslade offers a range of suggestions for avoiding an excessive compliance burden, including the following.

1 Have a well-drafted operations manual in place, proportionate to the size of the business. This sets the framework for how your business will operate under the new regime.

2 Embed simple to use technology into the business and maximise its potential. This is absolutely critical and needs to be well thought through.

3 Have a really good advice process in place that includes simple to understand and quick to prepare advice documents. These documents

06 | ASSET JULY 2020

should ideally be digitally delivered, and short enough that clients will read them.

4 Obtain the level five qualification as soon as you can – and don’t regard it as a box-ticking exercise.

“Instead, select your education provider based upon its quality of training material, range of training methodologies and NZQA qualitative rating – and consider it an investment rather than a cost. This is the foundation for the way advisers will need to operate under the new regime and the more you know about the requirements and obligations, then the easier compliance will become.”

5 Outsource some compliance tasks to reputable providers to gain efficiencies and ensure you are on the right track and remaining compliant.

Use them to conduct annual endto-end compliance reviews, and provide periodic advice on systems, processes, templates and governance.

Greenslade points out that the financial advice provider retains liability and responsibility for compliance and conduct, so if something goes wrong, it is the FAP that the clients and FMA will be chasing.

“With this in mind, hiring the cheapest compliance provider may end up being the most expensive option in the long term if something goes wrong,” Greenslade says.

“Select your compliance provider based upon experience, capability, capacity and quality.”

6 If you have a secretary or PA, make

sure you get them on the Strategi Compliance Officer Course (before March 15, 2021). An investment of $2,100 plus GST to upskill that person to the level they can undertake most compliance tasks will save considerable time and money. Strategi estimates at least a 10-fold return on the course cost.

There is no doubt that the compliance step-up required for some Registered Financial Advisers will be huge, Greenslade says. However, it is all achievable provided the journey starts now and not on March 15, 2021 when the new advice regime begins. A Strategi Group is the leading provider of compliance and training services for the New Zealand financial advisory industry.

For more information, visit www.strategi.co.nz

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UP FRONT | NEWS

News story about declined claim divides advice industry Ailepata Ailepata made news last month. The 43-year-old from South Auckland was turned down for a $100,000 claim for gastric cancer because he had been switched to a new insurer, with less cover, and he had not disclosed his “impaired glucose tolerance”.

Some were quick to decry advisers looking to make money from vulnerable clients. Adviser coach Tony Vidler described the actions of the NZ Home Loans adviser who shifted Ailepata from a Westpac policy to a Fidelity Life one, with half the amount of trauma cover, as a “shocker”. But insurance adviser Katrina Church said there was not enough information to condemn the advice process.

“Sadly, guys, this is all about the client understanding their obligation about their disclosure requirements. If they had disclosed the high sugars he may not have been accepted and still be insured at Westpac,” she wrote in reply to Vidler’s LinkedIn post.

Vidler said this sounded like she was blaming the client. “If you are publicly condoning replacement, where the client ends up with less cover and a higher premium and was only minimally involved in completing the application form under the pretext of ‘better service’ and a ‘better’ deal, you are contributing to the problem the industry faces.”

Both Church and Vidler, however, agreed that the issue of non-disclosure was a pressing one. Vidler said:

Adviser stops scam and saves client $60,000

An adviser who saved his client from losing $60,000 to a scam says it shows his systems are working.

Craig Fraser, of VIP Financial in Timaru, said his client, who is in her mid-70s, requested a withdrawal from her DIMS account. She made one request, which was processed, but two weeks later she requested another $60,000.

“That set all sorts of alarm bells ringing,” Fraser said.

While Fraser said he “felt terrible” pushing her about why she wanted the money, he discovered she was trying to help a friend whom she had never met.

The person had been emailing her for a couple of months, and there had been emails from someone claiming to be the friend’s son at boarding school in the United States.

He told the client he had an obligation to her family and asked her to send the emails they had traded. The woman lost $30,000 but was relieved not to have lost more.

Fraser said he had not been able to persuade her to report the fraud but he said it showed his systems, including a vulnerable client policy, were working.

In a case considered by IFSO this year, a woman complained that an adviser did not stop her brother withdrawing a total of $189,100 from a family trust’s bank account.

She said the adviser had a duty of care to question the reason for the withdrawals but IFSO said that was not necessary because the man was authorised to make withdrawal requests.

08 | ASSET JULY 2020

“Clients often tell you everything they think you want to know then later say ‘I didn’t think that would matter’.”

Clients were in a poor position to judge what would be important to an insurer, he said, and it was the adviser’s job to step up.

Church said there was not enough in the articles written about the case, adding: “There are many ways an adviser can lower the level of nondisclosure – ensuring the client reads their application post-submission and confirms this prior to issue, obtain medical notes from the outset, obtain ACC claims histories.”

Many people did not understand what was in their medical notes, she said, and sometimes GPs had added information that clients did not know was there.

Sale of AMP Life 'an absolute travesty'

Parliament’s Finance and Expenditure Committee has been told the way the sale of AMP Life has been handled is an “absolute travesty”.

The Reserve Bank has now finalised the sale of AMP Life to Resolution Life, but not before a petition was heard in Parliament on July 1 objecting to the deal. AMP policyholder Andrew Body’s petition had asked for the House to review the Insurance (Prudential Supervision) Act to ensure policyholders are treated fairly when a life insurer is sold.

Body told the committee: “The problem I have is I haven’t been consulted. All I know about the purchaser is it’s a Bermudan tax-haven company apparently controlled by a financial entrepreneur from the UK.” A trust has been set up to provide security but Body said it was not possible for the beneficiaries of that trust – the policyholders – to access information about it. The Financial Markets Authority (FMA) should have been required to approve the transaction, he said.

Reserve Bank deputy governor Geoff Bascand said it was only the ultimate ownership of the company that was changing and AMP Life was still continuing as the insurer.

FMA director of regulation Liam Mason said his organisation did not have a role in the sale of life insurance companies, but if it had the legislation it would look at transactions like this.

Resolution Life NZ chief executive Therese Singleton said the Reserve Bank had been “thoroughly diligent” in its oversight of the transaction.

Active management alive but 'not very well'

Active management is alive but “possibly not very well”, a Russell Investments New Zealand investment forum session has been told. The conference is being held online this year as a series of webinars.

One was conducted by Russell Investments strategy research director Leola Ross. She outlined research measuring the performance of sample managers defined as having demonstrated skill.

It showed active managers outperformed from 1999 to 2014, returning 4.73% in outperformance between 1999 and 2002. But a “performance pandemic” in 2015 to 2018 saw performance drop.

“Skill was not enough,” she said.

There were a few reasons for this, she said.

Mega-cap stocks outperformed dramatically, both in developed economies and emerging markets. Many active portfolios were also underweight to the US, she said, because there were so many active managers there.

“Managers are working hard to find opportunities and some are finding it,” she concluded. “Active management is not dead – but whether or not it’s fully recovered is a tough one.” A

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UP FRONT | PEOPLE

Fidelity Life promotes from within for head of adviser distribution role Fidelity Life has promoted Todd Allan to become head of adviser distribution. Allan, who has worked for both Asteron and Sovereign, will report to Adrian Riminton, Fidelity Life’s joint acting chief executive and chief distribution officer.

A key focus for Allan at New Zealand’s largest locally owned life insurer will be supporting advisers through a period of change. “The new financial advice regime, conduct and culture changes and Covid-19 are all having an impact on our business,” said Riminton.

“We’re focused on a sustainable future for advisers’ businesses and ours, and Todd has a critical role to play in delivering this.”

MMC turns to big names

MMC has appointed two new independent directors to its board. Carmen Vicelich is the founder of Valocity Global and Data Insight, having built up both multimillion-dollar businesses within the space of five years. Vicelich has won numerous awards including finalist in the EY Entrepreneur of the Year awards; CIO Winner of Digital transformation; NZDM Nexus Supreme Winner Award; and Winner 2019 Global Fintech Startup of the Year.

Paul Mersi is an independent company director and consultant, having previously been a senior financial services and tax partner with PricewaterhouseCoopers. His current roles include being a member of the Financial Advice Code Working Group and a director of Ngai Tahu's Whai Rawa Fund.

Mersi was a member of the government-appointed independent Savings Working Group, a director of Brook Asset Management and early in his career held a senior policy position in Inland Revenue with secondments to the OECD and the NZ Treasury.

MMC managing director Tom Reiher said Vicelich’s “expertise with data, and ability to leverage technology, is an invaluable asset.”

Reiher added that Mersi’s “governance proficiency and in-depth knowledge of the funds management and advisory industry will be essential to ensuring we are a step ahead of upcoming changes in the regulatory environment.”

With the recent acquisition of Aegis, MMC has more than 100 clients, with combined funds under administration in excess of $77 billion.

010 | ASSET JULY 2020

A new leader for Westpac's investment arm

BT Funds Management NZ has appointed Philip Houghton-Brown as head of investment solutions.

Houghton-Brown joins BT after eight years at Mercer (NZ), where he was chief investment officer and prior to that its head of investments. He has also held senior roles at OnePath NZ/ING NZ and AMP Asset Management.

Westpac NZ’s acting head of investments and insurance, Nigel Jackson, said Houghton-Brown would bring a wealth of expertise to the role.

“Philip has a strong background in managing investment portfolios for retail, wholesale and institutional clients.

“His breadth of knowledge in managing balanced funds will provide real value to BTNZ and our investors.”

Houghton-Brown takes up his new role in late September.

Life in the fast Lane suits Cigna

Tony Lane has been appointed chief risk officer at insurer Cigna, bringing with him a wealth of banking and financial services sector experience.

Chief executive Gail Costa said the role had been created as a result of Cigna and OnePath combining earlier this year.

“We’re excited to have Tony join our leadership team. We now have the perfect opportunity to build upon our existing risk management activities to deliver a programme that meets the needs of our larger organisation.”

Former Fidelity man seals the deal

Craig Winterburn has been appointed national network development manager at dealer group SHARE. Until recently he was general manager distribution at Fidelity Life and he has previously held senior roles in Asteron Life and AMP over more than 20 years working in financial services.

Winterburn starts immediately, with advisers and suppliers having the opportunity to welcome him at the relaunched annual conference at the end of August.

Haaking back to the old days

Sovereign's former head of distribution, David Haak, has joined Cigna to strengthen its team of advisers in the firm’s Takapuna office.

Haak stepped down as Sovereign chief distribution officer in 2015. He has more than 35 years’ experience in the insurance industry, 19 of which have been as an executive at Sovereign. A

Keep up with the news at

goodreturns.co.nz/people-events

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FEATURES

KiwiSaver exodus to conservative GRTV speaks with Mint Asset Management’s David Boyle, following the ASSET Annual KiwiSaver Round Table, on the Covid switching trend, robo-advice and membership compulsion.

Because you were part of the round table I was interested to talk about what came out of that because I thought there was some quite surprising things. Last year when we did the round table, we talked about how would managers handle a downturn? And I think last year you said that it was going to be a bit of a dog fight. It was going to go to hell in a handcart, I think you said.

Hell in a handbag, I think.

That’s right.

So did you get it right?

Look, I was genuinely surprised.

No one would have picked what Covid-19 was going to do to NZ investors and particularly our wellbeing, if you like. And there were a number of switches. We had, what? $1.4 billion or thereabouts moved from growth to income assets. But given there's $60 billion or thereabouts and the number of investors that did make that change, I thought it might've been higher. I guess my fear is if we have a double dip, which today feels even more likely than not, what's the resilience really going to be like then, for investors?

Overall, do you think people handled it pretty well?

I think they did. I mean, there was a lot of mixed messages in the media about it. There were some really good articles as well, but I think the providers did a pretty good job, relative to the numbers they had to deal with. And some of the switching that took place, it would have been great if they were able to help mitigate that a wee bit, but let's hope that they have a better plan for the next time.

012 | ASSET JULY 2020

But that was one of the really interesting things for me, because there were 40,000 people that switched $1.4 billion, and if they switched and they haven't moved back, they've actually crystallised quite a few hundred million dollars loss. So we asked the question, should providers be offering some sort of advice or intervention when this switching goes on? And surprisingly, they said no. Did that surprise you?

Yeah, it does to a point. I mean, the ability to give reasonably qualified advice is not cheap and we've got new regulation that's not going to make it any easier, right? So robo-advice may be an option in the future, but it didn't appear to be something that was genuinely well accepted by the providers that were talking at the time.

But surely the providers, you're talking about 40,000 people, so I don't know how many providers we've got?

About 31, I think – of schemes – 26 providers.

Thirty-one. And so, they could do stuff by telephone, on the internet, making sure they ask some questions, and they hadn't done it.

But what surprised me is, for years we've been talking about shifting people up the risk curve, because they're in the wrong funds, and now they want to go the other way and they say, “oh no, we're not going to get involved”. It doesn't make sense to me.

No, and I think there was a bit of a mixed bag of conversations around that. But I think there has to be more done in that area and how they can deliver that in an effective way that will help mitigate that risk again. Because if it happens again and we see another 25% market correction perhaps, which I'm not saying, goodness, is going to happen, but I think people are feeling a little fragile and their financial wellbeing is probably more under the pump now, given the changes in employment [security].

It’s interesting because if these people realise that they have crystallised some quite big losses, questions will be asked. And they should be.

And they should be asked. The thing is that they don't know what they've lost. Imagine if you got a statement saying: "Now, if you'd stayed where you were, you would have ..."

Well, maybe that's what they should do.

I don't know, that's a big call. Not for us to say today.

Maybe the FMA should get onto this one.

Maybe they should.

So interesting, we talked about roboadvice and no one thought it was the magic or silver bullet.

No. And in fact, some of them were quite dismissive of robo. What was your take on that?

I was a bit surprised by that as well because I saw that as a possible lever. And like they said, it's not a silver bullet, but to invest more time in technology, I think, with the numbers, with over three million New Zealanders coming through, younger New Zealanders coming up that are more savvy with the internet and digital options. It's something that probably needs to be investigated further.

Another surprise for me is I asked about compulsion, and it was a compulsion in the scheme we have, but surprisingly again, they supported compulsion, but they supported an Australian model where it's more like a payroll tax. Where's that come from?

Well, I think it's taking into account some of the demographic changes that we're seeing, or employment conditions we're seeing in New Zealand as well. A lot of New Zealanders are employed, but not eligible because they're on contract or they've signed up with an employer saying ... Which, whether it's legal or not, needs to be tested further, is making sure that they do pay KiwiSaver on top of their contribution. Compulsion sounds a little bit self-serving for providers, we've got to be mindful of that. But I think for a lot of New Zealanders that can't afford to get into KiwiSaver, and we're seeing hardships increase, an employer contribution without an employee contribution may seem to be an appropriate solution in the longer term if we can find some commonality around that.

So what do you think? Do you think we should move more towards an Australian-type system, stay like we are, or make our current one compulsory? There you go, three choices. Put you on the spot.

While the scheme in Australia is amazing and I think they've got something like $3 trillion of FUM, it's not perfect either.

And the amount of changes and the complication and, I guess, the legislative elements that are wrapped around it are pretty costly too. So I think it's finding that middle ground, I think Kiwis like to follow their own road and not necessarily follow their cousins, and I think that's a good thing. I think as New Zealanders get bigger

balances, they'll take more interest in what that money is doing and where they can get a little bit more support.

We also talked about changes that people would like to see made to KiwiSaver. What would you like to see? If there was one thing you could change, what would it be?

I would really like to see … and it's on the table now … that we have a balanced fund as the option for default. But we need to manage and help New Zealanders to move up that risk curve. And that means better information [from] providers and ensuring that they are paying or making their contributions, because we've got over a million New Zealanders not contributing at all. One third, for example. Nearly 300,000 of those are children, but there's another 800-odd thousand that are not even saving $20 a week. So there's no point getting everything else right if we are in a position where New Zealanders aren't contributing.

So do you think the government will have the balls to make these changes?

Look, the devil's going to be in the detail through the default provider process. I mean, the headlines were right, but how do you actually facilitate that and transition New Zealanders into that new regime?

I think that's where I hope there's a lot of consultation. And I hope the industry really gets behind the education elements around this, so that they agree on the maybe three key themes and all say the same thing at the same time and that will genuinely help New Zealanders improve their position, I think.

There should be a more united communication front amongst providers – is that what you're saying?

Yeah, I am. I think that everyone's got their vested interests in respect of their scheme, but take that off the table and get the FMA, CFFC and providers together and just identify, well, look, the next three to five years could be bloody challenging. How are we going to help New Zealanders not only stay where they are, where they hopefully should be in whatever fund they've chosen?

So where do you think that role should sit? Is it the Retirement Commissioner? The CFFC? There are a lot of different options.

I think seeing the FMA and CFFC taking leadership in that area will …

So is it an FMA role as a regulator?

Well, the regulator ...

They've got quite a lot on their plate at the moment.

They genuinely have, but they've been resourced up too with the changes in licensing, and I think they're going to take a stronger education element. You can be the educator and regulator, but it's about how the rest of the industry gets behind that. And they need to be part of that.

And so, what should advisers be doing in this space?

I think advisers have done a bloody good job. We've seen that with our own business, with advice business going in. And I guarantee with those schemes that have been advised in, their members wouldn't have switched so much and they've been supported through this, which I think's actually, given the number that we have available in advice, pretty admirable.

Yeah. So that comes back to that whole value of advice and how critical it is. And that's why I was so surprised that they didn't want that around the switching.

Well, we'll see what happens in the next round. But this next 12 months will, I think, test a lot of investors' mettle and this is where we're going to need to support them. A Yeah. Thank you, David.

That's a good point to finish on.

To watch the full interview, download an audio podcast or to read the full transcript, visit: goodreturns.co.nz/grtv

WWW.GOODRETURNS.CO.NZ | 013

LEAD | ASSET ANNUAL KIWISAVER ROUND TABLE

KiwiSaver – after the first big downturn ASSET assembled KiwiSaver players to discuss the state of the industry after what some see as its first big test.

Sarah Beauchamp ANZ

Martin Hawes

Independent wealth coach, adviser, author

014 | ASSET JULY 2020

John Berry

David Boyle

Murray Harris

Sharon Mackay

Sam Stubbs

Sarah Whitelock

Pathfinder and CareSaver

Fisher Funds

Mint Asset Management

Simplicity

Milford Asset Management

Mercer

ASSET: So Covid-19, big downturn. What did we learn out of that from your guys' perspective?

David Boyle: We saw … and I think every provider that had plans saw that KiwiSaver communication was a big issue. And a lot of what went on later into March, when it hit the bottom, there was obviously a lot of transfers, switching and a lot of media attention around how bad things were going. And I think that’s kind of a lesson learned that is doesn't matter how well you communicate before an event, you can tell people what's going to happen, but when it actually does people will react on an emotional level, rather than perhapsASSET: So did people react, as you expected them to react?

David Boyle: You know, what was it … about $1.4 billion was transferred from growth to income out of $50 billion.

I don't know how many customers that was.

John Berry: Up to 40,000 I think.

David Boyle: I thought it might've been worse than that. And perhaps the recovery, the speed of recovery has probably stopped a lot of that momentum. I guess the real risk is if we have another dip, which is very likely in my view.

ASSET: Then what will the resilience be like for that next wave?

Sharon Mackay: You walked in the door and phones were going out of control. Clients were excessively concerned about what was happening.

So we had the largest volume increases in calls that we had ever seen and the depth of conversation was much bigger than we've ever seen as well. The really fascinating thing is as fast as it took off, it's settled really well. And it settled really sharply. We were expecting the call volumes to go on for quite a long time. And when New Zealand moved into lockdown and everybody started to work from home, we actually thought call volumes would go up because people,

theoretically had more time. Cause they weren't traveling, going out to shops, doing other things.

Call volumes really fell off. But what we found is we really went hard on doing lots of videos, mostly from the investment team, talking about what they were seeing in the markets, what that meant to the end client. What resonated really well for clients … again we weren't expecting it … was the informality of the videos.

ASSET: You guys said the videos and you talked about Facebook and webinars. Were these things you had planned in advance for this or was that suddenly, “Oh, we got to do something”?

Sarah Whitelock: It's really interesting because we have been talking about this pre Covid about, like you were saying, it's going to happen. Do you have something there ready to go … scripted, but you don't know what the event's going to be.

So you can do a bit of … bit of readiness, but in some ways you just had to respond. And I agree sometimes it was informal and you just got things out more quickly, which was really well received.

Sharon Mackay: From our perspective … all of the stuff we were doing, but we just weren't doing it at the same volume.

And I think, being in that situation where you were really thinking about how did you connect with people, you had all the technology, you always had it, you just started using it. So we did. Again we weren't expecting it, but people really got a lot out of it.

Sarah Beauchamp: So I would say one thing I think we will have to appreciate is that this wasn't just an abstract financial crisis that people heard about, but didn't really have that much impact on their lives. This was a global pandemic for some people. It literally felt like the world was ending. So I think when we look at some of the irrationality that was going on, like the toilet paper, panic buying.

Then I think you have to really look at the switching behaviour with that [same] lens. And in that context there was a lot

of irrational activity. And I really agree with what Sarah was saying around how people were doing things to try and take control … even in some small way.

So we did see huge amounts of switching 60% in one month, 60% of the entire year’s switching activity. But we have to keep that in perspective, when we looked at the percentage of the whole base who had actually switched, it's a really small percentage – around 3% of the whole base.

I don't think we should judge members too harshly. I don't think we should judge ourselves too harshly. Obviously we're always going to look at what we could have done better, but there was a real level of irrationality around.

In terms of your question about, is this something we planned. We do have a market volatility response plan and that's based on unit price movement, but also on the media activity. Cause sometimes you can have sharp falls in unit price, but it doesn't really get into the media. And so you kind of react differently in that perspective as to whether retail investors are aware what's happening – we've got a set responses for that. And so we followed our response plan and we have … often the key messages that you give are actually the same stay the course it's time in the market, not timing, make sure you’re in the right fund for your circumstances.

So some of the key messages can be the same, but obviously the messaging around particular event, it is a little bit different.

Martin Hawes: It’s very hard to have a KiwiSaver conversation because most people are not like the people in this room. But the lesson I think we should take [from this], it's already been touched on a couple of times, is that people wake up when there's all this opportunity and you've got to look at this from both sides of the coin and that's the teachable moment. So Robert Havighurst, back in the 1950s, talked about “a teachable moment”. The time when you can actually teach people.

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And I think there's a teachable moment right now because markets have bounced.

People have got the value back and it's a relatively easy conversation to say: “If you felt very, very uncomfortable back in mid-March, then now’s the time to get into the right fund because we all should be taking as much risk as we can tolerate, but no more.” And a lot of people had too much risk on board and they switched … some people, I don't think got a chance to switch. I think they would've, I think your 3% might've gone to eight or nine or 10% or something if a further wave of selling had taken. And Murray and I were talking before about that, maybe the waves of selling haven't yet finished.

ASSET: Do you think some people had taken on too much risk?

Martin Hawes: Yes. I think the biggest factor in getting the right level of risk is somebody's psychological profile and their ability to be comfortable in times like we've just had, or we are about to have, I'm not sure with that.

Murray Harris: We have always focused on getting a lot of education and communication out to our membership.

And I'll give you an example. Every month we do these videos with the investment team … on a good month, you can get six or 700 views. The first Facebook video we did, which I did one of, was all from home, which was all exciting. Cause it's like, how do we get this done? And you're setting up your camera, getting your phone sound right.

And [there’s] noise in the background.

We put the first one out on Facebook … “don't panic, stay the course” … 15,000 views in four days. So you go, "wow" that's … there's two things there: one the power of Facebook or social media, but two just how open people were to listen and learn – they were actually looking for information and education.

The other thing for us is the value of having as much information online [as possible]. So our portal, our app which had only launched fully in January, just got flooded with inquiry, which would 016 | ASSET JULY 2020

have otherwise been going into our phone lines or our email. So whilst our investor services team had a double in volume of calls and emails, there was more than double that amount again, going through the portal and the app. So people were able to get information and self-serve, without us being flooded with calls falling off and lots of long wait times and also transactions.

So, we can transact online and we had a spike in transactions in fact – more than I would have thought – switching to conservative. But interestingly enough, we're at about 3% of our members went up the risk scale. So went to growth or aggressive from balanced and conservative. So they obviously saw an opportunity cause it was good. But they were doing that online.

John Berry: We did have, like you say, Murray, reverse switching of people going from conceptual balanced up to growth, which always got me excited when people were being counterintuitive about it. In fact, I suppose for us, we had to pivot from doing face-to-face and lifestyle shows and businesses and community groups to online and videos and April was our biggest month for sign ups. So the social media videos, we also did a campaign where we just sent out on social media: “Do you have questions about KiwiSaver? We have answers.”

It wasn't an advertising campaign. It was essentially just answering people's questions. And then for me that was an eye opener.

The thing that struck me was either people thought the money had been stolen or they just thought: “I need to act, I've got to take control of this.” And actually communicating with someone and having the discussion of you're actually in the right risk fund. You should stay where you are or talk to your provider about that. Just gave people comfort that they were doing something and taking a step.

ASSET: So the fact that people moved up the risk scale does that indicate that financial literacy

might be improving or are they just gaming?

John Berry: I think it's probably a reflection of our not being default providers. I think probably our members, well we know because we survey them, they are more engaged and they understand financial literacy more than probably your average KiwiSaver member.

Martin Hawes: I don't think you can underestimate the value of advice here.

I've seen hundreds of clients over the last 10 or 15 years. I didn't have a single one ring up in any sort of panic. Whereas KiwiSaver people … we've got three million people who weren't in this before and are investors now – and this is the first test.

ASSET: So, ANZ, did you see people moving up the risk scale?

Sarah Beauchamp: We did see that.

I wouldn't necessarily agree that shows a high level of financial literacy. I think it shows a little bit more understanding, at least there's an understanding of what they're invested in. And I think most advisors would give the message that KiwiSaver is a long-term investment.

And that it's time in the market putting regular contributions in. It's not like trading the stock exchange uses. It's not buy, sell – bears, bulls, it's just staying the course.

ASSET: So one of the things I'm interested in with the switching, and there's been quite a lot of discussion about it … and it seems like some providers make it too easy for people to switch.

Sarah Beauchamp: You can switch in internet banking when you're with ANZ. That is a question we ask ourselves all the time. So at the moment you can't switch in the app, you can switch online on internet banking. I think if somebody has made their mind up to do something, I'm not sure that it's the right thing to do to actually block them to not do it. And I would hope that our communications, would help to educate members.

Sam Stubbs: I would say they may have made their mind up, but is it an informed decision, because the people want to take action and often they react to the last news story that they heard.

Sarah Beauchamp: Yeah. But are we actually talking about not allowing them? Cause I think someone was telling me that you'd [used] popups [when investors were looking to switch online and] they didn't really make that much difference.

Murray Harris: Well, at the end of the day, if they’ve made up their mind, they want to switch and the world's ending, they're going to do it. But at least we can warn them. And, so yes on our portal, it's a little message pops up … “You need to stay the course and switching could have long-term implications on the value”.

To get them to really think about it. But they can click past that and still do it … because we didn't want to stop them if they were wanting to do it.

Sharon Mackay: I think when, when people are in their blind state of panic and you've got a bigger business, it's actually hard to reach everybody all of the time and creating delays by forcing someone through a conversation, increases their anxiety and it really pushes it out of control and minimises their trust.

Sarah Beauchamp: In the broader context, we're not just one of the services in people's lives, they are used to doing things digitally. So if we prevent people from doing things digitally we're just not meeting their expectations of the world generally.

ASSET: I'm just wondering if people actually understand the significance of it, so this piece that I was sent [said]: If you had 40,000 KiwiSavers who switched $1.4 billion, that would have crystallised the loss of $160 million a year, and if they didn't go back to the fund they were in, it's probably another $28 million a year, of returns they haven't got.

Martin Hawes: They shouldn't go back to the fund they were in. They were in the wrong fund. I don't care if they're 35 years old, they shouldn't have been in that fund, because they were too frightened. I call it “rattled out of the market”.

Sarah Beauchamp: It was a true test of the risk profile question where you ask: "If the market dropped by 20%, would you be comfortable with that loss?" It was a true... It wasn't a hypothetical question, it was a real situation.

ASSET: So, you think these people switching might have

actually ended up going into the correct funds they should've been in in the first place? Is that your thesis?

David Boyle: You can talk blue in the face to ask people kind of, “How would you experience a minus 20%?”.

And they've got no idea, right? I mean, at the end of the day, until you see it actually happen and go through it. And we're talking in hindsight now. If we wait another six months, we could be in quite a negative environment again and really it could be even worse than what we experienced in March. It's about what should or could we be doing as an industry. I'm kind of more interested around what are the key messages that we can take out while people remember that feeling?

And probably if you look at the FMA and CFFC for example, this is a grand time for them to bring together the industry and pull together some of the key themes. All power of one … get everyone talking about these things at the same time … but don't go back to this ... I really worry about the nanny state where basically we tell people what they should do.

Martin Hawes: I always, in my practice, ask people to tell me an experience where they lost money. Not everybody can do that, but most people can. And I feel like some sort of psychologist or counsellor or something saying, “How does it feel?”. But it's a feeling.

Sarah Beauchamp: I think [with] the switching functionality, just to be clear, of course, we've got prompts about seeking advice, of course we've got the risk profile tool available. It's just, we haven't designed ours so that it pops up so you have to click it away. My experience ... so we did have the similar thing with accidental payments, people putting their uni money into KiwiSaver.

So we've got popups but the problem is, what do you do when something pops

up on your phone? You click it away and afterwards you go, "Hang on, what did that say?" Right? So digital development is a challenge, it's difficult to get right.

Sharon Mackay: It's kind of such a psychological thing, the pain of any loss, whether it's financial or an accident far outweighs the euphoria of the gain.

And that's what drives so much of what's happening and it's not necessarily a financial market thing, that's a human condition.

John Berry: It's also, with the loss, what we found in conversations with people is they felt like they'd lost this money overnight but if you put it in a six month context and said, “Actually you've just lost the last six months of gains,” then it didn't quite seem so bad.

Murray Harris: This was the challenge – now, for those 40,000 members that switched, and you can guarantee most of them haven't switched back, what have they missed out on? Granted, some of them may now be in the right fund but for those that are still in the wrong fund, as an industry, we've got an obligation to make sure those people get into the right fund and stick with it. Because otherwise, the long term, as you know, for a 35-year-old, what's the cost of that over 30 years? It's $370,000 for the average member.

John Berry: But Murray, if they're not wired up well enough to be able to withstand the pressure of watching their KiwiSaver balance or investment balance falling, then they're not. And we can't do anything about that.

David Boyle: Since KiwiSaver started, no one's experienced a real negative [year], even though we went through two terribly negative years in 2008, 2009, they had no money. So the impact of those losses, which were actually probably just as much as we experienced up to March, they didn't see it. So as balances grow, this is where people will see that fluctuation. And then now with the annual statements, which I think is

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a really great thing, it's not only seeing what your balance is today but what it’s going to be in the future and what income you're going to get.

John Berry: There's also communication around ... when prices are off [lower] at your clothing store you go and buy, when prices are off [lower] in [investment] markets, and you're trying to explain to people: “This is great. You're contributing every month, it's cheaper.”

And they look at you like you're mad.

It's an education thing. We need people to understand. [With] your 30-year horizon, stuff is cheaper at the moment, it's a good time to buy. You're putting in every month. See it as an opportunity.

ASSET: Is KiwiSaver achieving what it was set out to do? And I'll ask everyone to score it out of 10.

David Boyle: From what I've seen and the impact of what has been quite an event that I've not been around for a while, I would give it probably a seven at the moment. We always have a feeling of what investors might do, but actually to go through an event like this and see what they actually did would suggest that providers have done a better job around informing, providing that information. There's still a lot more to be done obviously, but I think it's got better.

Sam Stubbs: A nine. It's democratising capitalism. Three million people who've got accounts open, and we all complain about the people not contributing, but what was the last financial product that had this goodwill, this popularity and has survived two crises without losing people.

Sharon Mackay: For me, it's an eight.

I think, as a total system ... KiwiSaver has such amazing buy-in from the New Zealand public.

Murray Harris: I’ll give it an eight. I mean, there's still room for improvement, I think it's achieving what we wanted it to do. And that is to get people engaged, to think about saving long-term for their retirement.

Sarah Beauchamp: Eight or let's say eight and a half. If you think back to before KiwiSaver was born, there were 15% of people in workplace retirement savings schemes, and it was a declining trend. We've now got 85% of the 18 to 64-year-old market enrolled in KiwiSaver.

So that's actually one of the highest rates of non-compulsory participation in the whole world.

It's easy for employers to administer.

It's a great deal for the member. I think for every dollar they put in ... I did a really

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quick calculation, obviously depends on circumstances and settings, but for every dollar a member puts in, they get something like $3 back if they save over their entire lives from employer contributions, government contributions and investment performance. And we've got a thriving, competitive market. There have been a number of new entrants.

The number of transfers outweighs new members to KiwiSaver and it's really easy to transfer. So yeah, I think it's a great thing.

John Berry: Overall, I'd give it an eight.

I think it's achieving its objectives and there's a wide range of offerings for people to choose from as well.

Sarah Whitelock: I think coverage is good, the number of people, the amount of money in it. Mercer globally does a pension index every year. And it surveys, I think 37 countries, which picks up something like 65% of the world's population and our system rates a B. So we're about seven out of eight out of 37. So, it's pretty good, but it could be better. We are lower in the adequacy space and the key recommendations there are around increasing coverage and increasing contributions so I think that's where there's room to improve.

Martin Hawes: I'd go nine-and-a-half.

KiwiSaver can't give world peace and global democratisation of capitalism, and … I don't know … apple pie and motherhood and everything else. It's not designed to do that. It's designed for retirement saving and it's got three million people. So 13 or 14 years ago, when Michael and Diane were sitting down, scratching their heads saying, “What did we do here?” And you say, “Well, there'll be three million people with a retirement savings account,” you'd have said, “Well, that would be transformational. That would be fantastic.” It's done ... yeah, look, it needs a couple of wee tweaks in my view, but they're little projects.

ASSET: If there's one or two things you could do to KiwiSaver to make it better, what would they be?

Martin Hawes: I think one of the things I would do is allow multiple funds.

You can have your two deposits with one bank and with another bank. Why can't you do it with KiwiSaver? And it's probably the question I get about KiwiSaver as a practicing adviser more than anything else.

Sam Stubbs: I'd make it compulsory.

It's now discriminating against the

poor. That's the perverse outcome of KiwiSaver, it's going to make the rich richer and the poor poorer, relatively.

And only compulsion fixes it.

Sarah Whitelock: Mine would be to improve the contribution levels … not so much saying you need to increase the contribution rates, but there are still a large number of people who are members, but are not contributing. I still think those average balances are still too low.

Sharon Mackay: I really do think we need to think about contribution rates, but we need to think about how we get some equity around those contribution rates as well. So the people that can afford to contribute will contribute, and if they're not contributing in KiwiSaver, they're doing something else.

Sarah Beauchamp: I would take a cautionary approach to changing settings. So we've seen quite a lot of talk in the market, like the recent retirement income policy review. There was lots of discussion around ideas that possibly would change the main incentives or the main purpose, like Martin was saying, of KiwiSaver. So what we found when we talked to members is that some of those really fundamental changes, they actually undermine people's perceptions of the stability of the system. And also just around ... us as a provider, I am particularly working in product. I don't agree with anything that makes the product more complex and harder to explain to people.

For the first time from 2022, providers will be able to change contribution rates on behalf of members, rather than filling out a paper form and taking it to the employer. That's good. Even if it's two years away, it's good that that change is happening. But it's actually a little-known fact that we don't even know people's contribution rates.

John Berry: Look, if I think about the conversation we had earlier on what the biggest issues have been this year, it's not so much structural with KiwiSaver itself, it's more around financial literacy and education and that would be my focus … more resource, particularly at younger ages.

Murray Harris: In terms of contribution rates, I agree it's too low. So education around that, people need to save at least 10%. Perhaps one of the ways to help that and particularly the lower income earners is compulsory employer contributions. Even if the member's not

contributing, the employer puts in, even if it's only 1%, for somebody's working life that at least gives them something.

Sharon Mackay: Actually take off the ESCT on the contributions.

Murray Harris: Yeah, well that's my next point, we need to look at the taxation of KiwiSaver because if you look at the successful superannuation systems around the world, there is relief around the contributions and also the way it's taxed while it's invested, but particularly the contributions. And I think if we really want to move it to the next level from here, it's about how do we get people to contribute more? Well, you need to give them some relief on that from taxation, whether that's the employers as well as the members. So I think there's some tweaks that can get quite technical if you get into the detail of it, but that's why I wouldn't give it a 10 at the moment.

David Boyle: Contribution rates are still really, really poor. I mean, in respect of those that aren't contributing at all, let alone getting them the maximum MTC. I would suggest looking legislatively around how, if people are employed on contract that they still have to get

a KiwiSaver employer contribution built into that.

ASSET: Compulsory, can we do a yes, no, around the room?

David Boyle: Compulsory employer.

Sam Stubbs: If employer contributions are compulsory, they're already onto a great thing. But then engagement goes down because I'm not contributing and suddenly it's less important. Cause it's something my employer is doing.

David Boyle: I still think you need to educate to get people engaged and say, look, if you put in 1% as well you're going to have twice as much.

Murray Harris: This theory that people can't afford it is rubbish. What happens is they get the money and they spend it.

If they don't get it in the first place they adjust their spending. You can take 1% of income away from almost any family in New Zealand and they'll adjust.

Sarah Whitelock: I think compulsion.

ASSET: So advice, how do we get more advisers involved in giving people advice around KiwiSaver?

Murray Harris: I think it's probably the single most important issue as balances have grown. We've talked about financial literacy and education. There's

no substitute for getting people in front of an adviser to first of all get them into the right fund and you can use as many calculators as you like, but people need guidance. They need education. They need reminding that sometimes they haven't learned from their own mistakes, but they need [advice] to tell them what the pitfalls and mistakes are. So getting access to advice is vitally important. If there was one thing we wanted to do with KiwiSaver to make that achievable it might be that you could use some of your KiwiSaver funds to pay for that advice.

Sarah Beauchamp: I totally agree with Murray that we massively rate the value of advice. We are always trying to understand people's blockers and people's attitudes towards advice. We found that two-thirds of people have never sought advice. Incredibly, three quarters of people would never even consider getting advice until they're 10 years out on retirement, a little bit scary.

And 40% of retirees regret not getting advice. Some of the roadblocks that members told us about were things like: they just didn't think they were the kind of person that would get advice: that it was associated with like a rich person

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thing; that it would take too much time.

The Kiwi DIY mentality really played into it. I thought the FSC research was really interesting. They were saying the 80% of people felt very confident in their own financial decisions, which I think really ties in to our stats around people aren't getting advice. They think they're confident in making financial decisions, but actually the same research showed that they're actually not, they don't understand those key ideas very much.

And the same research talks about a lot of people under 52 described themselves as coach seekers. So what are the coaches they're seeking out?

And I think the anecdotal evidence shows that they're asking friends, family and colleagues, which is a real worry when we think about the low level of financial interest.

Sharon Mackay: When you think about KiwiSaver advice is really important and we have to find ways of getting more advice to more people. But it can't be the way that we do it today because the complexity around the advice today is too much. So (a) I'm not going to commit the time. And (b) an adviser scares me to death because [they've] got all the knowledge and I've got none and (c) it's not something I need.

Sam Stubbs: The traditional advice model is just going to die on a vine.

Ultimately they won't believe the advice they get if you're only selling your own product because this thing is such a weapon of transparency. So, the world's changing and my understanding is people are hanging on to all distribution models because they have to. But ultimately people will receive advice and it will be very cheap and very high quality

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and very commoditised because that's how most people are built.

The commission-based models are going to die. I mean, people smell these things a mile away now. There's about 10% of advisers that are fee-based and truly independent. So, they're not getting paid as much as other people are right now, but they will because that's the only thing that can survive.

David Boyle: I think of the advice spectrum for KiwiSaver, at the one extreme, you've got basic advice people need, which is, should I be in KiwiSaver? How do I get to get more contributions? What funds should I be in? And then the other extreme is a full financial plan which you're going to pay for and it's expensive. And we just need to find ways for people to access the advice that they need at a price they can afford. And hopefully over time, as KiwiSaver balances grow and people and businesses get more innovative then they see the opportunity.

ASSET: I'm interested to know what each of you are doing around robo-advice and whether it's actually going to take off. If you look at the people who have come to the market recently with robo offerings and of which two spring to mind, you'd have to say they haven't actually done that well so far.

John Berry: Nobody should be coming to the market with a robo-advice offer thinking that they can corner the market or grow their investor base. Digital advice [is good] as a service to your existing membership. No KiwiSaver manager should be thinking they can offer digital advice and make money from it because

it's not something that you could even charge for. And you look in Australia, where robo has been going for a period of time, 7% uptake in Australia, 20% uptake in the US which is a huge market.

In fact, the robo-advisers in the US are making more money by selling this software to human advisers, to make their role more effective than the roboadvice itself.

Sarah Beauchamp: What we've found is that when we talk to people about robo-advice, the whole concept for full, personalised, all singing, all dancing platform, just wasn't something that they connected with at all.

Sharon Mackay: I think as an industry, we go the whole nine yards and we're going to solve your problem. And you're going to get everything. But as an individual you're probably not ready for it. So give me the one thing I need to do.

What's the one thing that I need to do on my account today?

John Berry: Why not as an industry just have one standard platform that everyone uses and it's consistent because you talk about your differentiation outside that and use that money to put more into education.

Murray Harris: Well, I'm with David in the sense of when someone's offering a robo platform and their offering is just, “we are robo” that in itself is not a reason to come to KiwiSaver. But, if people are moving away from their bank, if they go to Simplicity or Milford, they know exactly what that brand stands for and what the offering is.

ASSET: So responsible investing. How much more important has that become in the past year?

Sharon Mackay: Yeah. I don't know that I'd say that the importance of it has gone up. I think the importance of it was always there.

I think as any company operating in any market, you've got an obligation to really think about how you're conducting your business and that includes, when it really comes down to it, we're handling the money of our clients and how we're conducting that as well. So the challenge there is, what does it mean? What's responsible to me, may not be to you.

Martin Hawes: It's the ticket to the game – in this day and age – in ESG and RI. And our members are going to demand it, particularly our younger members, they're much more engaged in this than the older cohort. But it comes back to an education around ...

well, just because one fund says it's the ethical XYZ fund or the exclusion ABC fund, doesn't mean that it's necessarily different to the growth fund, which might actually be applying the same principles, but it's just not named that. So we need to get people to understand that it comes back to: “How do you get your members and the public to understand what we're doing as investment managers?”

And we've got an exclusions list on our website that runs to tens of pages but does anybody look at it? How do you get the message out there that you're doing this stuff, but it's not necessarily understood?

Sarah Beauchamp: As an industry, we've got a way to go with the taxonomy of responsible investing. So all the providers should have a stance on responsible investing and it should be obvious and transparent what that stance is. We are seeing some funds, just like you were saying, that are labelled ethical. So there's actually a spectrum of RI, starting with just standard and then you've got exclusions, and then you moved this through to sustainable, and then positive impact, right? And I think some of the funds that we're seeing labelled positive impact are actually, if you look at the underlying investments, it's not necessarily reflective. So I would definitely recommend that we have some ... I was actually going to volunteer for it at the FSC working group to work on some industry standard of the labelling.

And also, maybe some industry standard on the things you should have on your website that describe how your labels translate to your investment approach and philosophy in your holdings.

Martin Hawes: And I think the default suggestion, they're going to exclude fossil fuels and weapons. That feels like a bit of a knee-jerk reaction to climate change and the fact that we had a terrible event here just over 12 months ago. Why just those two? If it's actually ESG, you need a proper framework around that. If it's going to be exclusions – what?

And how? And why? Or is it a principlebased approach?

John Berry: I think there was a sea change four, five years ago. Can you say that? My thinking is that being SRI is about exclusions and ESG is about inclusions, it's about scrolling the screen, saying what you want rather than what you don't want. And the final thing that really, I agree with you, that I don't think fund managers should be the arbiter of morale and therefore, you've got to have transparency. Because ultimately, it comes down to, what would you pay for a subtle conscience? If indeed you have to pay? You might argue, they actually don't pay to have a subtle conscience, so you actually get better returns. ESG is good evidence, at least it is with RI. Sam Stubbs: Although the highest judgment on these things should be on our own industry, because it's full of hypocrisy in this regard. You have companies that will exclude fossil fuel on one hand and yet, another arm of the company will lean to fossil fuel companies. You have some firms offering RI funds and make a lot of noise about them and then quietly offering non-RI ones because they want to make more money … This industry collectively, is the major shareholder of most New Zealand public companies. Shareholder activism in this country, zero. Why? Conflict of interest.

Sarah Beauchamp: I feel that that comment was slightly pointed towards the banks on the whole fossil fuel thing [laughs]. So I do actually have a pre-prepared answer for that. [Quotes] ANZ New Zealand is playing its part to support the Paris climate accord. So our lending in NZ fossil fuels is less than 0.22% of our whole lending book, and declining. And most of that is in gas, thermal coal mining represents 0.001% of our book. In fact, we lend a lot more … 0.71% to green tech and renewable energy sectors, than the non-renewable and that's greatly growing.

Sam Stubbs: How much is 0.22 of your lending book?

Martin Hawes: Hundreds of millions of dollars.

ASSET: It's still a pretty small proportion. So we're getting towards the end, are there any questions or topics anyone wants to propose for their colleagues here?

Sharon Mackay: I think it's in, I guess, the wide ranging conversation and some of the things we've touched on. And we started out by, what did we learn? How do we take these types of forums and think about improving the outcomes for New Zealanders? So we all work within our businesses, we all approach things slightly differently but we all face the same challenges. And I think I'm going to come back to your point, David, how do we have a little bit more unity around some of the bigger issues?

David Boyle: [There needs to be] alignment as an industry. But, through an impartial portal of continuity around … you'll pick three things and work together on those elements because those three things will probably impact 80% of all the things that we perhaps touched on today. To improve that will actually have a massive cascading impact on investors' wellbeing, or New Zealanders' wellbeing when they reach retirement.

If you keep working in your silos or have a biased [viewpoint] ... because of the members that are in particular groups or the size of them or whatever … You need a neutral referee to corral providers, not just [those] around this table, but for everyone who wants to do more – have someone to help facilitate that. That would be a beautiful thing.

Sarah Beauchamp: I think this industry collaborate really well.

Sharon Mackay: I think we do and we don't [laughs].

Sharon Mackay: I think we do.

To be honest, I think we collaborate on operational stuff, but a lot of what we talked about today isn't operational stuff.

It goes to financial literacy, financial capability. And operational greatness won't get us to someone making the right fund choice. A WWW.GOODRETURNS.CO.NZ | 021

INSURANCE

Non-disclosure divides opinions When a case is turned down for non-disclosure, it can create shockwaves.

But how often does it really happen?

W

hen the story of Ailepata Ailepata’s refused insurance claim made news headlines in June, it caused ripples through the insurance industry.

Ailepata was denied a $100,000 payout for gastric cancer because his New Zealand Home Loans broker had moved his trauma cover from Westpac to Fidelity Life.

The amount of cover was reduced and when he went to claim he was reportedly turned down by Fidelity Life because he did not disclose “impaired glucose tolerance” when the policy was taken out.

The family told media they felt betrayed.

In another case, in 2018, Shane Laker had his claim turned down for income protection when he developed trigeminal neuralgia, because he had not disclosed

022 | ASSET JULY 2020

BY SUSAN EDMUNDS

to Partners Life that he had sleep apnoea, high blood pressure and high cholesterol readings. The insurer said that should have meant he was not accepted for insurance in the first place.

Adviser Katrina Church and adviser coach Tony Vidler said Ailepata’s case highlighted the problem of nondisclosure.

Many clients were not disclosing information on their application forms because they did not realise they needed to – or sometimes because they did not even know that there was something that should be disclosed, they said.

It was not until claim time that they realised that symptoms of an undiagnosed illness, or something that seemed unrelated, could derail their ability to claim on a policy.

Vidler said: “Clients often, with the best of intentions, tell you everything they think you want to know then later

say ‘I didn’t think that would matter.

A doctor told me I needed to get my blood pressure under control 17 years ago but that doesn’t matter, does it?’”

Clients were in a poor position to judge what would be important to an insurer, he said, and it was the adviser’s job to step up.

“I always take the view that the adviser should be the frontline underwriter … if there’s any doubt or questions you’ve got to draw attention to it.”

If there was a concern about something from a client’s past, the adviser could suggest the insurer requested medical files, he said.

“The reality is the overwhelming majority of good risk advisers do that already.”

Church agreed advisers needed to do what they could to ensure that a claim couldn’t be turned down for non-disclosure.

“Advisers should be thinking, is this client really understanding what they have to do when they are filling out this form? That’s the first thing. The industry could do better, insurers could do better.” _ Katrina Church

“Clients often, with the best of intentions, tell you everything they think you want to know then later say ‘I didn’t think that would matter.

A doctor told me I needed to get my blood pressure under control 17 years ago but that doesn’t matter, does it?’” _ Tony Vidler

“Advisers are the first underwriters and we should do all we can to derisk the situation for clients – this is something that online or applications made direct to providers can't. That’s our point of difference.

“Advisers should be thinking, is this client really understanding what they have to do when they are filling out this form? That’s the first thing. The industry could do better, insurers could do better.”

She said it was the adviser’s obligation to underwrite all business and “derisk” the situation for clients in a way that online or direct-to-provider applications would not.

She said the level of non-disclosure picked up through her own business’s processes was “huge”. It was a concern that there was so much business being written on standard terms, she said.

“There are many ways an adviser can lower the level of non-disclosure –

ensuring the client reads their application post-submission and confirms this prior to issue, obtain medical notes from the outset, obtain ACC claims histories.

“This all gives you the tools to understand if a client knows and understands their medical history – this protects the client. Your own business picks up a huge amount of nondisclosure from highly intelligent people who just forget things.

“If I have a proposal with nothing disclosed – that’s a red flag.”

Another adviser, Tim Fairbrother, said non-disclosure was a “huge issue”.

“Your average punter doesn’t realise what information they need to divulge.

We have only had a handful of issues in the last 10 years, as we go through the application very thoroughly with every client.

“Advisers need to be coaching them through previous operations and trips to the hospital, current medication, recent trips to the doctor, ACC schedules …

We go back over their medical history to cover all we can, no matter how trivial.

“While this does frustrate clients at times with lots of paperwork and a long underwriting period to get cover in place, it is well worth the difficult conversations that can be created by doing a poor job upfront.”

As part of the review of insurance contract law, non-disclosure was identified as a problem to be addressed.

The Government plans to change the duties of disclosure so that consumers are required to “take reasonable care not to make a misrepresentation” – effectively to answer any questions asked by the insurer truthfully and accurately.

It will require that insurers’ remedies for non-disclosure are “proportionate” to the level of non-disclosure.

The Insurance and Financial Services Ombudsman has said about 10% of its complaints relate to non-disclosure – across personal insurance and fire and general policies. Industry data is not kept

on how many claims are turned down for this reason. Ombudsman Karen Stevens has suggested applications could be submitted with medical notes attached, and the onus to go on insurers to process that appropriately.

But Partners Life managing director Naomi Ballantyne said non-disclosure was not as much of an issue as was claimed – and the solution was not necessarily all the extra checking and paperwork that the advisers suggested.

She said only about 4% of all claims were turned down for any reason, and non-disclosure would only be a proportion of those that were.

“The problem with non-disclosure is that it’s such an awful thing to have to deal with. You’re effectively calling a client out for not telling the truth.”

She said the idea that a life insurer might use an unrelated piece of undisclosed medical history to turn down a claim was false. “That doesn’t happen.

If it did not a single adviser would sell products from a company that behaved that way.”

Extra measures to catch all nondisclosure, such as looking through medical records with each application, would slow the process and add cost, she said. That would make cover more expensive for all the customers who had disclosed appropriately, she said.

Ballantyne said application forms were clear enough that it could not be claimed that clients did not understand what they were being asked.

Commentator Russell Hutchinson, of Chatswood Consulting and Quotemonster, said incidence of nondisclosure would vary according to the type of insurance. It was “vanishingly uncommon” with life insurance, he said, but more common with trauma, income protection and health cover.

The more claims that were made on a particular type of policy, the more likely there were to be questions of non-disclosure. A WWW.GOODRETURNS.CO.NZ | 023

FEATURES | MARKET UPDATE

Interest and flexibility in times of uncertainty Nikko AM’s new 3% Income Fund an attractive alternative to term deposits.

N ‟For as long as the Covid cloud casts its shadow over our economic recovery, we recognise that New Zealanders will continue to seek both flexibility and security when it comes to managing their own money.” _ Fergus McDonald

024 | ASSET JULY 2020

BY NIKKO AM

ikko AM NZ has introduced a new fund designed for investors seeking to balance security with regular returns through the current period of economic uncertainty and low interest rates.

As term deposit rates continue to fall well below 2%, the new Nikko AM NZ Income Fund offers an annual defined distribution of 3%, paid out quarterly. In addition to generating higher cash payments than term deposits, the new fund offers greater transparency and flexibility, should an investor’s circumstances change, with no performance fees or fixed investment period.

Nikko AM NZ Head of Bonds and Currency, Fergus McDonald, says the new fund is another example of the leading fund manager’s ability to help investors meet their income needs in the current economic conditions and to meet market demand.

“Understandably, given the market’s Covid-19 driven unpredictability, investors with a low risk profile or shorter-term investment horizons have been seeking to defend what they have, and have therefore been looking increasingly towards term deposits.

However, with the backing of our investment expertise, we are confident that we can meet these investors’ risk criteria and also generate additional regular income for them; income which

is hard to come by in a low interest rate environment.”

The fund generates income through comprising up to 30% shares alongside a base of fixed income assets. Nikko AM NZ’s award-winning investment team carefully selects the companies for their diversity and collective ability to provide reliable, sustainable dividends.

Currently 24% of the fund is held in shares in 12 companies across the telecommunication, consumer staples, real estate, utilities and financial sectors.

Pre-defined quarterly distributions are derived from this income – with the flexibility to use the capital to ensure a consistent level of payments to investors.

This inherent flexibility also allows for additional growth of the underlying unit price.

McDonald says the peace of mind that comes with Nikko AM’s investment expertise should make the new Income Fund an attractive alternative to term deposits and other income-generating funds currently in the market.

“For as long as the Covid cloud casts its shadow over our economic recovery, we recognise that New Zealanders will continue to seek both flexibility and security when it comes to managing their own money. With our new Income Fund, we can provide both of these with the added benefit of a 3% defined income rate with no lock in period.” A

Interest on Your Terms Introducing our new Income Fund Defined annual distribution of 3% Alternative to term deposits No fixed term No performance fees

With up to 30% exposure to an income focused portfolio of NZ equities, Nikko AM NZ’s new Income Fund is a flexible alternative to term deposits for investors seeking better returns in today’s low interest rate environment.

Allow your clients to benefit from the investment expertise the professionals use.

Talk to us today: nzenquiries@nikkoam.com

Nikko Asset Management New Zealand Limited (Company No. 606057, FSP22562) is the licensed Investment Manager of Nikko AM NZ Investment Scheme, Nikko AM NZ Wholesale Investment Scheme and the Nikko AM KiwiSaver Scheme. This material is for the use of researchers, financial advisers and wholesale investors (in accordance with Schedule 1, Clause 3 of the Financial Markets Conduct Act 2013 in New Zealand). This material has been prepared without taking into account a potential investor’s objectives, financial situation or needs and is not intended to constitute personal financial advice, and must not be relied on as such. Recipients of this material, who are not wholesale investors, or the named client, or their duly appointed agent, should consult an Authorised Financial Adviser and the relevant Product Disclosure Statement or Fund Fact Sheet (available on our website: www.nikkoam.co.nz).

WWW.GOODRETURNS.CO.NZ | 025

FEATURES | ADVISER PROFILE

Adviser’s first-hand experience of insurance changing lives Shaun Vining’s brother, Blair, wouldn’t have been able to enact huge changes to New Zealand’s health system without his insurance.

F

ormer teacher and now Queenstown financial adviser Shaun Vining didn’t take much convincing to move into insurance. “I’d been teaching for 20 years and then one of the parents came to me and said ‘if you don’t want to be teaching anymore you’d be great at this … everyone trusts you, you’re great with people’. Two weeks later I said ‘let’s do it’.”

Vining said, while he loved teaching, it was hard to survive on a teacher’s salary in Queenstown with a mortgage and four children.

026 | ASSET JULY 2020

BY SUSAN EDMUNDS

“I could move to Invercargill or I could get another job. I got another job.”

While he got into the insurance industry with a view to becoming more financially secure and helping local families, it was two years later, in 2018, that the importance of what he was doing really hit home.

His brother, Blair, who was one of his first clients, became his first claim. He had a rare bowel cancer that had spread to his lymph nodes, lungs and liver, without having had any major symptoms.

He was told he would not see a specialist in the public system for eight

weeks – but he had only eight to 10 weeks to live.

Blair Vining had health insurance through an employer group scheme that enabled him to get an appointment with a specialist through the private health system quickly, but it provided only $10,000 of cover for the non-Pharmac medication he needed. The drugs cost $35,000 for one month alone. That meant he had to tap into his life and trauma cover, which had been intended to pay down debt.

But Shaun Vining said the insurance money paid for drugs that extended his

“Now I have seen what having it in place can do – it can change everything.

It now has a total different meaning for me.”

“I’ve seen people not covered and it’s devastating.

Givealittle pages set up because people didn’t have $10 a week insurance to cover this type of thing.” life by almost another year, and allowed him to make major changes to the New Zealand health landscape in the process.

Blair Vining set out on a mission to reform the New Zealand health system to provide better care for people suffering from cancer. More than 25,000 people followed his Facebook page “Blair Vining’s Epic Journey” as he strived to make a difference – having realised that rather than being the outlier he had thought he was, his story was very common.

He was the force behind the development now under way of a charity hospital in Southland, which will provide healthcare for those living in the region who would otherwise be unable to access treatment through the private or public systems. A building has been found and donated for the hospital to use and a “buy a brick” campaign is running to raise $500,000 needed to get the hospital build started as soon as August.

As a result of Blair Vining’s campaigning, the Government set out a New Zealand Cancer Action Plan including allocating $60 million for Pharmac for cancer medications, the establishment of a cancer control agency and the appointment of a director of cancer control. His petition to create a

national cancer agency was signed by more than 140,000 New Zealanders.

Vining said the extra time his brother had because of his insurance cover had changed New Zealand society forever.

“Now I have seen what having it in place can do – it can change everything.

It now has a total different meaning for me.”

Vining said the shift from salary-based teaching to the commission structure of insurance “freaked me out” at first.

“There wasn’t much money coming in from the Ministry of Education but I knew it was coming every two weeks.”

He had a “side hustle” as an MC for corporate events and as lead singer and guitarist in a band that does corporate events around New Zealand. “When I was teaching I was having to do it every Friday and Saturday, now I can pick and choose when I want to do it … it’s still freaky living month to month by commission … it’s not until now that the renewal coming in is a bit more and each month there’s a bit more being added to the pot.”

Moving from teaching to running a business had been a learning curve, he said, and had required investment in himself to make sure he was doing it properly “not just selling insurance”.

That was a change that was likely to have to happen across the industry with the introduction of the new financial advice regime. “You have to run a proper business now. I set aside time each week to go through stuff, policies and processes.

“It’s needed for the industry. There are still too many cowboys out there.

It’s good from that perspective, for making people realise we are running a business not just going out there and selling a product and onto the next thing, we’re building a business and building a reputation.

“The regulatory stuff happening will make people feel more secure in looking at it, it’s consumers being looked after not the company making money.”

The Covid-19 lockdown had spurred an increase in interest in insurance, he said,

as people realised they wanted policies in place to protect their families – even though the policies issued at the time were unlikely to provide any cover for Covid. “I was busier during lockdown than I had been at any time in my business career … now everyone is back to work trying to catch up it’s getting a bit more difficult.”

Queenstown was still bustling, he said, and there was an increase in attention on spending local and supporting local businesses. Vining himself had been affected by the pandemic because about 40% of his existing client base is Brazilian people who had decided to go back home. “The clawbacks from insurance companies are hitting now.

When you lose 20% of your business overnight it can make it a bit rough.”

Most of the new clients he had lined up to meet with in the near future were also Brazilian. “Previously I thought if 20% or 30% of them didn’t turn out to be anything it would still be my best year yet but it’s all dried up.”

Vining isn’t deterred, though. He said he wanted to make it clear that he was not an “old school” insurance broker – and insurance did not have to be dry and boring.

“I really enjoy working with families, that’s my main niche. I was teaching for 20 years, primary and early childcare, looking after families is my main thing.”

With each client meeting, he would talk about how a family would cope if one of their income-earners was no longer in work, and how they would maintain their lifestyle and look after their children.

“Making sure families are protected.

I’ve seen people not covered and it’s devastating. Givealittle pages set up because people didn’t have $10 a week insurance to cover this type of thing.”

Having seen first-hand the impact that insurance has on a family, Vining said his big goal was to see every family in New Zealand have life and trauma cover.

“Everyone can afford life insurance. “[Blair] was only 38 when he [was diagnosed]. It makes a huge difference.

If he hadn’t had it, he would have been gone in eight weeks, not a year later.” A WWW.GOODRETURNS.CO.NZ | 027

REGULARS | INVESTMENT COMMENTARY

Is KiwiSaver proving to be an ‘investment success’ for members?

O

As most KiwiSaver investors are receiving their annual member statements David van Schaardenburg looks at how accurate a measure of success they are.

ver the past few weeks, just over three million New Zealanders or 60% of the total population, will have received their annual member statement from their KiwiSaver provider.

While annual member statements are a useful summary for KiwiSaver investors to monitor their savings progress over the last year against their current KiwiSaver strategy, these statements may not prove to be such a useful tool when assessing the investment performance of your current KiwiSaver manager.

Due to the significant volatility in financial markets in Q1 2020, generally KiwiSaver funds delivered negative annual returns to most investors for the first time in over a decade. However, we can see from the following data that KiwiSaver is proving a success in terms of the build-up in household savings and in the growth of New Zealand’s fund industry revenues.

•

KiwiSaver FUM has grown at an annual compound rate just above 17% over the past five years, even after considering the recent decline in asset values in Q1 20201.

•

Gross contributions to KiwiSaver funds in the year to March 2020 added up to an estimated $7.7 billion ($7.2 billion via IRD), which is 48% higher than five years ago2.

028 | ASSET JULY 2020

•

At March 31, 2020, KiwiSaver assets make up 32% of New Zealand fund industry FUM, which comprises 52% of the industry’s FUM growth since KiwiSaver started in mid-20073.

•

Growth in KiwiSaver FUM has seen related income to suppliers growing from $250 million in 20154 to an estimated $540 million ($490 million in year to March 2019) in the latest financial year5.

•

As a percentage of year-end assets, supplier revenues from KiwiSaver over the past five years have modestly declined from 0.88% of FUM6 to an estimated 0.85%.

Even though many individual KiwiSaver accounts sizes are still small, growth in KiwiSaver funds under management (FUM) has been very important to the prosperity of the New Zealand funds management industry. KiwiSaver member statements relate to $63 billion in household savings as of March 2020, which is up 10% from $57 billion in the prior year7.

While the increase in wealth invested through KiwiSaver is good for the New Zealand funds management industry, I want to explore if KiwiSaver is working out as an “investment success story” for its current three million members.

KiwiSaver fund performance over 12 months For my assessment, I’ve used the most recent returns as reported to the FMA by KiwiSaver fund managers in their March 2020 quarterly fund updates8.

The FMA KiwiSaver database contains 240 funds that have a performance history over 12 months. The range of returns (after fees before tax) for the 240 funds over the year to March 2020 has ranged from +19% to -39% with an unweighted average of -2.4%.

Of the 240 fund options in the FMA database, in the year to March 2020: •

75 KiwiSaver funds (31%) after fund manager fees, before tax achieved a better return than their return benchmark (set by the KiwiSaver fund manager)

•

66 KiwiSaver funds (28%) delivered a higher fund return after fees, before tax to their members than the fund fees charged (ie KiwiSaver members made more money in the fund than its KiwiSaver fund manager)

•

89 KiwiSaver funds (37%) had a positive return (after fees, before tax)

It’s no surprise after the slump in sharemarkets in Q1 2020, that the

“It’s no surprise after the slump in sharemarkets in Q1 2020, that the KiwiSaver funds industry delivered a negative average fund return after fees, before tax of -2.4% in the year to March 2020.”

“From my analysis, it appears only a minority of KiwiSaver managers have been delivering ‘investment success’ to their members.”

KiwiSaver funds industry delivered a negative average fund return after fees, before tax of -2.4% in the year to March 2020. What was more disappointing was the average KiwiSaver fund return was below the average fund performance benchmark (market index) return of -1.7% by 0.7% on average.

Most KiwiSaver fund managers follow an active management approach to their KiwiSaver funds. In principle, the aim of an actively managed KiwiSaver fund is to beat the fund’s return benchmark after their fees. With 69% of funds not achieving that hurdle in the most recent financial year, I draw two interim conclusions.

01 Most active KiwiSaver fund managers have fund costs that exceed their ability to “beat the market”.

02 A good number of KiwiSaver fund managers might do better for their members by reducing their fund charges and being less active and more index oriented.

RBNZ https://www.rbnz.govt.nz/ RBNZ https://www.rbnz.govt.nz/ 3 IRD https://www.ird.govt.nz/

If we look at the five largest KiwiSaver providers by FUM, including the big four banks, the underperformance trend is further accentuated. In the year to March 2020, 89% of their KiwiSaver fund offerings had after fees before tax returns below their own benchmark hurdles.

But maybe my underperformance concerns are overstated as a 12-month period may not be indicative of KiwiSaver fund performances versus benchmark over the longer term.

Longer term performance of KiwiSaver funds To get a sense of the longer-term performance trends in the KiwiSaver industry, I’ve analysed the five-year performance trends of KiwiSaver funds. I have focused on the “growth” KiwiSaver funds offered by 14 of the larger KiwiSaver providers. As of March 2020, these funds collectively have FUM of $12.4 billion (20% of total KiwiSaver FUM).

Per annum, this fund group had average returns after fees before tax of 5.3%, which varied from a high of 7.3% to a low of 0.6%. Their benchmark average return was 6.3%, which represents an average underperformance of 1% per annum on fund returns versus their return benchmark.

Excluding one significant underperformer, this differential drops to 0.7% per annum. However, only three of the funds, which manage 27% of sector FUM, outperformed their benchmarks over the most recent five-year period.

Pretty disappointing.

to be useful when assessing the “investment success” of your current KiwiSaver manager, which can vary widely.

In my opinion, the best publicly available reports to assess investment performance are the quarterly fund updates which each KiwiSaver manager is required to compile and publish on their website.

From my analysis, it appears only a minority of KiwiSaver managers have been delivering “investment success” to their members. Given the rising wealth invested through KiwiSaver funds, it is important KiwiSaver managers are made more accountable for fund performance as well as providing their members with lower cost, possibly less active, investment options.

Even better, given the increasingly important role KiwiSaver is having in building their household wealth, KiwiSaver members should move on from a DIY approach to use an independent Authorised Financial Adviser to recheck the “investment success”, or not, of their current KiwiSaver solution.

If you have any further questions relating to this article or KiwiSaver contact the Findex advice team at findex.co.nz A David van Schaardenburg is a Senior Partner, Wealth Management at Findex.

An Adviser Disclosure Statement is available on request and free of charge. www.goodreturns.co.nz/disclaimers

Summary KiwiSaver annual member statements are a useful summary of your savings progress but do not necessarily prove

FMA https://www.fma.govt.nz/ FMA https://www.fma.govt.nz/ 6 IRD https://www.ird.govt.nz/

1

4

7

2

5

8

IRD https://www.ird.govt.nz/ FMA KiwiSaver database of reports released mid-May for the period up to March 31, 2020

WWW.GOODRETURNS.CO.NZ | 029

REGULARS | PRACTICE MANAGEMENT

Living and dying in New Zealand in 2020 Russell Hutchinson looks at how expected mortality rates have been affected by Covid-19.

H

ow long will people live?

Has that changed much?

What has been the impact of Covid-19? Have measures to control Covid-19 made life expectancy longer or shorter? Rarely is there so much interest in mortality data as a subject by general media than over the last couple of months.

Financial advice would be a heck of a lot easier to give if we had more certainty. One of the most interesting numbers we could possibly have is the date of death. It would revolutionise retirement planning and destroy insurance planning. Instead we have to live with uncertainty. Most people seem to get along okay knowing this. But they still form a view about how long they may expect to live, and that shapes their view about how bad things would be if they died much earlier. For example: in 1800 few adult men could expect to live much past 50 years – even having navigated the dangerous years of early childhood successfully. It was a tough market for life insurance, and most people relied on family and church to cushion the blows of fate. On the other hand, today, most people expect to live well into retirement, so early death would represent a major blow to their expected fortunes. They are – relatively – keen to agree that they should buy a little insurance cover.

030 | ASSET JULY 2020

How has Covid-19 affected the rate at which people die in New Zealand?

It’s complicated, it’s a story that is still unfolding and death rates have, briefly, became very political.

First, a baseline. A few months ago, Statistics New Zealand released new period life tables. Based on death rates in New Zealand for 2017-19 they found the following data.

•

Life expectancy at birth is 80.0 years for males and 83.5 years for females.

•

Life expectancy at age 65 is 19.5 years for males and 21.7 years for females.

•

Life expectancy at all ages reduced very slightly from 2016-18 (allowing for revised population estimates).

•

Life expectancy at birth has increased by about six months for males and four months for females since 2012-14 (see New Zealand period life tables: 2012-14).

More detail will be made available later this year. A brief explanation of how these numbers work: period life expectancy is the average length of life remaining at a given age, assuming people experience the age-specific death rates of a specific period from the given age onwards. For example,

life expectancies for the period 2017-19 are based on death rates for that period and take no account of changes in death rates after 2017-19. As a result, if death rates continue to decline, the period life expectancies will underestimate actual life spans. Or put another way, we have become used to the idea that life expectancy tends to improve over time – so this is not an idle caution.

Although this need not necessarily be so. Big public health crises can make a difference. In some parts of the US the life expectancy of some groups is worsening considerably – a major factor is rising deaths due to drug overdoses. In Russia, life expectancy has been falling for some time.

Public health experts were very, very worried that we could experience thousands, or even tens of thousands of deaths from Covid-19. We were very fortunate that the first cases took as long to get here as they did. It meant that we had some data from China, and perhaps more importantly, South Korea and Taiwan, to help get our heads around what might happen. Although some people point out that if we closed our border sooner, we could have avoided some of the economic pain of the lockdown, it cannot really be disputed that the lockdown has done a very effective job of controlling Covid-19.

We are now in the happy position that,

“Most people expect to live well into retirement, so early death would represent a major blow to their expected fortunes.”

“Public health experts were very, very worried that we could experience thousands, or even tens of thousands of deaths from Covid-19.” as I write, tens of thousands of people were able to gather again to watch sport.

During the height of the lockdown even as we saw our numbers fall we saw the numbers rise dramatically in the UK and in New York. Some people literally could not believe the numbers and thought that deaths from other causes were being counted as Covid-19. But good data is kept on the number of deaths in both the UK and the US and what we saw was, if anything, that the number of Covid-19 deaths explained only about half to two thirds of excess mortality that was being seen over the average of previous years.

So, in line with Covid-19 infections there were more deaths.

Some may have been Covid-19 and were not counted (because they got counted as a heart attack, say), while some others may have been additional heart attacks that would have survived, but they were not seeking treatment soon enough due to concerns about health services, or catching Covid-19.

That led to some speculation that lockdown itself may be causing some of the excess deaths seen as not as many people were using health services as would be expected. That theme was explored by the The Economist1 in the UK where there was some evidence to

suggest that it was a contributing factor to their excess mortality.

In our own local version, because lockdown was successfully controlling Covid-19, some people thought that the lockdown could also be causing deaths, and were so keen to prove that, they didn’t wait for the actual data to come out. Rumours circulated on Twitter raising the spectre of a sharp rise in suicide deaths. That was quickly contradicted by the Ministry of Health, and subsequently by the Chief Coroner2.

Farah Hancock of Newsroom did some great data-based journalism and could not find any excess mortality here3, although in non-age standardised review there were 129 more deaths at the point of their analysis than there were in the same period in 2019. Since then I have had one of my staff produce an age and population standardised review of mortality (and we had a few weeks of additional data) and now deaths are running at below trend for last year – about 400 less when controlling for those other factors. You might expect that to be the case: after all, seasonal influenza has reduced almost to zero, as well as road traffic reductions reducing the road toll, and with noone on construction sites or adventure tourism sites for a while workplace accidents fell as well.

There is still time for knock-on effects to be felt – delays to some treatments, and the economic pain that will be felt for at least the next couple of years, will have an effect. We hope, and we will work to avoid that effect, but as insurers must make estimates of claims, we also have to be realistic. You can do your bit to try and help too. Here is a list of services to which you can refer people if you believe that they need to talk. A Russell Hutchinson is director of Chatswood Consulting and Quality Product Research, which operates Quotemonster.

•

1737, Need to talk?

Free call or text 1737 to talk to a trained counsellor

•

Depression.org.nz 0800 111 757 or text 4202

• Lifeline 0800 543 354 •

Suicide Crisis Helpline 0508 828 865 (0508 TAUTOKO)

•

Kidsline 0800 54 37 54 for people up to 18 years old – open 24/7

•

Youthline 0800 376 633, free text 234, email talk@youthline.co.nz, web chat and other support options at youthline.co.nz

• Rural Support Trust 0800 787 254 •

Samaritans 0800 726 666

•

What's Up 0800 942 8787 (for 5-18 year olds). Phone counselling available Monday-Friday, noon-11pm – and weekends, 3pm-11pm. Online chat is available 3pm-10pm daily.

•

thelowdown.co.nz Web chat, email chat or free text 5626

• Anxiety New Zealand 0800 ANXIETY (0800 269 4389) •

Supporting Families in Mental Illness 0800 732 825.

In a life-threatening situation call 111.

https://www.economist.com/graphic-detail/2020/04/16/tracking-covid-19-excess-deaths-across-countries https://www.stuff.co.nz/national/health/coronavirus/121556568/chief-coroner-opposes-rumours-suicide-rate-increased-during-covid19-lockdown 3 https://www.newsroom.co.nz/2020/05/05/1157173/are-there-hidden-covid-19-deaths-in-nzs-statistics 1

2

WWW.GOODRETURNS.CO.NZ | 031

REGULARS | ASSET ADVISER

Name

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

NZ Insurance Cash AMP KiwiSaver Cash Fund AMP NZRT Cash Fund AMP Prem PSS OnePath NZ Cash AMP PSS Select Cash ANZ Default KiwiSaver Scheme-Cash Aon KiwiSaver ANZ Cash Aon KiwiSaver Nikko AM Cash ASB KiwiSaver Scheme's NZ Cash BNZ KiwiSaver Cash Fund Booster KiwiSaver Enhanced Income Fidelity Life Super-Super Cash Portfolio Fisher TWO KiwiSaver Scheme-Presv Kiwi Wealth KiwiSaver Scheme Cash Mercer KiwiSaver Cash NZ Defence Force KiwiSaver Cash OneAnswer KiwiSaver-Cash Fund SIL 60s + Sup Cash Fund Westpac KiwiSaver-Cash Fund

1.555 1.54674 1.63946 1.53662 1.4912 15.82305 14.89643 1.5198 1.2048 1.5606 2.8344 2999.4978 ---1.4395 2.2947 1.4486

0.84 1.03 0.99 0.79 1.77 1.23 1.46 1.28 1.72 1.24 0.77 1.41 1.87 1.28 1.06 1.79 1.57 1.57

1.33 1.52 1.53 1.33 2.10 1.64 1.87 1.79 2.15 1.71 1.18 2.00 2.42 1.77 1.59 2.03 1.99 1.96

1.63 1.81 1.82 1.62 2.28 1.83 2.13 2.09 2.34 1.92 1.26 2.23 2.64 2.07 -2.19 2.07 2.22

123.38 138.98 3.12 0.76 23.41 7.24 3.06 768.30 247.48 37.15 7.65 35.38 319.72 35.15 3.71 63.44 1.46 548.99

-------------------

1.96 9.89 8.50 9.64 10.52 14.42 12.74 41.30

3 4

1.72

4.61

4

7.59 12.48 12.31 7.39 7.35 13.74 13.56 7.07 4.35 10.63 9.69 1.27 1.54 9.47 9.52 10.01

2 3 1 1

10.38 8.57 4.06 3.81 13.42 29.65

NZ Insurance Equity Region Australasia Booster KiwiSaver Trans-Tasman Share OneAnswer KiwiSaver-Australasian Share

1.9081 2.5315

NZ Insurance Equity Region Australia AMP KiwiSaver Australasian Shares

1.4281

9.15

--

NZ Insurance Equity Region NZ AMP Prem PSS ACI NZ Shares AMP Prem PSS ACI NZ Shares Index Fidelity Life NZ Shares Portfolio Fidelity Life Super-Super NZ Share

3.53773 3.27311 8.6513 --

NZ Insurance Equity Region World AMP Prem PSS ACI Global Shares Index AMP Prem PSS FD Intl Share Fund 1 Value Mercer KiwiSaver Shares NZ Defence Force KiwiSaver Shares OneAnswer KiwiSaver-Intl Share OneAnswer KiwiSaver-Sustainable Int Shr

2.74805 1.57804 --2.3677 2.5102

10.52 7.96 7.01 6.81 11.03 15.42

8.48 6.30 7.43 -9.71 10.75

8.18 9.92 27.95 11.61 56.16 12.53

3 2 2 1 5 4

5.30 7.38

---

4.34 4.68

3 3

NZ Insurance Equity Region World - Hedged AMP KiwiSaver International Shares AMP KiwiSaver Passive International AMP Prem PSS ACI Global Shares Index Hdg Booster KiwiSaver International Share FANZ Lifestages KiwiSaver High Growth Fidelity Life Aggressive Fidelity Life International Fidelity Life Super-Sup Intl Fidelity Life Super-Super Aggressive Fisher FuturePlan - Intl Coms Fisher TWO KiwiSaver Scheme-Eq

1.3923 1.4679

2.59 6.14

2.57112

1.09

3.43

4.68 7.90

2

2.3646 1.35222 3.959 2.9243 --3.78042 5741.7157

11.99 2.57 -1.05 5.85 11.86 7.51 9.28 10.36

8.52 6.38 4.51 5.78 8.39 7.64 7.14 10.53

7.59 -5.13 4.59 6.79 7.66 5.59 9.20

4 3 2 2 3 3 3 5

16.16 159.70 0.43 0.34 23.95 24.73 26.13 168.06

6.06

3.36

1.16

2

5.48

3.51

3.87 3.48

4

2.16447

5.94

3.39

3.62 6.81

3

1.9021

7.51

4.54

4.06 3.46

4

1.139 -2.5702 2.656 2.3097

0.69 3.27 6.78 6.81 6.82

1.81 3.11 8.30 8.32 8.32

2.04 3.09 8.00 8.01 8.02

63.14 125.01 16.34 23.51 19.14

------

0.79 1.23 0.29 -1.80 8.46 7.83 13.48

5.66 6.01 5.09 3.08 9.77 8.04 10.47

5.46 5.74 4.90 4.14 8.80 7.34 9.00

318.07 264.90 34.52 74.42 91.84 385.86 95.70

3 3 3 1 4 4 5

AMP KiwiSaver ANZ Balanced Plus AMP KiwiSaver ANZ Growth AMP KiwiSaver ASB Growth AMP KiwiSaver LS Growth Fund AMP KiwiSaver Nikko AM Balanced AMP KiwiSaver Nikko AM Growth AMP NZRT AMP Growth

-- 5.23 1.95 8.41

5 3

4.7247 2.3005

-2.35 -3.36

5.31 8.66

5.81 485.47 8.59 27.93

1 5

NZ Insurance Global Bond AMP KiwiSaver International Fxd Intr AMP Prem PSS PIMCO Global Fixed Interest AMP Prem PSS SSgA Global Fixed Int Index OneAnswer KiwiSaver-Intl Fxd Int

--

NZ Insurance Miscellaneous Booster KiwiSaver Capital Guaranteed Kiwi Wealth KiwiSaver Scheme CashPlus Westpac KiwiSaver-Capital Protect Plan 3 Westpac KiwiSaver-Capital Protect Plan 4 Westpac KiwiSaver-Capital Protect Plan 5

NZ Insurance Multisector - Aggressive AMP KiwiSaver LS Aggressive Fund AMP NZRT AMP Aggressive AMP PSS Select Growth Booster KiwiSaver Asset Class Growth Booster KiwiSaver Geared Growth Booster KiwiSaver High Growth Booster KiwiSaver Socially Rsp Inv Gr

1.7929 3.68845 2.03779 9.2612 2.6582 1.8683 2.2667

032 | ASSET JULY 2020

3.64756 1.9367 ---

Name

7.33 8.19 2.45 2.23

7.67 9.55 5.91 5.72

7.06 8.13 6.73 --

81.71 885.37 187.52 24.79

4 5 4 3

1.1144 1.2371

-0.49 2.54

1.21 5.31

---

12.43 4.49

1 2

1.2316

0.94

4.29

--

13.05

2

1.287 1.916

3.61 2.45

5.89 5.10

-- 24.84 4.84 945.98

3 2

1.873

2.56

4.73

4.50 706.42

2

2.064 3.38749 1.11178 1.24761 2.45524 2.40764 2.77294 3.02166 1.23576 1.99917 2.13742 2.06012 1.9975 2.0858 28.79614 10.38034 10.50487 10.86412 2.0953 1.7165 2.0405 1.6081 5.2681 -4.79155 5908.1892 --2.4936 -2.1153 2.0502 4.1294

2.58 2.68 -0.24 3.41 2.62 3.71 2.63 1.61 0.99 1.53 1.70 1.87 5.76 5.76 5.52 5.98 5.66 5.37 3.85 7.41 6.66 9.67 4.82 6.40 5.87 6.98 8.66 3.19 6.52 3.00 5.77 5.05 3.74

5.06 5.30 1.41 5.87 4.90 6.15 5.21 5.99 4.48 3.89 4.37 4.45 5.93 5.93 5.76 5.74 6.45 6.54 6.32 6.89 6.69 7.95 6.10 6.41 6.36 7.43 6.56 5.06 7.17 4.87 5.96 6.34 5.11

5.66 5.06 --4.69 6.34 5.85 6.60 -3.81 4.11 4.22 5.63 5.67 5.68 5.98 6.78 6.87 6.53 6.76 6.11 7.06 5.41 5.90 6.05 7.02 5.22 5.59 7.32 -5.71 6.18 5.00

49.02 833.59 3.55 3.32 288.42 87.76 142.24 158.19 5.06 5.76 1.99 45.40 179.47 2614.37 31.59 21.69 22.56 181.79 1966.14 501.26 528.56 80.61 3.74 278.45 126.37 926.39 1751.66 410.42 407.89 58.66 607.38 1655.14 94.63

3 2 1 3 2 3 3 3 2 1 2 2 4 4 4 --5 4 5 3 5 2 4 4 4 3 3 5 2 4 4 3

6.71 3.52 3.80 6.41 6.22 6.24 4.46 4.93 3.62 5.25 3.82 1.50 5.30 7.75 5.80 4.61 4.42 4.16 6.08 4.46

4.85 4.11 3.36 5.23 5.12 5.13 4.91 4.54 3.64 4.99 2.86 1.50 5.13 5.43 5.06 4.56 5.16 4.21 4.83 4.77

-4.17 3.28 4.80 5.22 5.21 4.96 4.68 -4.75 -1.50 5.16 4.67 4.75 4.79 5.49 -4.49 4.63

15.16 1349.18 1.08 1166.51 4.47 74.97 4073.27 842.93 190.13 100.71 101.00 17.77 704.99 871.19 289.80 1104.06 182.64 7.20 484.26 303.88

3 2 2 5 -5 3 3 2 3 1 1 4 4 3 3 4 2 4 3

AMP KiwiSaver NZ Fixed Interest AMP Prem PSS ACI NZ Fixed Interest Fidelity Life NZ Fixed Interest Fidelity Life Super-Super Fixed Int OneAnswer KiwiSaver-NZ Fixed Interest SIL 60s + Sup NZ Fixed Interest Westpac Retirement Plan - Accum Port

6.91 6.31 2.27 1.66 1.31 1.77 2.09

6.83 7.08 6.05 5.65 5.70 6.37 5.98

6.39 --5.32 6.31 -5.62

263.91 22.25 20.99 711.68 75.55 18.11 229.53

3 3 2 2 2 2 2

AMP AIT NZ Cash - UT35 AMP ARS-Cash AMP Capital NZ Cash Fund AMP Capital Term Advantage AMP PUT Select Cash ASB Cash Fund BT Enhanced Cash Fund

NZ Insurance Multisector - Conservative

1.1219

-8.37 4.20 -10.10 1.31

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

NZ Insurance Multisector - Balanced AMP KiwiSaver AMP Global Multi-Asset AMP KiwiSaver AMP Income Generator AMP KiwiSaver AMP Responsible Invmt Bal AMP KiwiSaver ASB Balanced AMP KiwiSaver LS Balanced Fund AMP KiwiSaver LS Moderate Balanced Fund AMP KiwiSaver Mercer Balanced AMP NZRT AMP Balanced Fund AMP NZRT AMP Global Multi-Asset AMP NZRT AMP Income Generator AMP NZRT AMP Moderate Balanced AMP NZRT ASB Balanced Fund AMP NZRT Mercer Balanced AMP NZRT Nikko AM Balanced AMP NZRT Responsible Investment Bal AMP PSS Lifesteps Consolidation AMP PSS Lifesteps Progression AMP PSS Select Balanced ANZ Default KiwiSaver Scheme-Balanced ANZ KiwiSaver-Balanced Aon KiwiSaver ANZ Balanced Aon KiwiSaver Russell Lifepoints 2025 Aon KiwiSaver Russell Lifepoints 2035 Aon KiwiSaver Russell Lifepoints Bal ASB KiwiSaver Scheme's Balanced BNZ KiwiSaver Balanced Fund Booster KiwiSaver Balanced Booster KiwiSaver Socially Rsp Inv Bal Fidelity Life Balanced Fidelity Life Super-Super Balanced Fisher FuturePlan - Balanced Fisher TWO KiwiSaver Scheme-Bal Kiwi Wealth KiwiSaver Scheme Balanced Mercer KiwiSaver Balanced Milford KiwiSaver Balanced Fund NZ Defence Force KiwiSaver Balanced OneAnswer KiwiSaver-Balanced Westpac KiwiSaver-Balanced Fund Westpac Retirement Plan - Balanced Port

2.56243

1.1569 1.4455

NZ Insurance Equity Sector NZ - Real Estate MFL Property Fund OneAnswer KiwiSaver-Australasian Prpty

Fisher FuturePlan - Growth Generate KiwiSaver Focused Growth Fund Mercer KiwiSaver High Growth NZ Defence Force KiwiSaver High Growth

AMP KiwiSaver ANZ Conservative AMP KiwiSaver Default (Default) AMP PSS Select Income ANZ Default KiwiSaver Scheme Cnsrv(Dflt) Aon KiwiSaver Russell Lifepoints 2015 Aon KiwiSaver Russell Lifepoints Cnsrv ASB KiwiSaver Scheme's Cnsrv (Default) BNZ KiwiSaver Conservative (Default) BNZ KiwiSaver First Home Buyer Fund Booster KiwiSaver Default Saver FANZ Lifestages KiwiSaver Income Fisher FuturePlan - Capital Prot Fisher TWO KiwiSaver Cash Enhanced(Dflt) Kiwi Wealth KiwiSaver Scheme Cnsrv Kiwi Wealth KiwiSaver Scheme Default Mercer KiwiSaver Conservative (Default) Milford KiwiSaver Conservative Fund NZ Defence Force KiwiSaver Conservative OneAnswer KiwiSaver-Conservative Westpac KiwiSaver Default

NZ Insurance Equity Sector Global - Real Estate AMP KiwiSaver Property OneAnswer KiwiSaver-Intl Property

Name

1.192 1.8075 1.92902 1.9403 10.43566 10.92656 1.961 1.4359 1.2038 1.3659 1.15373 1.2664 1.94364 ---1.8624 -1.8972 1.3476

NZ Insurance Multisector - Growth 2.3895 1.3363 1.3331 1.8427 2.0621 1.2991 2.6036

AMP NZRT ANZ Balanced Plus AMP NZRT ANZ Growth AMP NZRT ASB Growth AMP NZRT Nikko AM Growth AMP PSS Lifesteps Growth ANZ Default KiwiSaver SchemeBalanced Gr ANZ Default KiwiSaver Scheme-Growth ANZ KiwiSaver-Balanced Growth Aon KiwiSaver Milford Aon KiwiSaver Nikko AM Balanced Aon KiwiSaver Russell Lifepoints 2045 Aon KiwiSaver Russell Lifepoints Growth ASB KiwiSaver Scheme's Growth BNZ KiwiSaver Growth Fund Booster KiwiSaver Balanced Growth Fidelity Life Growth Fidelity Life Super-Super Growth Fisher Funds Growth KiwiSaver Fund Fisher TWO KiwiSaver Scheme-Gr Generate KiwiSaver Growth Fund Kiwi Wealth KiwiSaver Scheme Growth Mercer KiwiSaver Growth Milford KiwiSaver Active Growth Fund NZ Defence Force KiwiSaver Growth OneAnswer KiwiSaver-Balanced Growth OneAnswer KiwiSaver-Growth Fund SIL 60s + Sup Balanced Fund Westpac KiwiSaver-Growth Fund Westpac Retirement Plan - Dynamic Port

Latest 1Yr 3Yr 5Yr Size Morningstar Transaction Return Return Return $M Rating Exit price % Overall 3.00951 1.33532 1.31709 1.28211 2.12994

5.79 6.56 2.31 1.42 1.46

5.78 7.34 6.18 6.42 4.85

5.35 ---4.65

274.29 10.57 12.75 12.73 0.17

2 3 2 2 1

2.039

5.56

6.41

6.22 188.40

3

2.057 2.1637 3.9528 20.80683 10.38765 10.94135 2.0759 1.8793 2.0745 5.2595 -2.5229 2.1031 1.8334 --3.9754 -2.1957 2.2387 5.019 2.1341 4.7508

4.92 5.56 5.32 1.13 5.24 4.87 2.34 8.32 7.34 5.05 6.93 8.05 6.02 6.08 9.30 2.67 5.19 2.38 5.57 4.95 5.73 4.17 3.09

6.69 6.40 8.88 5.83 6.98 6.98 6.46 8.06 7.91 7.15 7.58 9.29 7.53 8.69 7.47 5.37 8.88 5.12 6.43 6.73 6.63 6.79 5.69

6.60 6.22 8.75 6.36 7.38 7.38 7.02 7.81 7.11 6.17 6.54 8.74 7.31 7.78 5.49 6.14 8.81 -6.24 6.67 6.29 6.76 5.68

167.97 2253.73 148.46 10.30 19.07 45.82 2971.86 701.97 348.89 2.27 140.51 2198.54 552.82 690.03 1585.58 115.54 1597.14 24.61 527.95 448.80 89.84 1579.83 112.08

4 4 5 3 -5 3 4 3 2 3 5 4 4 3 3 5 1 4 4 3 4 2

3.13 3.02 2.85 3.41 3.22 1.96 3.08 2.85 3.66 2.02 1.92 2.13 5.92 5.93 5.83 3.38 6.54 1.41 5.79 5.13 4.89 5.29 3.68 3.44 5.94 4.63 4.31

4.75 3.94 4.41 5.05 4.19 2.90 4.61 4.85 5.25 2.96 3.55 3.09 5.40 5.39 5.92 5.32 5.93 2.74 5.52 5.25 5.33 6.21 4.53 4.32 5.42 5.43 4.82

-3.77 4.17 -4.74 2.74 4.37 --2.85 3.35 2.96 5.05 5.07 6.11 5.56 5.88 3.46 5.16 5.15 5.28 5.92 4.90 -5.07 5.25 4.70

15.50 409.99 536.62 25.18 115.89 331.45 167.30 17.01 14.24 3.12 5.41 8.39 67.70 1291.41 26.60 1893.82 561.22 22.34 188.96 940.14 163.07 403.92 145.48 5.61 212.27 606.81 2814.51

3 2 3 3 2 1 3 3 3 2 2 2 4 4 5 4 4 2 4 4 4 4 3 3 4 4 3

1.1822 2.36823 4.4466 -1.941 3.4063 3.4486

6.04 6.00 4.19 3.33 7.46 7.38 2.16

5.02 5.09 3.77 3.44 5.69 5.59 1.90

-4.91 3.46 3.35 5.28 5.01 1.91

4.12 10.94 0.19 1.25 10.33 5.49 15.08

3 4 1 1 4 3 1

1.15353 2.0372 1.64816 -1.37894 -2.2024

0.92 1.15 1.38 -0.80 0.18 1.48

1.50 1.61 1.90 -1.28 0.38 1.97

1.81 1.95 2.20 -1.54 0.76 2.24

5.77 6.74 3702.97 -2.36 250.09 12.27

--------

NZ Insurance Multisector - Moderate AMP KiwiSaver ASB Moderate 1.2133 AMP KiwiSaver LS Conservative Fund 1.935 AMP KiwiSaver LS Moderate Fund 1.8916 AMP KiwiSaver Nikko AM Conservative 1.2082 AMP NZRT AMP Capital Assured Fund 2.77577 AMP NZRT AMP Conservative 3.08279 AMP NZRT AMP Moderate 2.40964 AMP NZRT ASB Moderate 1.21671 AMP NZRT Nikko AM Conservative 1.20311 AMP PSS Lifesteps Maturity 1.85069 AMP PSS Lifesteps Stability 1.98861 AMP PSS Select Conservative 1.93976 ANZ Default KiwiSaver Scheme-Cnsrv Bal 1.9568 ANZ KiwiSaver-Conservative Balanced 1.9904 Aon KiwiSaver Russell Lifepoints Mod 11.07417 ASB KiwiSaver Scheme's Moderate 2.0342 BNZ KiwiSaver Moderate Fund 1.5865 Booster KiwiSaver Asset Class Cnsrv 3.8728 Booster KiwiSaver Moderate 1.9219 Fisher Funds Conservative KiwiSaver Fund 1.7918 Fisher TWO KiwiSaver Scheme-Cnsrv 2.0300 Generate KiwiSaver Conservative Fund 1.4906 Mercer KiwiSaver Moderate -NZ Defence Force KiwiSaver Moderate -OneAnswer KiwiSaver-Conservative Bal 2.0103 Westpac KiwiSaver - Moderate 1.4222 Westpac KiwiSaver-Conservative Fund 1.8678

NZ Insurance NZ Bonds

NZ OE Cash

For more information call 0800 888 361

Name

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

Fisher Cashplus Fund Nikko AM NZ Cash

1.375 1.0367

1.29 1.92

1.87 2.33

2.07 52.48 2.62 209.51

---

1.31 1.93 9.51 1.35 7.93 5.95 -1.91 -11.98 -5.03 -16.57 5.69 1.72 0.27 8.18 12.98 6.36 6.91 3.53 16.85 12.99 16.35

8.32 8.86 11.77 9.28 12.83 14.63 5.61 0.77 5.83 -3.92 12.82 11.01 5.41 13.20 15.63 11.24 6.30 10.85 12.63 14.89 17.00

7.72 8.29 10.04 8.69 11.79 13.68 4.60 4.78 6.66 2.71 13.19 12.10 5.91 12.02 14.55 11.89 5.84 10.87 13.52 9.02 --

10.12 7.25 5.20 10.12 59.13 110.47 104.64 32.91 80.88 21.49 278.24 15.40 47.98 461.28 268.04 44.87 12.38 130.42 105.12 102.38 248.74

2 3 3 3 4 5 1 1 2 1 3 3 2 4 5 3 3 3 4 4 4

-4.75 -11.18 5.50 5.94 9.41 -13.24

5.08 1.46 10.38 10.74 11.62 -2.37

3.32 3.09 8.15 8.40 8.80 -1.96

244.46 13.49 67.77 114.94 330.42 18.48

3 3 4 5 4 1

NZ OE Equity Region Australasia AMP AIT Australasian Shrs-Multi Mgr-UT07 3.64488 AMP ARS-NZ & Australian (multi-manager) 4.2215 AMP ARS-NZ & Australian (Value) 5.1203 AMP NZRT Australasian Shares 1.7202 BT PS Australasian Diversified Share 2.956 Castle Point Ranger Fund 2.068 Devon Alpha Fund 1.7653 Devon Dividend Yield 1.7535 Devon Trans-Tasman Fund 3.9777 Forte Equity Trust 1.2016 Harbour Australasian Equity 3.2765 Harbour Australasian Equity Focus Fund 1.963 Harbour Australasian Equity Income 1.8655 Milford Trans-Tasman Equity 3.2132 Mint Australasian Equity Fd (Retail) 3.8751 Nikko AM Concentrated Equity 2.5918 OneAnswer SAC Equity Selection 2.6288 Pie Australasian Dividend 2.8248 Pie Australasian Emerging Companies 4.1311 Pie Australasian Growth Fund 6.4843 Pie Growth 2 Fund 2.1105

NZ OE Equity Region Australia AMP Capital Australian Share Fund Devon Australian Fisher Funds Australian Growth Fund Fisher Funds Premium Australian Fund Milford Dynamic OneAnswer SAC Australian Share

2.82577 1.3493 4.5173 1.9916 2.1073 3.6796

NZ OE Equity Region Emerging Markets AMP AIT Emerging Markets - UT65

1.44276

-3.54

1.29

1.94 1.40

--

1.18764 2.70953 3.48035 3.62315 2.87116 11.69 2.7922 7.1974 3.5312 1.8286 2.6641 6.1533 2.0695 1.6364

-1.67 10.21 7.77 7.92 7.93 13.02 14.03 10.39 4.87 0.10 6.24 10.55 5.82 -1.66

3.05 14.41 12.87 12.44 13.70 16.79 17.51 14.44 13.20 9.32 13.67 14.33 12.83 9.64

2.35 13.95 12.71 12.22 13.10 15.49 15.90 12.90 13.71 10.17 13.95 12.95 13.44 11.18

-4 3 2 3 5 5 2 3 1 4 4 3 2

NZ OE Equity Region NZ AMP Capital Emerging Markets Share AMP Capital Ethical Leaders NZ Shares AMP Capital NZ Shares Fund AMP Prem PUT ACI NZ Shares AMP Prem PUT ACI NZ Shares Index Fisher Funds NZ Growth Fund Fisher Funds Premium New Zealand Fund Fisher Trans Tasman Equity Trust Forsyth Barr New Zealand Equities Harbour NZ Equity Advanced Beta Fund Nikko AM Core Equity OneAnswer SAC NZ Share Russell Investments NZ Shares Smartshares NZ Core Equity Trust

62.11 30.93 484.54 2.98 3.09 215.25 160.43 62.73 56.67 266.94 32.52 58.32 226.89 96.44

NZ OE Equity Region World AMP Capital Core Global Shares Fund AMP Prem PUT FD Intl Share Fund 1 Value AMP Prem PUT SSgA Global Shares Index Elevation Capital Value Fund Fisher Funds Property and Infrastructure Nikko AM Global Equity Unhedged OneAnswer SAC International Share Pie Global Small Companies Fund Russell Investments Global Shares T.Rowe Price Global Equity Growth

1.75288 1.64608 2.37678 1.4589 3.0056 2.4527 2.6871 1.8975 2.0976 2.1218

6.83 8.83 10.88 2.40 -0.84 15.77 13.27 16.40 6.30 23.14

8.00 7.96 10.18 0.22 9.42 11.88 10.84 10.60 7.37 17.18

7.73 6.25 8.60 2.99 10.32 9.55 9.60 9.20 6.52 12.81

898.45 3.70 2.72 19.40 150.86 114.10 249.61 105.44 87.16 135.02

2 2 3 1 4 3 4 4 2 5

0.45 -1.30 14.27 3.32 5.96 -2.07 -0.32 -1.31 2.22 4.10 5.72

2.99 4.26 10.75 5.16 4.15 1.16 3.59 4.04 4.90 6.12 7.46

4.15 4.52 11.00 5.23 6.06 3.99 3.19 3.46 5.68 6.40 6.82

9.76 22.95 6.99 3.02 3.84 549.65 74.07 318.27 57.56 8.94 7.45

2 4 5 3 2 2 2 1 4 3 4

NZ OE Equity Region World - Hedged AMP AIT Global Equities-Multi Mgr-UT28 AMP AIT Global Infrastructure - UT04 AMP ARS-International Shares (Growth) AMP ARS-International Shares (Passive) AMP ARS-International Shares (Value) AMP Capital Core Hedged Global Shares Fd AMP Capital Ethical Leaders Global Shars AMP Capital Global Listed Infrastructure AMP Capital Global Shares Fund AMP NZRT International Shares AMP NZRT Passive International Shares AMP Prem PUT SSgA Global Shares IndexHdg ASB World Shares

1.32312 2.99645 1.9614 1.8606 1.5088 1.60737 1.78113 1.88407 3.18958 1.70451 1.76117 2.59833

1.44

2.54

4.51 3.95

3

1.751

2.95

4.61

5.85 528.75

3

Name

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

BT PS International Diversified Share Fisher Funds International Growth Fund Fisher Funds Premium International Fund Fisher Global Fund Milford Global Equity Nikko AM Global Equity Hedged Pathfinder Global Water Pathfinder World Equity Fund Russell Investments Hedged Global Shares

2.0724 2.7083 2.8434 6.3983 1.81 2.0763 2.1127 1.884 2.1148

6.05 20.18 20.67 9.67 16.16 5.84 3.80 3.99 -0.33

5.76 14.58 15.00 7.41 9.62 4.61 5.10 4.32 2.61

5.89 11.76 12.10 5.78 7.08 5.74 5.37 3.56 4.22

65.97 63.13 194.45 107.23 732.41 39.66 27.37 8.94 89.33

3 4 4 3 4 2 3 2 2

-8.28 -10.72 -11.34 -9.98

3.64 1.58 1.30 1.19

3.64 1.28 1.42 1.77

1.47 4.25 155.57 252.61

4 1 2 3

3.9584 2.59914 4.9595 2.2818 4.0397

-4.96 -8.02 -9.24 -3.48 -3.37

7.02 6.58 5.34 8.15 8.63

7.24 7.72 7.26 8.29 8.56

3.14 152.27 34.05 75.84 142.81

2 2 3 3 4

1.27438 2.14068 2.7137 1.09944 2.60488 1.31281

1.95 5.13 5.88 1.73 6.08 7.63

2.03 2.74 3.38 1.96 3.77 4.09

2.30 2.67 3.33 2.26 3.62 3.75

49.53 6.63 1.52 128.88 104.08 2.17

1 1 3 1 3 3

1.99652

5.97

3.27

3.43 3.42

2

2.4225 2.3808 1.1021 1.289 1.3577 1.2167

3.74 3.64 4.68 7.58 7.36 6.84

3.32 3.29 3.77 4.78 4.38 4.45

3.06 3.54 3.88 4.66 3.94 4.45

94.21 156.71 65.07 36.02 1.35 606.95

2 4 4 5 3 4

0.7525 1.32028 1.0992 1.4308 0.9005 1.3875

1.79 2.42 ---6.93 0.77 ---5.31 2.25 -2.85 -1.63

-2.05 -2.83 --0.78 3.50

6.61 15.09 4.00 24.71 4.58 78.30

-------

2.20287 1.58185 2.10319 2.95667 1.94579

0.18 1.64 0.75 -0.19 0.47

4.75 5.74 4.64 4.68 5.08

4.39 5.42 4.30 4.20 4.82

55.95 7.89 23.79 8.17 16.54

2 3 2 2 2

1.44804 2.0367 2.327 2.1043 1.27321 1.15038 1.9726 2.0249 1.8217 2.4412 2.0249 2.5321

2.20 2.05 2.59 1.01 -0.20 2.41 1.87 5.71 3.37 6.45 5.71 4.79

4.86 3.60 5.25 4.45 1.60 5.40 4.34 5.73 5.79 7.06 5.73 5.85

4.70 3.34 5.05 4.08 2.52 5.89 4.09 5.40 5.98 7.14 5.40 5.56

39.21 46.85 131.56 59.09 137.97 158.76 37.65 398.10 358.84 787.81 56.10 553.70

2 1 2 2 1 3 1 4 3 5 4 3

1.79681 1.6981 1.7626 1.181 1.6981 2.0596

3.82 5.98 3.79 4.36 5.98 3.75

3.34 4.62 4.29 5.23 4.62 4.04

3.21 4.26 4.34 -4.26 3.88

1.82 65.93 149.81 436.03 18.83 318.77

1 3 3 4 3 2

2.17119 1.53892 2.1093 2.2185 2.3676

2.07 1.64 1.82 5.51 4.88

4.35 5.37 5.72 6.21 6.49

4.02 5.09 5.42 5.99 6.37

75.30 10.96 46.82 252.07 137.92

1 1 2 3 3

NZ OE Equity Sector Global - Real Estate AMP AIT Global Property - UT54 AMP ARS-Listed International Property AMP Capital Global Propty Securities Fd OneAnswer SAC International Property

3.58023 3.9141 1.54615 1.457

NZ OE Equity Sector NZ - Real Estate AMP ARS-Listed NZ & Australian Property AMP Australasian Property Index Fund BT Property Fund Mint Australia NZ Rl Estt Invm (Ret) OneAnswer SAC Property Securities

NZ OE Global Bond AMP AIT Fixed Interest Income - UT36 AMP AIT Global Bonds-Multi Mgr-UT13 AMP ARS-International Fixed Interest AMP Capital Global Short Duration AMP Capital Hdgd Gbl Fixed Intrst Fund AMP NZRT International Fixed Interest AMP Prem PUT SSgA Global Fixed Int Index BT PS International Diversified Bond Fisher BondPlus Fund Fisher Funds Income Nikko AM Global Bond OneAnswer SAC International Fixed Intrst Russell Investments Global Fixed Int

NZ OE Miscellaneous AMP ARS-UK Cash KTAM NZ Australian Long Short Equity Nikko AM Income NZAM Global Growth Pathfinder Commodity Plus Fund Salt Long Short Fund

NZ OE Multisector - Aggressive AMP AIT Aggressive Portfolio - UT31 AMP AIT eInvest - Aggressive - MDF7 AMP AIT Growth Portfolio - UT03 AMP Capital Ethical Leaders Growth AMP PUT Select Growth

NZ OE Multisector - Balanced AMP AIT eInvest - Balanced - MDF5 AMP AIT Moderate Portfolio - UT01 AMP ARS-Balanced AMP Capital Ethical Leaders Balanced AMP Capital Global Multi Asset Fund AMP Capital Income Generator Fund AMP PUT Select Balanced ANZ Invmt Fds Balanced ASB Balanced Milford Balanced Fund OneAnswer MAC Balanced Westpac Active Balanced Trust

NZ OE Multisector - Conservative AMP PUT Select Income ANZ Invmt Fds Conservative ASB Conservative Milford Conservative OneAnswer MAC Conservative Westpac Active Conservative Trust

NZ OE Multisector - Growth AMP AIT Balanced Portfolio - UT 02 AMP AIT eInvest - Growth - MDF6 AMP ARS-High Growth ANZ Invmt Fds Balanced Growth ANZ Invmt Fds Growth

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

Name ASB Growth Fisher Multi Sector Fund Milford Active Growth OneAnswer MAC Balanced Growth OneAnswer MAC Growth OneAnswer SAC Balanced Westpac Active Growth Trust

1.7769 3.7377 3.9553 2.2185 2.3676 3.5317 2.504

1.87 5.91 5.74 5.51 4.88 5.54 4.02

5.94 6.31 8.94 6.21 6.49 6.25 6.36

6.46 5.87 8.71 5.99 6.37 5.96 6.14

110.56 11.55 1176.17 44.35 33.84 52.50 119.00

3 3 5 3 3 3 3

1.30867 1.37375 2.4681 2.5927 1.89782 1.8577 1.7772 1.7819 0.9898 1.7508 1.0742 1.8577 1.6689

2.63 2.30 3.13 2.14 2.10 5.88 3.78 2.83 2.33 1.86 1.54 5.88 4.28

3.60 4.09 4.06 3.16 3.02 5.20 4.90 4.76 4.65 5.85 4.17 5.20 4.98

3.52 3.96 3.96 3.17 2.81 4.81 4.91 5.00 -7.66 4.67 4.81 4.74

10.32 42.80 37.70 6.59 12.18 230.65 763.57 509.26 126.86 2277.03 204.33 20.87 1002.14

2 2 2 2 1 4 3 3 3 5 3 4 3

1.32551 1.98122 2.8854 1.81492 1.30802 1.42382 1.7425 1.494 1.9101 1.9569 1.1849 1.1372 1.1229 1.2572 1.9369 1.293 1.268

3.87 5.57 6.00 6.27 3.61 6.07 3.31 6.43 5.38 5.26 5.48 5.94 7.33 6.48 7.32 5.45 1.60

3.65 4.68 5.11 5.37 3.53 5.21 3.79 5.89 4.98 5.09 4.84 5.02 6.09 5.89 5.55 5.13 2.30

3.88 4.49 4.96 5.18 3.71 4.96 3.87 5.18 4.70 4.88 4.87 4.79 5.47 5.50 5.16 4.98 2.41

6.38 10.38 5.10 2288.34 581.87 11.35 144.19 59.63 27.49 178.35 177.73 435.82 92.85 187.15 14.04 70.66 6.00

2 2 3 4 2 3 2 4 3 3 3 3 5 5 4 4 1

NZ OE Multisector - Moderate AMP AIT eInvest - Conservative - MDF2 AMP AIT eInvest - Moderate - MDf3 AMP ARS-Conservative AMP Capital Ethical Leaders Conservative AMP PUT Select Conservative ANZ Invmt Fds Conservative Balanced ASB Conservative Plus ASB Moderate Harbour Income Milford Diversified Income Fund Mint Diversified Income OneAnswer MAC Conservative Balanced Westpac Active Moderate Trust

NZ OE NZ Bonds AMP AIT NZ Bond - UT36 AMP AIT NZ Fixed Interest - UT60 AMP ARS-NZ Fixed Interest AMP Capital NZ Fixed Interest Fund AMP Capital NZ Short Duration AMP NZRT NZ Fixed Interest BT Corporate Bond Fund Fisher New Zealand Fixed Inc Trust Forsyth Barr NZ Fixed Interest Forsyth Barr Premium Yield Harbour NZ Core Fixed Interest Harbour NZ Corporate Bond Nikko AM NZ Bond Nikko AM NZ Corporate Bond OneAnswer SAC NZ Fixed Interest Russell Investments NZ Fixed Interest Westpac Active Income Strategies Trust

Returns are calculated to 31/05/20 Returns are calculated before tax 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.com.au © 2016 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

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TOP 10

As usual it has been a busy month on Good Returns. Here is a list of the top 10 most read stories over recent weeks.

01 Adviser stops scam and saves client $60,000 An adviser who saved his client from losing $60,000 to a scam says it shows his systems are working.

02 ‘We will be a formidable team’: Ballantyne MD Naomi Ballantyne hails the hiring of former Fidelity Life chief executive Nadine Tereora by Partners Life.

03 ASB on recruiting drive as it cuts branch numbers Financial advisers will be among the 150 people ASB recruits to provide advice to customers as it cuts branch numbers and reduces hours.

04 Core portfolio for just 27 and a half basis points NZX-owned Smartshares rolls out a suite of exchange-traded funds (ETFs) which will give investors a core portfolio with management fees of 27 and a half basis points overall.

05 Date set for new financial advice regime The new financial advice regime will begin on March 15, says the Government, as it sets new disclosure requirements to ensure consumers seeking financial advice can make informed decisions.

Keep up with the news at

GOODRETURNS.CO.NZ

034 | ASSET JULY 2020

06 Regulatory change needed, or halt to AMP Life sale, policyholder says An AMP Life policyholder says the sale to Resolution Life should be stopped if more protection is not provided for its customers.

07 Commission disclosure: what’s material?

Advisers' requirements to disclose what they’re paid will centre on what clients might consider a material influence.

08 Replacement case puts spotlight on 'churn' New regulations in insurance and the financial advice sector may help avoid situations where people are left exposed by insurance replacement.

09 All-clear for AMP Life sale While AMP says the sale of AMP Life to Resolution Life has received all regulatory approvals, the Reserve Bank has added conditions on the sale.

10 [The Wrap] Dealer group land is like a game of Risk Why the dealer group network faces major challenges ahead of changes to the regulatory regime.

CALLING ALL FINANCIAL ADVISORS 16TH ANNUAL

FINANCIAL MARKETS LAW 22 October 2020 | Auckland

Conference

Future pathways of NZ’s financial markets Adapting to the new age of financial market regulations

LIAM MASON, Financial Markets Authority

SUSAN TAYLOR, Financial Services Complaints

MEDIA PARTNER:

SIMONE ROBBERS, Reserve Bank of NZ

MARK PETERSON, NZX

SUPPORTING ORGANISATIONS:

Register online at conferenz.co.nz/FMLAW

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