ASSET Autumn 2023

GRTV: Getting up to speed with RI

Exit interview: George Carter

Do things that really blow your hair back

KEEP CALM AND CARRY ON

despite the uncertainty

Keep calm and carry on, despite the uncertainty

It’s still a good time to invest; the question is where? Some of New Zealand’s leading financial heads give Asset their take on what’s ahead - and where to position your portfolios.

10 PEOPLE

22

Adviser living the life-changing power of

insurance

Cancer survivor and insurance adviser Melissa Still says it’s important to spend your time doing things that really ‘blow your hair back’.

The latest appointments: a former AMP Capital strategist joins JMI; new board director at Octagon; acting CEO at Smartshares; a new Guardian angel; two new roles at AIA

26 PRACTICE MANAGEMENT

The Government’s proposed income-insurance scheme has been deferred until next term, but is it a good use of money?

12 INSURANCE ADVISER PROFILE

Prior to going back to the UK, Nikko Asset Management managing director George Carter talks about success as a leader, the flaws in KiwiSaver, and the fee he would like to see abolished.

28

COMMENTARY

Enough regulation already? David van Schaardenburg argues it may be time to push pause.

32 MORNINGSTAR

34 THE GOOD RETURNS TOP 10

Let’s get agreement on NZ Super

Once again, the age of eligibility for NZ Superannuation has been raised as an election issue. Labour has vowed to keep it at 65, while National and ACT want to raise it to 67.

National propose to gradually increase the age of eligibility to 67, with adjustments not beginning until 204420 years after the legislation has passed. This change wouldn't affect anyone born before 1979.

Meanwhile, ACT wants to raise the age of eligibility more quickly.

If there is one policy which should be above the fray of politicking this is it.

The reality is that it is such a longterm policy where changes would be introduced gradually over many years it should have bipartisan support.

It’s hard to believe National thinks it can pass a law which doesn’t come into effect for 20 years and expect it to still be sitting on the statute books unchanged for two decades.

It’s an interesting election issue as any of the proposed increases would only impact people in their mid 40s.

Raising the age of eligibility makes sense considering NZ Superannuation is one of the Government’s big-ticket expenses each year, and of course we are living much longer than when the pension was started.

It should have been done years ago. I’d always planned on not having NZ Super when I hit 65 but it’s pretty clear I’ll be getting my fortnightly cheque – and a winter energy allowance.

I’ve often talked about the changing face of the financial advice world and it’s

becoming clear we are entering a whole new era.

Of course the catalyst for this is the new adviser regulations. While it is hard to get data on how many advisers have left the industry and how many new people are coming on board it is clear that there is change afoot.

We see it pretty much daily where emails come in from people saying they have retired. Then, as we reported on Good Returns, the training establishments are busy and the age of people studying is well down on the average age in the industry.

It’s sad to see so much experience leave, but then it is good to see new blood coming in. Over the years the mortgage and insurance sectors have arguably seen many new advisers with a good mix of males and females, and a good mix of ethnicities. It’s not so clear that is the same with investment advice. (Happy to be proved wrong).

The fortunate thing is New Zealand has not seen the exodus of advisers like the Australian market has witnessed.

It’s going to be interesting to see how the advice world evolves over the next couple of years – whether from my desk or an armchair.

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Ramping up insurance referrals from mortgages

Lets Talk Mortgages and Insurance director Sarah Bloxham shares one of her tips in a recent speech to financial advisers from around the world at the Million Dollar Round Table (MDRT) conference in Nashville this month.

MDRT is an independent association of the world's leading life insurance and financial services professionals from more than 500 companies in 70 nations and territories.

Bloxham started her mortgage business in 2015 and two years later added insurance into her services. By 2018, the single mother of two, had won New Zealand Adviser of the Year, but at the time no business or money was coming in and she was just about to sell her car to pay the mortgage.

As her business flatlined, she went to a Gold Coast conference, having won Adviser of the Year for the second time, and met Doug Bennett who became her mentor. She speaks to him every week and says this has been an added avenue to her success.

Because Zoom meetings have proved successful, Bloxham doesn’t work weekends, has timed meetings with clients, ends meetings during the week at 5pm and spends Friday afternoons prepping for the next week.

At the end of each meeting she always asks clients if they have anything to ask her. “You're making sure you've put the conversation both ways.”

If her business partner is in an insurance meeting, he will be booking the next meeting, not waiting for office staff to do it.

“I’ve got clients who don’t work Fridays or Mondays because they work weekends. I know they are free on those days, so I rebook the same time the week after the first meeting to keep the momentum going.”

Adding services

Bloxham says if mortgage advisers are not doing insurance themselves, they should think about adding a person into their business who has expertise in the field or the reverse, insurance advisers adding a mortgage expert into their company.

She says this is important as a mortgage client needs to get insurance before they get the keys to the house, particularly if they have a big mortgage.

There are two reasons for doing this, she says. “Number one, if something happens to buyer while they are looking for house and the adviser has arranged insurance, they can still buy the house. Number two, when a client has the keys to their new house, they really don't want to hear from their adviser again.”

Bloxham does warn against rushing clients into the insurance aspect of buying a house.

She says insurance should be talked about with clients and arranged if possible between when pre-approval for a house purchase is granted and when they are viewing potential properties. “That’s when we want to be doing their insurance because the mortgage part is slowed.

“If the mortgage adviser is passing on the insurance to another party, both don't want to be pressuring the client at the same time,” she says.

“When an insurance referral is made, the adviser must get an overview from the mortgage adviser, as the client won’t know the insurance adviser. All those pieces of the conversation have to be kept going.

“Because I am the mortgage adviser, I can lead the person in from the start because a relationship is already established. I can drop into the conversation about doing insurance as I have a ticked box amongst the preapproval asking if the client would like to be contacted about insurance. You have their buy in, but if people don't want use your services it in writing they have declined.

“Not every single person gets insurance through my business – maybe 40%.”

Insurance conversations

Before it gets to that detail, Bloxham says she will do a fact find on a client and be prepped before the first Zoom meeting, so she is not wasting clients’

time and can work out the insurance conversation. Clients also provide some of the fact find.

If clients agree to Bloxham arranging insurance she will send a fact find form for them to fill out, with information already gathered from the mortgage application. She also does preunderwriting to give clients some information on real insurance rather than just guessing at it.

In other tips, Bloxham says changing mindset can play a big part in success. Her mentor Bennett helped her stop second-guessing. “Pick a mentor and when a problem arises, and ask yourself what would your mentor think? It gives you a different version and then go with your gut instinct and confidence.

She says MDRT tools have also helped her plan. Every Friday Bloxham checks what her business numbers need to be. She is already a month ahead for next year. ‘Nothing of anything we do is by accident.”

She says mortgage and insurance advising all about the process:

• clients are individuals who are not all the same and can be overwhelmed;

• keep the conversation going. They have come to you as they are looking for a mortgage;

• focus on the insurance being in place before they turn the front door key to their new home;

• for insurance advisers it is about teaching the mortgage adviser when to move the client to you.

Bloxham uses social media heavily, putting up comments about mortgages. “It's all general, so it can't be taken as given financial advice. And people are messaging me. I probably get five or six messages per day coming in from people who often come to see me about a mortgage and then insurance at the back end. A

Getting up to speed with responsible investing

Ι You started Pathfinder back in 2009 and focused on ethical investing. And how has that whole world changed in 14 years?

The world has changed a lot. Our first ethical fund was in 2010, which was the Global Water Fund. Back then, discussions around climate change and even the world's water crisis were fringe in the sense that it didn't really resonate with advisers, didn't really resonate with investors. It was a struggle to raise in both interest and money into the fund.

Ι It was quite a bold move to launch at that time.

Yeah. Well, it was GFC, the fallout from the GFC was still resonating through markets. But I think over time, there has been a significant shift in the last decade with the approach of both investors and advisers towards ethical investment, responsible investment.

Ι Tell me, how have advisers changed your views about ethical investing and responsible investing? Because if you go back 12 years ago, it didn't really register with them.

Yeah. And look, we even had one adviser said to us, "Your fund is just for nutcase tree-hugging greenies." It was regarded as quite out there at the time. It's now quite mainstream. And a lot of that I think has been driven by consumers. In 2016, 2017, everyone found their KiwiSaver had nuclear weapons, cluster munitions, stuff they didn't want in there. That drove an awareness that it was possible to invest in line with the greenies.

Ι Was that a game changer for the responsible investing space?

It was a landmark moment in the sense that it raised awareness of the discussion. But at that point, the discussion really just started and stopped at what do I want to avoid?

It's really important to be clear on what your value set is or what you want to avoid, but you're not going to change the world or have an impact on the world just by avoiding stuff. It's a very slow way to change the world. The more important focus is where do I actually put the money?

Ι Would you say that now ethical investing is mainstream?

I would say, and I don't want to dwell on terms because there's so many different terms used in the market and no one knows, there's no set definition of all of them. I'd say responsible investing is absolutely mainstream, responsible investing being, I will use a longterm lens for looking at an analysis of a company or a sector. And therefore, something like climate change is important to me because it is a risk over the long term for the company.

Pathfinder Asset Management founder John Berry joins Good Returns TV to discuss the latest trends in responsible investing and what issues advisers need to think about.

Responsible investing is essentially saying, "I'm going to use these environmental, social, and governance metrics to manage risk and make more money for my investors."

Whereas we focus, at Pathfinder, on ethical investing, which is actually going a step further and is also putting a values-based lens on it.

Ι That's one of the questions which is always interesting as you know. We could call it responsible investing. We could call it ESG and we could call it ethical. Are they all interchangeable terms or do you think they've got separate meanings?

They definitely have separate meanings. Unfortunately different countries, and different people within our market, use the terms differently. ESG is essentially a data set and it's environmental, social and governance metrics, but it is data about a company and how its policies and practices score. It's ESG alone is not going to save the world. It's not a values-based approach. It's really a database approach.

Ι It's more quantitative?

It's more, it's quantitative. We think there's a high correlation between ESG and quality if you look at market factors. It helps you choose better companies. But if you want to, you need to separately overlay a values-based lens and you need to separately do your own research because different ESG data providers come up with different answers, different methodologies, different scoring. Some will exclude Tesla from a ESG index, some will include it. You've got to make your own.

Ι In the US at the moment, there seems to be a lot of media pushing back against responsible investing. Why do you think that's happening?

It's very politicised in the US. One extreme, we've got President Biden who has just used his veto for the first time in his presidency to veto legislation that would stop ESG being used in types of pensions. And at the other extreme, you've got Elon Musk who said ESG has been weaponised.

You've got these two polar

opposites. Within that, you've got some states like Texas and Florida that are taking a really hard line against the use of ESG.

Ι Is there any factors driving that? Is it, what's behind it?

I would say it's largely a reflection of the political landscape in the US and it is drawn down political lines.

Ι And it's very US-centric rather than global, the pushback?

It hasn't hit New Zealand in the same way the you're regarding e SG as woke extremism. In New Zealand, it's regarded as a great way to analyze companies.

Ι Is that a risk for you guys, have we got to that stage?

Well, looks, it's always a risk in terms of how far you push ESG. I would say ESG is a data set to choose better companies. If you want overlay social environmental factors, really push hard on diversity, for example. On climate change from a social perspective, that's going beyond the ESG data set, that's getting into a valuesbased set. Which is entirely legitimate, but we've just got to be clear where the boundaries are.

Ι One of the big stories recently in the space was the greenwashing case in Australia of Mercers. What do you take out of that and where's this whole greenwashing thing going to go?

What I take out of that is to be honest with your investors and be fully transparent and disclose. It's not just ASIC in Australia, it's also DWS in Germany has had its offices raided. Essentially, fund manager investment teams have to be lined up with their marketing teams and the marketing team needs to tell a story that aligns with how the investment is actually happening on the ground.

Ι Does it worry you sometimes that some of the names of some these funds might be misleading in terms of what they do?

Yeah, look, I would say don't judge a fund just based on its name. Take the word sustainability, for example. When people talk about sustainable

income, some people may look at that and say, "They mean green, they mean conscious." Other people may look at it and say, "Sustainable means constant income over a long period of time."

Don't just judge a fund by its name.

Ι How does an adviser go about working out what a fund really is and how responsible or ethical it is?

It's really important for advisers to understand who they're investing with and why, and the investment philosophy. You can use Mindful Money, which will tell you some of the harmful things that are included, but it doesn't tell you the good or the engagement that a manager is doing.

Ι Is it something that advisers should be spending more time on actually doing their own research? Or can they go elsewhere and get it?

There are tools like Morningstar that probably can help, but ultimately advisers are going to have to do their own research. They're going to have to read sustainability reports that are starting to get published.

Ι What are advisers obligations to ask their clients about their values and their risk?

I would say it goes back to the Code of Conduct for financial advisers. The code is principlesbased. My interpretation of the principles-based approach is if you look at suitability, making sure the client understands what they're investing in, making sure that there's fair assumptions used for the advice you're giving. If you don't ask the question, do you care about responsible or ethical investing? Then you're making an assumption they don't care about it. Is that a fair assumption make?

Ι That's something they should be asking. And do you think if they weren't asking that they could end up facing charges at the Financial Advisers Disciplinary Committee (FADC)?

It's entirely possible. It depends on what the client, what the investor thinks the portfolio of them you put into and how the adviser has explained it. A

Nikko criticises passive funds and index trackers

Nikko Asset Management NZ has criticised passive funds and index trackers for backing the original lowball offer for church-software company Pushpay Holdings.

The passive funds followed the recommendations of Australia-based proxy service companies, which, if the takeover had succeeded, would have been “a funny outcome when a better outcome could be achieved”, according to Nikko’s co-head of equities, Michael Sherrock.

The bidder, a consortium of US-based Sixth Street and Australia-based BGH Capital, had offered $1.34 per share for Pushpay, valuing it at nearly $1.53 billion, but that was near the bottom of Grant

Samuel’s independent valuation of $1.33 to $1.53.

However, Sherrock says he doesn’t know whether passive fund managers could have chosen to reject proxy companies’ advice.

“I guess their job is to track an index,” he says.

Concerted opposition by local active fund managers, including Nikko, ACC, Fisher Funds, ANZ Investments and the NZ Superannuation Fund, meant the vote failed to reach the 75% threshold required for the takeover to succeed.

Of the shares not owned by the bidders, only 55.5% voted in favour.

NZX-owned Smartshares did vote to accept the offer, confirming it had

acted on the recommendation of Glass Lewis; the other proxy services company, Institutional Shareholder Services, had also recommended acceptance.

The bidders have since come back with a new offer of $1.42 per share, valuing the company at $1.62b.

“We’ve signalled our intention to vote in favour of that, as have a number of other institutional investors,” Sherrock says.

That price “isn’t a knock-it-out-of-thepark type price” but there are a lot of hedge funds on the register.

In the absence of a successful offer, they would have been forced sellers of Pushpay shares, meaning the share price would have been under pressure for a period.

Fisher Funds removes performance fees

Fisher Funds will remove performance fees across all its KiwiSaver and managed funds’ multi-asset portfolios on July 1.

CEO Bruce McLachlan says Fisher wants to leverage the scale it has achieved through its acquisition of Kiwi Wealth last year.

The $310 million buyout led Fisher into the number-three spot in the country’s largest KiwiSaver fund providers, behind ANZ and ASB.

Currently, Fisher’s KiwiSaver Growth Fund has a performance-based fee based on a hurdle rate of return of OCR+5% per annum.

The hurdle rate is the minimum return the fund must achieve before the client is charged a performance fee.

This means clients may pay a performance fee even when the fund’s performance is below the market index.

Fisher says it has provided a range of performance fees in its product disclosure statements, as they vary considerably year-to-year.

The highest performance fee paid by the growth fund was in the exceptional year to 30 June 2021, when it paid 1.78% against a fund performance of 21.19%. That performance fee was zero the following year.

Dropping fees is good news for clients, who last month faced the unsettling news that Fisher Funds KiwiSaver was among the many local schemes which lost millions of dollars through Signature Bank Investments.

This was confirmed by Fisher to be around $50 million, from its select international portfolio and NZX-listed investment company Marlin Global. A Fisher Fund spokesperson said at the time that this would equate to a loss of $320 on a $50,000 balance in the KiwiSaver Growth fund.

New PI in the market offers cheaper policies

Quandrant PI has joined the crowded professional indemnity (PI) insurance market for mortgage and financial advisers.

The new company is the brainchild of a small group of advisers who saw their annual PI premiums skyrocket in price about 18 months ago. Their risk profiles hadn’t changed, and there had been no adverse claims, but their premiums had suddenly tripled.

This meant premiums for a single adviser/director soared from $2,500 per year to $4,000, while at the bigger firms, premiums for five to six advisers rose from $10-11,000 to $30,000 annually.

The group decided to take control and launch their own PI scheme – one designed by advisers, for advisers.

Quadrant director Tony Vidler says interest in the new product has spiralled, and about 150 adviser businesses have already signed up. On average, single advisers are saving 10-12% in premiums, with bigger firms being up to 20% better off.

Vidler says the ease with which advisers can access the product is one of its biggest drawcards.

“We’ve made it easy for someone to get a quote, regardless of where they are, which most of the other schemes don’t allow,” he says.

Advisers who want to check out Quadrant can see the policy wording before buying a policy.

PI insurance is notoriously expensive, largely because most Kiwi providers are subsidiaries of Australian insurers, who price for their home market without taking into account the different risk and claims experience in New Zealand.

Vidler says D&O (directors and officers) liability claims are much higher in Australia, where the regime is heavily legislated and very prescriptive.

“It’s a crowded space over there, with a lot of people looking for trouble and a lot of trouble to be found. There are big company brands and big scale in advice. That’s not the structure here.

“Apart from the advice given by big trading banks, New Zealand has a deconstructed financial advice industry. “There are lots of small businesses embedded in local communities with a principles-based approach.

“That drives different behaviour here, with more personal responsibility by individual advisers to do a good job with consumers and behave professionally. So the product is not well-priced for New Zealand and doesn’t reflect the risk here.”

Undisclosed “layering”

Over the years there has been considerable “layering” of extra costs from the brokerage industry, often not disclosed to clients, and “a real degree of protectionism” around the key players, including industry associations which

would charge advisers joining fees in return for, among other things, access to PI cover.

Insurers generally refused to deal directly with individual advisers or small advice businesses.

Vidler says the recent sudden rise in premiums was covered off by insurance companies claiming advisers had moved into a riskier environment now they were regulated.

“To be told they are in a riskier environment, when the general consensus is the public is safer because of regulation, beggars belief,” he says.

Insurers also changed their model on assessing risk.

“Now they assess a business overall and not individual advisers and say this means premiums had to rise.”

Vidler says it would be easy to assume insurance companies are making a 50% gross margin profit on PI insurance - at a time when advisers have had their margins squeezed over the past four to five years.

Another significant benefit of Quadrant’s scheme is that retroactive cover is automatically included. This means a policyholder is covered for advice he or she has given in the past, no matter which insurer held the policy at the time.

“Most advisers don’t understand how important this is,” says Vidler. A

FORMER AMP CAPITAL STRATEGIST JOINS JMI

JMI Wealth has appointed Michael Gray to the role of investment strategist, reporting to JMI Wealth director Andrew Kelleher.

With more than 20 years of investment and wealth management experience, Gray has held a number of senior investment roles in both New Zealand and Australia, including time with Macquarie Asset Management (previously AMP Capital), Caliber Investment, Suncorp, ASB and CommInsure. He has accumulated considerable experience and expertise in manager selection, asset allocation and investment strategy, and worked with a variety of retail, wholesale and institutional clients.

Kelleher says JMI is delighted to have someone of Michael’s standing join their investment team.

"Our clients value our ability to customise investment solutions to meet their needs, and we’re confident Michael’s background and experience will contribute significantly in this regard.”

OCTAGON APPOINTS NEW INDEPENDENT DIRECTOR

Paul Bevin has been appointed as an independent director to the board of Octagon Asset Management.

He recently retired as general manager investments New Zealand Government Superannuation Fund

NZX CFO TO BE INTERIM CEO AT SMARTSHARES

NZX-owned SmartShares has put NZX chief financial officer Graham Law into the position of interim CEO, replacing Hugh Stevens

GOVERNANCE LEADER JOINS GUARDIANS BOARD

Experienced governance leader Fiona Oliver has been appointed to the board of the Guardians of New Zealand Superannuation, which manages the New Zealand Superannuation Fund.

Guardians chair Catherine Drayton says Oliver “brings extensive experience to the Guardians’

Stevens, who led SmartShares for more than five years, announced he was leaving at the beginning of the year.

Law, who has been NZX CFO since 2017, will join SmartShares as acting CEO while the search continues for a new chief executive.

Authority and the National Provident Fund - a role he had held for 18 years.

Octagon chief investment officer Paul Robertshawe says the appointment comes at a time when the boutique NZ$0.5b fund manager is focusing on attracting external mandates and direct retail investment into its funds.

“As a former CEO, Bevin understands business strategy and financial management, staff engagement and

governance team, along with a strong understanding of global financial influences."

Oliver's current governance roles include Summerset Group Holdings, Freightways, First Gas/First Gas Services, Fisher Funds’ three listed investment trusts (Kingfish, Barramundi and Marlin Global) and Gentrack Group.

Existing Guardians board member Doug Pearce has been reappointed to the Guardians’ Board until 30 September 2024.

financial alignment with organisational goals,” Robertshawe says.

“His depth of experience and knowledge will be invaluable to helping us execute our strategy and ensure best-practice funds management disciplines.”

Bevin says the move “reflects my confidence in the strategy to grow Octagon Asset Management into a leading wholesale fund manager”.

AIA CREATES TWO NEW LEADERSHIP ROLES

AIA has added two new leadership roles within its customer division. Maddie Sherlock takes on the role of head of customer operations, and Andrew Anisi becomes senior manager contact centre and business solutions.

Sherlock has held several leadership positions across the operations teams, most recently as AIA NZ’s head of new business. In this newly-created operations role, she leads AIA’s operational service and relationship teams across both new and existing business, partner relationships and underwriting.

The role is also responsible for the development and implementation of AIA’s operations and service strategy to provide a market-leading customer,

adviser and partner experience.

“Our customer operations teams are such an important part of how we do business at AIA," she says.

Andrew Anisi steps into the new role of senior manager contact centre and business solutions, from his prior position of manager of partner relationships.

He will lead the high-paced customer and adviser relationship teams to deliver outstanding service and efficient resolution of customer, adviser and partner enquiries via phone and Live Chat channels.

“Our contact centre teams are the voice of AIA NZ, so it’s a great opportunity to lead these teams to make a difference every day for our customers and distribution partners,” says Ainsi A

goodreturns.co.nz

Nikko boss heads back to the UK

Before leaving the country, the departing managing director of Nikko Asset Management, George Carter, talks to Andrea Malcolm about the secret to success as a leader, the flaws in New Zealand’s KiwiSaver scheme, and the fee he would like to see abolished.

BY ANDREA MALCOLM

Losing two senior people from a staff of 30 could be a major blow to a small business, but Nikko Asset Management’s departing boss, George Carter, is optimistic.

Carter has led the Japanese-owned investment firm for the past seven years.

During his tenure, the business has launched KiwiSaver, started a Tearfund against human trafficking and modern slavery, and grown from $4 billion to $8 billion - nudging $9b - before the markets pulled back.

He leaves the company at the end of March to return to his native UK, while head of distribution James Wesley will relocate to New York in the new role of deputy chief executive of Nikko AM Americas.

“James and I leaving creates space,” says Carter.

“The analogy I've used a few times is a garden. You thin things out and create space for others to grow.”

Carter’s finance career began as an actuarial consultant, advising pension schemes in the UK.

He moved to New Zealand in 2007 and joined AMP Capital, where he was introduced to the size of the local market.

“I was looking for the gilt yield and asked a colleague, who said, ‘Oh, you mean the New Zealand government bonds?’ He started listing all government bonds at the time. I just couldn't believe that the market could be that small.”

But Carter was able to take advantage of that small market and the breadth of roles available.

“I was in my early mid-30s and was asked to join the board to get governance experience. That was fantastic.

“I had only recently been a relatively junior in the UK, a million miles from sitting around a board table.”

It was the breadth of knowledge gained, particularly in areas outside his area of expertise, that stands out from his time in the boardroom.

“I quickly learned what Richard Branson said, that the secret of his success was to surround himself with people who are brilliant and better than he is.

“He was spot on - and that has translated into my role of managing director.

“Really, I’m not running the business so much as holding the different pieces together, so people who are capable and skilled can run the business.

That's what I've tried to do.”

Building a strong team has enabled a smooth succession, says Carter.

The vision going ahead is to turn Nikko into a publicly-recognised brand. When he started at the company in 2015, he saw a great company with no reputation.

The strategy has been to build a reputation by fostering deep relationships. Carter believes this is what has seen Nikko grow year on year, particularly in the institutional channel, which at $6 billion is the bedrock of the company’s business.

Nikko has also increased awareness with its second channel advisers and with the third channel in mind has hired brand strategist Chemistry to build recognition in the direct-to-consumer market.

“In KiwiSaver and individual accounts, we are almost unknown in New Zealand. It's surprisingly hard to become known in the retail space; it's so crowded, and promoting a brand is really costly.

“We don't have millions to spend on marketing so we will do it slowly and organically over time with Chemistry, to hone in on a very modest 1% to 2% market share.”

Nikko and KiwiSaver

With $6 billion going through the institutional house and the remaining $2 billion mostly through advisers, Nikko has just under $100 million in KiwiSaver and direct retail.

“If we take the KiwiSaver market alone, say $90 billion, we're probably 10 times away from where we need to be.

“If you run the numbers over the next 10 years, it's hard to see how that's going to be less than $3 or $4 billion, because, whether markets go up or down, there is a wall of money coming in from employer and employee contributions.

“If any of the settings change, they can only go up and lead to an accelerated growth of the size of that market. With such a large tailwind in growth, it makes sense for your business to be well positioned into that.”

But perhaps Nikko’s most well-known KiwiSaver offering is its ARK Disruptive Innovation Fund, which plunged 64% last year.

However, Carter remains optimistic that the future-tech ETF is capable of delivering 7% to 10% per annum returns over ten years.

“We still see inflows into ARK despite the performance of the past year.

“If you are philosophically aligned with something, a period of poor performance doesn't necessarily remove that alignment.

“And if your view is that over the next 10 years there will be transformational change in how the world operates on a number of key platforms, whether it's autonomous vehicles or DNA sequencing, then having some assets linked into those thematics makes a lot of sense.”

Having consulted on pension schemes in the UK, Carter thinks well of KiwiSaver in general - but says as a defined contribution scheme, the amount of specific risk taken on by individuals is high.

“If you want to retire in a year when the market goes belly up, your retirement payments are put back considerably, and there can be a whole decade when the equity markets go sideways.

“With the old defined benefit schemes, we pooled those risks. We didn’t know whether somebody who retired at 65 would live one or 40 more years, but as an actuary, we could confidently talk about what the average would be.

“We could smooth investment returns over the timeframe, while having the backing of all employees helped smooth contribution levels and there were benefits of scale.

“So investors typically had the best advice in terms of legal, accounting and actuarial planning.

“The individual doesn't have that. We’re asking them to be their own actuary and financial planner which is hard.”

Having said this, Carter is wary of government ‘tinkering’ with KiwiSaver. He would rather see great financial literacy among the public and says there’s a need for more financial advisers on the ground.

The remuneration problem

Carter says the problem with broadening the pool of people to whom financial advice is given is how it’s funded.

“Somebody might have $30,000 saved and an adviser can do a full plan for $20,000. That feels disproportionate, and yet the need and the value of that advice over many years is quite high.

“The industry often works on a trail model, where the adviser gets a slice of the fee generated, which in early years is low but later very high.

“That can lead to misalignment of interests, whereby advisers are tempted to go to whoever pays the highest fee. For the record, I would like to see trail removed from our industry altogether.”

Carter’s main criticism is lack of transparency: advisers not disclosing trail commission to clients.

“Anecdotally, from friends and family, that disclosure is weak or and nonexistent. We get opaqueness. And where there is opaqueness around money, there’s all kinds of skullduggery.

“Often advisers will say it’s too hard to explain to the client, but that’s part of their job.

“Advisers deserve to be remunerated well for their professional skills, but I'd like them to explain the work they’re doing, the value they offer and what they think their services are worth.”

Carter thinks it’s partly a problem with how the industry is perceived.

“There's an adage that insurance is sold not bought and it’s the same with financial advice. Advisers have not always been seen as professionals, they’re often seen as salesmen pushing products.

“We need to do a better job of remunerating advisers and be clear about the value provided, the incentives in place, and show that fundamentally everything is in the interest of the end user.

“I've raised it with advisers, consultants, CEOs, CFOs, regulators, supervisors and get a good hearing, agreeable comments, but no actionbecause it's hard. And, realistically, the only way it can change is through the regulatory or legislative framework.

“Imagine four insurance companies paying trial and one decides to stop. The adviser will just go to the other three.

“But if the company CEO goes to the other three to work together on trail commissions, that will be seen as market manipulation and collusion.

“So, they can't do it alone, they can't do it together; the only authority who can say what should be done is the government.

“It shouldn’t set what trail should be or shouldn't be, but provide the framework and parameters to create a healthy financial services industry.”

Role of the Government

Carter increasingly finds himself pondering the role of the government.

“I think that role is to do not a lot. Governments don’t do a good job at allocating resources or fixing stuff, because they're relatively small and only have a certain amount of skill sets.

“Let the people who know what they're doing get on with it.

“I look to the government as an entity to provide a framework and a structure that enables us to do things well and fairly and build the society we want, but it can fall into wanting to solve everything.

“Maybe that is just illustrating that I’m slightly centred right in the way I think, in terms of some of those dynamics.”

Which speaks to where Carter thinks his future lies: in politics.

When he and his wife return to the UK, where his three children are now studying at university, he would like to offer his skillset to the political realm.

“It would be good to lean into public service. I'm a very proud Northern Englishman, born in Yorkshire, but I spent time up in the Northeast and we're heading back to County Durham in the Northeast. I love that part of the country and the people in the North of England are the most fantastic salt-of-the-earth people.

“I’d like a role whereby I can try to represent them, and help within the political sphere, which would be a real privilege.” A

‘I’m not running the business so much as holding the different pieces together, so people who are capable and skilled can run the business’

Opportunity to invest in nonbank lending

ASSET catches up with Metrics founder and managing director Andrew Lockhart to find out how private equity worksand why advisers should consider adding it to portfolios.

Andrew:

We started the first fund in June 2013. Today, we have about 15 different funds, with more than A$13 billion, and offices in Brisbane, Sydney, Melbourne and Auckland.

Our focus is primarily on lending in Australia and New Zealand.

Most of the companies we lend to don't have an external credit rating and they're not usually large enough to access capital directly through the corporate bond market; they're heavily reliant on banks for funding.

But the banks have been subjected to increasing regulatory pressure. They’re looking to lend more on home loans, and they can't get the returns to work from lending to large companies and projects in the same way they did prior to the GFC (Global Financial Crisis).

That means companies are looking for alternative funding sources.

Investors can now gain direct exposure to lending to those companies by investing in a private credit fund, rather than just putting the money on deposit and letting the banks lend.

We've created funds which span the entire risk spectrum: from very high investment-grade borrowers all the way through to sub-investment-grade borrowers.

We've been able to segment our funds to give investors exposure to the kind of risk profile they want. The market is not homogenous, and one company's financing terms, conditions and pricing might be quite different to the risk profile of another company.

Some companies want mezzanine debt and some investors are happy to

take that risk for a higher return. Other investors want lower risk and a lower return.

The investment product for New Zealand is diversified across more than 300 individual direct loans to companies - and the cost is very low as well.

Asset:

And how big is the addressable market?

Andrew:

It's in excess of $1.1 trillion in Australia and New Zealand. We decided to come to New Zealand in January 2020, at a time when banks were required to have additional capital, which means higher interest rates for borrowers.

We formed the view that the Australian banks would be unlikely to want to invest further capital into their New Zealand subsidiaries - and that meant demand for non-bank credit from New Zealand companies would increase.

We are originating direct-lending opportunities with a number of New Zealand-based companies.

We started with three people who came from ASB Bank to start originating loans directly to New Zealand companies. Then we introduced the New Zealand PIE in about March 2021, and we've increased the team to five.

The PIE has the same exposure to the Metrics Master Income Trust (MXT) as the ASX-listed fund and is designed for investors in New Zealand that would otherwise maybe buy MXT on the ASX (Australian Securities Exchange). It's an unlisted version of MXT.

Asset:

As an investment opportunity, how does this private credit market sit with a traditional bond fund?

Andrew:

At one end of the spectrum, you can invest in private credit as an alternative to traditional, fixed-income assets like bonds. It is the defensive part of the portfolio.

At the other end of the risk spectrum, where you're doing mezzanine or higheryielding, higher-risk transactions, we would say it's a replacement for an equity allocation.

Equity can be significantly volatile and it wears the first risk of loss. The mezzanine debt is lower risk than outright equity ownership, but the returns generated through private debt can replace the income you would otherwise receive from dividends.

We've created funds that are both an equity-market replacement in a client portfolio and a replacement for traditional, defensive assets.

Asset:

The way the banks have been behaving has created more of an opportunity for you here, hasn't it?

Andrew:

Yes, it has. During the pandemic, governments and reserve banks created a lot of liquidity to support companies and consumers.

The Australian term funding facility (TFF) provided the banks with cheap financing from the Reserve Bank to lend to companies. In June 2021, the TFF was terminated, and the banks have until June of 2024 to repay about A$185 billion.

Now, central banks are looking to reduce inflation pressures, so you've got rising interest rates and a withdrawal of liquidity as the banks repay the TFF.

When liquidity tightens, terms, conditions and pricing become more favorable to a lender than to a borrower. It's a very attractive time for people to invest in private credit.

In a recession, shareholders will wear the risk of a deterioration in a company’s performance, potentially reducing their dividend income.

But that company has a contracted obligation to pay you the appropriate interest and fees. Otherwise, you've got the right to enforce your security.

As interest rates rise, investors in our funds are seeing that immediately flowing through in the form of higher returns.

About 97% of our loans are secured. It's only loans to large, publicly-listed, investment-grade corporates that are unsecured.

Asset:

What are the default rates like?

Andrew:

For banks, they peaked at 0.67% net write-offs and are now down to about seven basis points.

Over the 10-year period that we've operated, we’ve demonstrated consistent-performance, month-inmonth-out, positive income distributions to investors for no loss.

Our losses have been zero, and we’ve outperformed the loss experience of the banks.

Asset:

What are the big issues that you and your team are debating at the moment?

Andrew:

In all investment markets at the moment, people are nervous; they’re uncertain about the economic outlook.

It’s important to demonstrate the differentiation between private market debt and private market equity compared to more traditional asset classes.

The Future Fund in Australia recently asked whether the model of a 60/40 allocation to equities and bonds is broken. Personally, I don't think it was ever a very sensible model.

If you look at long-term returns generated from different pension funds, often you’d have been better off just being a lender in the private market.

Look at our historical returns and the stability that we've generated. They're pretty attractive compared to other asset classes.

ESG (environmental, social & governance) risk management is obviously important for us. We have great levels of data and information to assess ESG risks across our clients. We were a signatory to the recent stewardship announcement in NZ. Looking at ways we can structure our funds to deliver good ESG outcomes is top of mind for us at the moment.

People have worried for a long time about liquidity in private markets. We’ve found as our funds have become larger, they naturally become more liquidbecause they’re open-ended with the natural churn of repayment across our portfolio.

We have about an A$8.5 billion exposure to commercial property. That portfolio turns over almost on an annual basis.

In excess of A$1 billion every 90 days is replacing loans that are maturing or being repaid with lending to new companies.

Asset:

Do you know how many KiwiSaver funds are invested with Metrics?

Andrew:

Currently? One. Booster

Asset:

I know you've done some capital raising. What's happening there?

Andrew:

We're always raising capital. We've been one of the strongest fundsmanagement groups in raising capital in the last 12 months.

We see a lot of interest from insurance clients, pension funds, universities, charities, high-net-worth individuals. We've also seen significant interest from retail clients. A

KEEP CALM AND CARRY ON despite the uncertainty

It’s still a good time to invest; the question is where?

Some of New Zealand’s leading financial heads give Asset their take on what’s ahead - and where to position your portfolios.

There’s a sharp divide in financial markets between those who expect central banks to start cutting interest rates later this year and those who think inflation is going to prove much stickier – and it’s a key factor in where fund managers are positioning their portfolios.

In the markets themselves, the former have the upper hand, with rate cuts later this year priced in.

Andrew Bascand, managing director at Harbour Asset Management, says the market has it wrong.

Wage and services inflation are where he expects the stickiness to persist, in part because of the global shortage of labour.

“Unemployment rates around the world do not suggest a near-term collapse in inflation,” he says.

“We would say inflation will be sticky.

“Monetary policy seems very unlikely to change course, based on the fact that unemployment rates are so low. So not sticky for goods or assets, but probably for wages and services.”

Yield curves around the world are inverted, with short-term interest rates higher than longer-term rates, which usually signals a recession.

“What we would say is you can't have your cake and eat it,” says Bascand, explaining that wage inflation is not likely

to collapse with the unemployment rate so low.

Because of that view, Harbour, which has $7.4 billion in funds under management (FUM), expects shortterm interest rates will remain high for considerably longer than the market is pricing.

The latest data shows unemployment near historic lows, at 3.4% in the March quarter, while the average ordinary-time hourly wage rose 7.6% in the year ended March, outstripping the overall inflation rate of 6.7%.

Market signals

Hamish Pepper, Harbour's fixed interest and currency strategy director, says while yield curves are “meaningfully” inverted, other market signals are telling a different story.

Corporate credit spreads, for example, are much closer to risk-free rates.

“Corporates are not having to pay a great deal, relative to historical spreads,” Pepper says.

As well, equities pricing is elevated and volatility in equities markets is low.

Harbour's view is dictating its strategy in the current market, and its fixedinterest investments are tilted towards the shorter end of the yield curve, reducing its duration risk, while the

longer-dated bonds it does hold will provide upside if its view turns out to be wrong.

“Where we might deviate from the benchmark, it's going to be in the short part of the yield curve up to three years,” says Pepper.

Citing similar reasons, Bascand says Harbour is underweight equities and overweight bonds, despite the long-term history of equities outperforming bonds.

While normally the group might hold 70% equities, it's currently sitting at about 65%.

“You've got to be very mindful that you're betting against history,” he says.

Corporate earnings have been better than expected and the balance sheets of listed corporates are sound, much stronger than they were a decade ago.

“But no matter which way you look at it - equity-risk premiums or price-to-

‘Unemployment rates around the world do not suggest a nearterm collapse in inflation

’

Andrew Bascand

earnings ratios - the New Zealand market looks expensive vis-a-vis Australia.”

In addition, there's been a string of earnings downgrades in New Zealand recently.

Australian economy stronger

The macro environment in Australia is also much better than in New Zealand: Australia actually has a current account surplus, while NZ's current account deficit (CAD) was 8.9% of GDP in calendar 2022, the worst on record. Generally, a CAD above 5% tends to worry investors.

Pepper says Harbour's view - that the Australian economy will outperform New Zealand's - is reflected in its currency positions: it isn't hedging its Australian exposures as much as it usually would.

That's also reflected in its holdings of Australian fixed income securities:

because the Australian economy is performing so well, the central bank there may have to raise interest rates further.

The equity exposures Harbour prefers include healthcare, which is relatively insulated from an economic downturn, though still affected by rising wages, and those it is shunning include tech stocks with weak balance sheets and poor cash flows.

But for Jonathan Windust, deputy chief investment officer at Milford Asset Management, the key word for the current environment is uncertainty.

While he agrees inflation could prove stickier than market pricing is suggesting, he's worried that unemployment in the US can swing very rapidly: it was 3.4% in April, but could very quickly get to 5.5%.

That would definitely see the Federal Reserve start cutting rates, with an inevitable spill-over into the rest of the world.

Windust is also worried about the extent of bank stress in the US, including a loss of deposits and increasing bad debts, particularly in the commercial property sector, and the impact that could have on credit availability.

“This is the most uncertain the environment's been for a long period. We do realise the risk is to the downside.”

‘Now is almost a better time to be investing than it has been over the last few years’

Chris Douglas

But the good news from a portfolio perspective is that investors are now getting paid to invest in cash and fixed income.

Milford, which has $17.7 billion in FUM, would normally have 80% equities and 20% fixed income in its active growth fund, but it’s currently 60/40. And of the 40% fixed income, about 32 percentage points is in bonds and 8% in cash.

Managing the risk

If the markets are correct about rate cuts coming sooner rather than later, “that's not really a great environment for shares. The return you're getting isn't that high, given the downside risks.”

Windust isn't too worried about missing out if the markets are wrong.

“We don't think you're going to miss out too much in shares and the risks are elevated.

“We're pretty active compared to most investment managers and are prepared to take reasonable allocation views. It really comes down to risk and reward.”

Milford is currently getting a running yield of about 7% from fixed interest.

But it is protecting itself from the risk its view may prove wrong by using call options, which are currently priced very low.

“If [share] markets do bounce sharply, we can get invested quite quickly.”

Windust says Milford does include some private equity exposure in the active growth fund, but it's constrained by the need to remain liquid in case clients decide to withdraw their moneysuch alternative assets don't tend to be very liquid.

Mark Lister, investment director at Craigs Investment Partners, is in the camp of doubting rates will be headed south anytime soon, noting that both our Reserve Bank governor Adrian Orr and US Federal Reserve chair Jerome Powell have been making the higher-for-longer argument.

“If the markets have got something wrong, I suspect it's in their enthusiasm for rate cuts soon,” Lister says.

Craigs has about $24 billion in FUM after selling QuayStreet, which had about $1.6 billion in FUM, to NZX earlier this year.

Lister notes the story isn't just how high rates have gone, but how fast they got there: both New Zealand's official cash rate (OCR) and the Fed funds rate are at 5.25% - New Zealand's having risen from 0.25% in October 2021 and the US's from March 2022.

“And we haven't seen the full effect yet.”

Pain ahead but carry on

The average rate those with mortgages are currently paying is about 4.5%, when most banks' fixed rates between six months and two years are above 6.5%.

“That pain and suffering is to a degree still ahead of us.”

But the strongest pay rises in 30 or so years should help most homeowners cope.

Lister cautions that employment indicators do tend to lag developments in the economy and notes that in 2007, as New Zealand was about to head into recession, the unemployment rate was about where it is now, but that by late 2009, when the economy had started to come out of recession, the rate peaked at 6.6%.

In one sense, building a portfolio for a new client shouldn’t be any different now than at any other time, if your perspective is long-term wealth creation, Lister says.

“What you would maybe do differently, because we've got this murky outlook, is probably take a more cautious tilt than you normally would,” he says.

That tilt would likely mean more fixed interest and less exposure to equities and property.

“We know from history that if there's a recession, fixed interest will do well, as central banks will cut rates at some point.”

With shares, you would target the more recession-proof parts of the market, such as consumer staples, healthcare and utilities, as well as stocks that do well in high inflationary periods, such as infrastructure, commodities and good quality property.

Good time to invest

On the other hand, “it's actually a much better time to be investing today than it was a year or two ago when everybody was upbeat and optimistic,” Lister says. Such periods of uncertainty often turn out to be the best time to invest.

“With new clients that we're getting at the moment, the natural inclination is to sit on the sidelines. If you wait for the green light, you will have missed the opportunity.”

Chris Douglas, co-owner of MyFiduciary, which specialises in investment strategies and has nearly $10 billion in funds under advice, shares Lister's view.

“I think now is almost a better time to be investing than it has been over the last few years,” he says, particularly since much better interest rates are available that through the worst of the Covid pandemic.

A number of funds with high-quality corporate bonds in them are now yielding close to 7%; these are issued by companies with strong balance sheets and should have no difficulty in repaying on maturity, he says.

“There's no shortage of risks out there,” including consumer confidence, the cost of living, and geopolitical risks.

“But equity markets are still below where they were 12 months ago, so as a starting point it's quite a good timeespecially if you have a long-term view.”

Douglas thinks it's a good time to get exposure to alternative investments such as gold and insurance-linked securities, which tend to be negatively correlated to equities, though that will depend on how much complexity clients want in their portfolios.

MyFiduciary advises financial advisers, large iwi and trusts.

Bonds allocation

Greg Fleming, head of global diversified funds at Salt Funds Management, which has about $2 billion in FUM, has quite a different take on fixed interest.

Fleming says his firm's allocation to bonds fell to about 9% last year because the risk of capital loss was very high and yields were so low, but that's lifted to about 27% now in the income fund.

“That's not to say we're in love with bonds – bonds still have a lot of issues,” he says, adding that a neutral position would be about 40%.

We might get a very sharp slowdown, “but it will be an inflationary recession. Bonds will still not be a particularly good friend in the portfolio because you will be getting a negative return” after taking inflation into account.

Over the next quarter, Salt is likely to move closer to neutral, “but I'm not inclined to go overweight at this point.”

While bonds have rallied this year, the equities markets have rallied at about double the pace or more. “You're still paid for taking relative risk on; that's probably not what a lot of market participants expected,” he says.

Picking equities is tricky at the moment, with no one sector leading the market – at times it's been IT and communications, and at other times it’s been defensive healthcare and consumer staples, with “very erratic” behaviour from energy and financial stocks.

Fleming's also expecting a greater risk of persistent inflation in New Zealand than offshore, with companies rebuilding margins after coming under pressure last year - so he's less likely to favour New Zealand shares. A

The power of “and”how InvestNow opened up KiwiSaver for competition

Kiwi consumers have a long history of getting shafted. Perhaps it’s our small size, or the fact that we’re tucked away at the bottom of the world, but the general lack of innovation and competition in NZ has stuck retail shoppers here with fewer and more expensive options compared to offshore counterparts.

Take the much-maligned $22 billion local supermarket duopoly, for example, that has foisted over-priced everday

items on consumers such as $20 1kg cheese blocks while the industry pockets $1 million of excess profits every day.

Unsurprisingly, Aucklanders queued in droves when US discount retailer, CostCo, opened its debut NZ store last September, bringing much-hyped competition to the scene.

Despite the welcome entry of a global heavyweight to rival NZ-owned Foodstuffs (New World and Pak’n’Save) and Australian player Woolworths (Countdown) in the supermarket space,

CostCo does not yet offer a serious check-out challenge to the incumbents. The CostCo model rests on a limited range of mainly in-house ‘Kirkland’ branded grocery items that typically must be purchased in bulk, which is likely ill-suited to the needs of the average Kiwi shopper.

While the super-sized products might measure up as attractive deals on a per-unit basis, a regular-sized NZ household is unlikely to get through a 5kg container of maple syrup or a tray of 60

eggs before hitting the expiry date limit, rendering any potential ‘savings’ moot.

CostCo’s reliance on an in-house product range to the detriment of consumer choice combined with its annual membership fee for the privilege of shopping in-store has striking parallels to another operating model that has a similar reputation for being inflexible: KiwiSaver.

Catering to Kiwi needs: the importance of choice

Most KiwiSaver schemes to date have followed the CostCo approach of offering members limited pre-packaged investment options carrying the house brand.

But as institutional investors have long known, relying on a single manager to shoulder all portfolio duties introduces some unwanted risks into the equation.

Manager concentration risk is real –who’s to say that this one provider will continue to perform well relative to its peers or the market forever?

Furthermore, managers tend to be experts in one particular investment approach, which is why professional asset-owners (such as global pension funds, for example) have favoured diversified strategies to control for such style risk.

With the KiwiSaver regime now almost 16, many New Zealanders have accumulated substantial account balances and are looking for tailored investment solutions akin to the flexible institutional portfolios.

Unfortunately, most self-select multimanager KiwiSaver solutions remain hidden behind a ‘paywall’, gatekept by schemes that have high minimum balance requirements and additional administration fees.

InvestNow KiwiSaver scheme: a simple solution for advisers

And this has been a source of frustration for financial advisers, where KiwiSaver has always been a reservoir of untapped potential for them.

While the savings regime opens up a vast potential client base, now surpassing 3.2 million members, the tight legal constraints established at the

inception of KiwiSaver in 2007 were never particularly conducive to financial advice.

Historically, advisers have offered bespoke KiwiSaver support to wealthier clients but either turned away lowerbalance members or partnered with one of a handful of providers offering product-based remuneration to solve the conundrum.

With regulators increasingly putting pressure on schemes to justify fees, the struggle to provide KiwiSaver advice is potentially only getting harder.

The InvestNow KiwiSaver Scheme solves this dilemma for advisers, offering a wide range of manager choice that can add an additional layer of diversification as well as a transparent fee-charging mechanism.

Launched in 2020, the InvestNow KiwiSaver Scheme provides 38 investment options across 15 leading local and international managers – all in one easy-to-use platform – including diversified, single sector, ethical, active and passive solutions with many of these being unique to the scheme.

Feedback suggests that advisers fully appreciate the value-add service for their clients by unlocking the benefits of manager diversification within the InvestNow KiwiSaver Scheme.

“Advisers have really latched on to the power of “and” says Jason Choy, InvestNow Senior Portfolio Manager. “Their customers can now have investments from multiple managers in their KiwiSaver portfolio – for example Milford and Fisher and Pathfinder. There is no longer the need to have all their eggs in one basket, hoping to have selected the single-best manager for their needs”.

The InvestNow KiwiSaver Scheme also empowers advisers to better-tailor investment strategies based on specific client needs such as adding active or ethical satellite exposures to a core passive portfolio.

Given the broad, and growing, investment choice, financial advisers can adapt to changing client preferences over time within the same InvestNow KiwiSaver Scheme environment – instead of embarking on the administratively laborious, and sometimes risky, effort of changing providers.

The scheme flexibility has proven popular with both advisers and endinvestors alike with the InvestNow KiwiSaver Scheme doubling in size over the last 12 months alone. Many KiwiSaver member balances are now hitting critical mass as the regime enters year 16, which may increasingly prompt members to seek advice or consider different asset mixes for their growing nest egg.

Importantly, the wide investment choice and flexibility of the InvestNow KiwiSaver Scheme is provided at no extra cost to members.

Unlike other KiwiSaver wrap solutions – which largely incur significant administration and transaction-based costs or require substantial minimum balances to join – InvestNow offers a comprehensive menu of investments at zero additional cost and no account-size threshold.

Instead, members simply pay the headline fees of their selected funds –with investment options like the low-cost Foundation Series Funds offering some of the most competitive fees in the market. Additional platform fees can significantly erode returns, particularly for longerterm propositions like KiwiSaver, which highlights why InvestNow has been laser-focused on keeping costs to a minimum.

The InvestNow KiwiSaver Scheme was also designed to be adviser-friendly with a simple and transparent client fee-charging mechanism. Advisers can charge annual KiwiSaver fees of up to 50 basis points, which are negotiated directly with clients and administered by InvestNow to ensure they are tax deductible for clients, administratively simple for advisers, and regulatorycompliant.

The InvestNow KiwiSaver Scheme, also takes care of all the compliance and disclosure duties, freeing up advisers from regulatory paperwork to spend more time on what they do best –solving their clients’ individual financial problems A

FundRock NZ Ltd is the issuer of the InvestNow KiwiSaver Scheme and Foundation Series Funds. Product Disclosure Statements are available at www.investnow.co.nz

Adviser living the life-changing power of insurance

Melissa Still says it’s important to spend your time doing things that really ‘blow your hair back’.

Mainland Insurance and Mortgages adviser

Melissa Still had worked in the industry for years before she finally became a financial adviser herself.

She started as practice manager at Canterbury-based Mainland in 2007, became a shareholder of the business in 2010 and a director in 2019 – but didn’t join the adviser force until late 2020.

Still says she was first “invited” into the industry by Rex Knowler, who was the business principal at the time.

“I got a phone call at work – I was the office manager for IHC here – and got a call saying ‘would you come and talk to us about a role.’”

At the time, then-Timaru Financial Services was being formed by a group of AMP-aligned advisers who had been running their own operations but were merging their books to create a complete adviser service business.

“They wanted to talk to me about whether I’d be interested in a role as practice manager, or adviser support. That was the introduction to it.

“I wasn’t actually looking to join financial services, it wasn’t until it came and jumped out at me that I thought this looks like a pretty awesome industry.”

She completed adviser qualifications, including the health and life insurance strands, in 2019.

Aren’t you my adviser?

A lot of clients were already under the impression that she was their adviser, because of how the business worked.

“When the adviser would go through an application process, they’d introduce the idea that ‘Melissa will take you through from here, ensuring all the outstanding requirements are taken care of’.

“Then quite often people would ring me for alterations. So on a service level I was getting involved, I was dipping my toes in and very mindful of not putting my toes over the line.

“Then I was at a conference and I was talking with a guy there who asked me why I wasn’t an adviser.

“I replied that in our business, we kept those roles separate. He said, “I’d challenge that, I think you should be.’ And I thought ‘why not?’. It’s an old rule we’d made we hadn’t ever kind of really challenged.”

After the conference, she talked to the other directors about taking the step into advice.

“I said, ‘Hey look, I think I could provide some quality advice; I can help many of the people who already believe I am their trusted adviser’.

“They said ‘yep, go for it’. I’ve been working with my own client base and serving the Mainland client base ever since.”

Still works with about 200 clients on a personal level – and also helps cater to the needs of the wider Mainland client base.

She focuses only on personal insurance clients, but Mainland advisers work across the four pillars of financial advice.

Still says it is rewarding to see financial advice paying dividends for people.

“It’s not like in the early days when I’d see these applicants coming through, but didn’t see the beginning-to-end process of getting advice and implementing it.”

Value amid the custard

Over time, she has started to see more clients experiencing the value of advice “when things have turned a bit to custard”.

“The advice really comes to the fore. We’ve been able to help people in situations that might have led to really quite devastating outcomes.”

Highlights have been supporting people to access prompt treatment for a health condition, or helping them finance drugs which might otherwise not have been affordable.

“The KiwiSaver journeys, as well, [have been rewarding]. I’m not specifically involved in that, but seeing how people’s wealth has improved through it.”

Still says it’s also exciting to see firsthome buyers coming in, knowing that they’re finally on the property ladder.

Mainland advice has helped clients to not just get in to a home, but to protect the asset with solid advice and planning.

“It’s a really human business, that’s what I like about it.”

Still has herself seen the power of insurance, due to an experience with breast cancer.

She credits her policy with giving her the ability to “rebuild” herself.

“If I didn’t have that private health insurance I might still be on the wait list.

“It wouldn’t be a priority to give me back the dignity of how I look. I wouldn’t necessarily consider it to be a luxury - but in this day and age, it is: to have choice.

“You realise how fragile your health is, and how critical it is to have your health first, and Plan B is the insurance policy in your back pocket.”

Industry change a good thing

Still says the large amount of change in the wider industry over recent years is cause for pride.

New education standards have made some people uncomfortable, she says, but have created opportunities for others - and a chance for advice to be more of a profession: “an industry that’s got some standards we can be proud of”.

She says the formation of financial advice providers (FAPs), and larger entities coming to the fore of the

industry, has enabled advisers who had previously worked with a greater degree of isolation to develop more connections and support.

Mainland is part of the Wealthpoint network, and Still has recently joined its board.

“It’s an exciting industry with plenty of opportunity.

“I think Kiwis do very much rely on advice and trust, and who they know, and whether or not they can eyeball someone.”

Even younger clients who are more tech-focused want to know they can trust the advice they are getting about things like buying a home, investing in KiwiSaver and protecting their assets, she says.

“We can be there to help people to have that trust. If they have good advice they’re able to put together a solution for those ‘what if’ moments.”

Sometimes that’s working within constraints, she says, figuring out how to get people cover when they have pre-existing health conditions or budget limitations.

“Some people can’t afford to fully cover the entire mortgage, but if it’s enough to provide some breathing space, to reassemble yourself so you don’t have a ‘For Sale’ sign at the gate in the first week, if you can do that for people on any budget, then that makes you feel good.”

Building a strong future

Outside work, Still says she is a regular gym-goer, and recently took up bridge.

“I’m a big one for looking ahead and going where could things go horribly wrong.

“I don’t want to end up with dementia, so when I read something like ‘avoid dementia play bridge’..!

“You meet some interesting people who’ve got really cool life stories.”

She and her partner also travel regularly - and she has a son in Australia.

“I would like to get over there and see him more than I’ve done in the Covid world.”

Still says one of the things she loves about the industry is the potential for flexibility.

“Life can be short. If you’re not getting the enjoyment out of what you’re doing, it’s time to look for something else.

“You’ve got to constantly ask yourself, ‘Is this fulfilling me? Am I enjoying this? Is this really blowing my hair back from time to time?’

“I’m lucky to work with a great group of people… in the Wealthpoint team there’s heaps of support, knowledge, and people who will keep encouraging you.

“We get together, kick a few ideas around, celebrate success, talk about pain points… it’s all good stuff.”. A

Partners Life gets behind advisers when they need it most

BY NAOMI BALLANTYNE

Life insurance advisers spend their days helping clients put the right protection in place for when it’s needed most, including economic downturns. But who will advisers rely on when the going gets tough?

Life insurance is all about planning for the unforeseen. Partners Life places huge importance on always providing the right services, products and support for both advisers and clients.

As we saw during the pandemic, that includes making sure adviser businesses have all they need to support clients and to realise opportunities in challenging economic times.

With this is mind, let’s take a look at how Partners Life is positioned to support advisers and clients, through what will continue to be an economically turbulent year.

5 Star rating

To provide strong support, it helps to have solid foundations.

At the end of last year, and for the 12th year in a row, Partners Life led the way as the only risk insurer awarded a five-star rating in the annual Lewers Life Insurance Benchmark Study.

In addition, it was the only insurer to have scored five stars since the study began in 2010. The results place Partners Life in the top spot for adviser satisfaction, with strong loyalty and patronage from adviser businesses who select the firm as their main provider of choice.

Deeper knowledge

Gaining access to the right information at the right time is essential for success.

To help adviser businesses prepare for emerging issues, the Partners Life Masterclass series helps advisers plan their responses to those issues. A recent class in the series focuses on helping advisers prepare for a possible economic downturn later in 2023. Led by Partners Life managing director Naomi Ballantyne and her team of experts, it brings together decades of experience to provide advisers with insights, analysis and informed opinion. They meticulously explore consumers’ attitudes when financial times are tough, and how advisers can prepare themselves to maximise the opportunities and minimise

the negative impacts for themselves and their clients.

Products built for these times

Partners Life is highly regarded for its top-rated health and life insurance product range. In the last few years, these versatile and popular products have been joined by a range of affordability solutions. Some of these were made available to clients over the past few years and certainly proved their value during the pandemic lockdowns. For clients who do become financially constrained due to the economy, Partners Life offers an expanded adviser toolbox of options for just this circumstance. As an example, clients may be able to retain the same amount of cover and adjust the comprehensiveness of their cover by utilising the new range of affordability solutions. This helps advisers retain the integrity of the advice they originally provided their client.

For new clients, affordability solutions can be mixed and matched with more comprehensive covers to deliver the best overall mix of coverage for price, enabling the most fulsome solution to be implemented irrespective of price constraints.

Meeting regulatory requirements

As advisers’ focus on their clients, they also face the major challenge of meeting regulatory requirements. In 2019, Partners Life launched an ‘Adviser Support Programme’ which provided comprehensive tools, templates, instructions and guidance to help advisers comply with the new licensing requirements. Over the years since the programme was launched, 238 advisers have completed the programme - while a further 505 are currently enrolled. The programme is confidential to the user, and free to adviser businesses who work with Partners Life.

Adviser feedback has been universally positive about the programme, citing a significant impact on business health and viability. In addition, the Partners Life Academy provides advisers with a range of training programmes to help them meet their competence requirements under Code Standard 9 of the Code of Professional Conduct for Financial Advice Services.

State-of-the-art technology

These days, the life insurance industry places great emphasis on technical innovation and personalisation. Partners Life advisers are benefiting from the firm’s unstinting commitment to developing technologies which put control in the hands of the people whose work Partners Life really appreciates: the advisers themselves. Over the years, Partners Life has created a range of innovative digital solutions to help ensure advisers have the best possible products, support and service to protect clients, achieve success and reach their own business goals.

When advisers are busy supporting clients’ needs in an economic downturn, fast, accurate and reliable technology can be a big timesaver. One of the most talked-about advances is ‘Evince’. This powerful, visual, interactive digital tool can be used in front of clients to help them understand both their need for life insurance and the value of the adviser’s professional advice. Evince was a genuine game-changer. And since its launch, Partners Life has developed and introduced other innovative tools, including ‘My Underwriting Manager (MUM)’, ‘Auto Issue’ and ‘Medical Claims Digital Lodgement’. Further developments will create even greater ease and efficiencies for advisers and clients in the future.

Claim time

Of course, what really counts for both advisers and their clients is a life insurance provider’s ability to deliver when it comes to claim time. Partners Life’s claim team won the Highly Commended Award in the Team of the Year category at the Financial Services Council Awards 2022 - a fitting recognition for the outstanding work they do, looking after clients when they need it most. As New Zealand moves further into this challenging year, Partners Life is well prepared: ready, willing and able to not only support advisers, but to help them thrive.

However the remainder of the year unfolds, Partners Life is working hard to help ensure advisers and their clients will have what they need A

Naomi Ballantyne is the founder and managing director of Partners Life.

Better things to do with five billion dollars

The Government’s proposed income insurance scheme has been deferred until next term – but is it a good use of money? How else could we spend $5.5 billion?

BY RUSSELL HUTCHINSON

From left to right, there are critics of the Government’s proposed income insurance scheme - so when they announced the scheme was being deferred until the next term, there was some cheer amongst those who opposed it.

Insurers had been unhappy with the New Zealand Income Insurance Scheme (NZIIS) from the start: although the Government usually rationalises interventions in private markets where market failure has occurred, the shortterm part of the income-insurance market is the portion which has the most customers and the most profit.

This was to be the target of the scheme, which would be open to all –except the self-employed – at a large cost.

Insurers were not consulted on the cost; and arguments raged over whether we should even have a scheme like this.

The discussion paper estimated the scheme would cost $3.5bn a year, but if we apply insurance rates to the new scheme, even subtracting distribution costs, a total cost of about $5.5bn is more likely.

If you think my estimate is high, bear in mind that the Reserve Bank of New Zealand (RBNZ) gave a range with the top end sitting on about $5bn annually.

Cost, cost, cost

Before we look at how better to spend such a large sum of money, it must be said that inventing new ways to spent another $5bn isn’t really what’s called for during a cost-of-living crisis,

At the start of Covid, when wage subsidies were paid to keep jobs open, the cost was less of a problem than the benefits.

Today, with high employment levels and high costs, the issue is cost, cost, cost.

On cost, the scheme must compete with the political priorities that vary across the spectrum.

I guess for now, Prime Minister Chris Hipkins considers it too hot an issue to take into the election year.

But before we heave a big sigh of relief, note that it was deferred only until the next term.

Right now, with a post-leader-change bump in the polls, Hipkins would want to think he has a chance; so that being the case, here are some suggestions for better things to do with five billion dollars.

Benefits? Homes?

Five billion is about four times as much as we currently spend on unemployment benefits, according to OECD comparisons.

Indeed, one of the most effective criticisms from the left was simply this: why don’t we redesign the jobseeker’s benefit?

Options here include a ‘no fault’ referral to the job-seeker benefit, making it available for anyone who has lost their job, at a higher rate for a short period of time.

Five billion dollars is also equivalent to increasing NZ super by about 40%, which would be a great policy if you want to win NZ First’s supporters over.

Or what about helping alleviate the housing crisis? With the average cost of a home in New Zealand just under $1m, the sum equates to 5,500 new homes a year.

If we opted for cheap apartments, we could probably house the 41,000 people currently homeless within two or three years; that’s another good alternative goal if you are on the left.

Fighter jets? Knees and hips?

Five-and-a-half billion dollars is a third more than all of our current spending on defence.

We spend just shy of $1bn on our air force – and with the lessons from Ukraine, and worries over Taiwan, our allies would be delighted if we spent more.

We seem a long way from the benign strategic environment which existed when we scrapped fighter jets; buying some could win over lots of National Party voters.

Or how about 20% more healthcare? Heart valve replacements are about $80k, new hips or knees about $20k.

Five billion dollars a year covers a lot more of those.

How about 20% more staff, more hospitals, more operations? That would be a welcome relief to staff, and probably prevent quite a lot of staff quitting or breaking down due to overwork.

Of course, we have to remember that money doesn’t come out of thin air: it comes from taxpayers, many of whom feel it is already being used for the right things.

At a time when inflation is running at over 7%, keeping a tighter rein on central Government spending would help to reduce the amount of inflation-fighting work that interest rates must do.

Sector: alternatives needed

Returning to our sector, however, fund managers are publicly advocating for alternatives.

For example, leading wealth management specialists have criticised the scheme recently.

They felt that the focus should have been on an alternative form of emergency provision: some form of increased savings and improved access to those, in individual accounts, managed by the funds which currently manage KiwiSaver products: “sidecar” savings.

That would silence the critics who talk about moral hazard, as money not

drawn from your account would remain yours to help fund a better retirement, for example, providing an incentive to get back into work.

The moral hazard point has probably not been adequately discussed.

New Zealand income insurers are already concerned about this; they understand that this risk rises the longer a person is off work.

In the discussion documents on the scheme published by the Ministry of Business, Innovation and Employment (MBIE), moral hazard is not given any serious consideration - evidence again of the gap created by failing to engage with the sector.

This hazard is made worse by several aspects of scheme design.

First, a person being offered the Government scheme who also holds long-term cover would be more likely to claim on long-term, private, income cover because of the reduced incentive to return to work given the higher repayment ratio.

Second, under the NZIIS, if a claimant does return to work, he or she enjoys full cover again after only six months.

The insurance sector is very concerned about the risks of the scheme – and those risks have only been deferred to the next term.

Scheme concerns advisers

Increasingly we are having conversations with advisers concerned about the scheme too.

The impact on existing schemes has not been talked about at all, but should be considered: after all, current policyholders and advisers are going to be affected.

Some consumers may cancel cover, thinking the new scheme is equivalent to full income protection, or at least current ACC cover, only to discover later, when it is too late, that it is not.

Direct challenges to the scheme are being argued against by the cautious: clearly one should not argue against increasing help for people who are disabled or recently redundant.

Examples of the value of the wage subsidy during the recent level four restrictions are given.

But, quickly after those lockdowns, there was widespread public interest in exposing instances where subsidies were taken by companies where they were not required.

Those stories would come out all the time if this scheme were operating right now.

Better targeted assistance would enable limited resources to be focused more on those in the most need.

There are always alternative demands on the public purse. A

Russell Hutchinson is director of Chatswood Consulting and Quality Product Research, which operates Quotemonster.

Enough regulation already?

Adviser numbers on both sides of the Tasman have fallen quite dramatically in the last three years, not least because of the sharp increase in regulation. David van Schaardenburg argues it may be time to push pause.

Back when I started my working career, the mantra of the time was about how we could remove or lighten regulations - trade and innovation would flow, and the economy and households would ultimately benefit.

Now, as we kick into another working year, it’s clear from industry media how much times have changed.

The concerning topic that I keep on coming back to is the ever-extending arm of regulation over our industry, and the challenging impact - not yet fully understood - this is having for businesses and their clients.

The industry regulator is increasingly well financed, if their increase in fees in 2022 is a guide, so they can’t be seen to be sitting still and not making ‘progress’.

I’m fully supportive of the improvements in the depth, standardisation and understandability of information available to investors. However, new regulations keep coming, with sometimes unintended consequences.

Advice businesses have just got through the licensing process, with regulators’ attention seemingly focused back again on product providers, via COFI (the Financial Markets [Conduct of Institutions] Amendment Act 2022) and VFM (Value for Money) assessments.

However, if we look across the Tasman, which has developed its investment industry regulations even more than New Zealand’s, there are maybe some lessons for us to learn.

Aussie adviser numbers down

In a full-of-facts presentation by Clayton Coplestone of Heathcote at

our recent conference, ‘An industry under challenge’, he indicated that financial adviser numbers in Australia had declined by 44% between 2019 and 2022.

A key driver of this decrease was increased regulation and examination of advisers.

The average cost to provide advice to a client in Australia was put at over $5,000 per annum, meaning access to personalised professional advice had now become solely the realm of the affluent. Probably not what regulators desire.

Financial adviser numbers in New Zealand are predicted to have fallen 30% over a similar period, equating to before and after the new FAP licensing regime.

In addition, I commonly hear of advisers now looking to get rid of their smaller clients, due to the increased compliance requirements that make them uneconomic.

Looks like the reduction to access to advice seen in Australian is being mirrored in New Zealand. Pause for thought?

Heatmap experiment

An interesting experiment has been going on across the Tasman called the Superannuation ‘Heatmap’.

This annual test has been designed by the Australian Prudential Regulation Authority (APRA), which regulates the Australian superannuation industry.

Designed to weed out ‘underperformers’ in the industry, it is based on comparing MySuper fund performances versus a similar benchmark over the last eight years.

Failure in year 1 means a letter from fund trustees to investors to tell them that they have failed.

Failure in year 2? They must return the last 12 months contributions to members and not accept any new members.

The latter is probably a business killer –and certainly a reputation killer.

Any test based on historic performances versus a standardised benchmark has numerous potential flaws. Especially when making the big call that this will apply to the future.

Past performance is not a good predictor of future performance, as we used to say.

Inevitably, some industry participants will ‘game the system’, with the worst outcome probably that business interests will trump client interests. No fund manager will want to ‘fail’, therefore the best way to avoid that is to substantially mirror the benchmark, irrespective of its validity, while still charging fee levels that ensure it passes the test.

While this may mean fees charged by the fund industry reduce, client returns may in turn contract - as active management, with its higher costs but potential to protect capital, withers on the vine.

‘I commonly hear of advisers now looking to get rid of their smaller clients, due to the increased compliance requirements that make them uneconomic’

In my experience, funds management has been a highly competitive industry full of innovation on a path of constant change and improvement. Most of it to the benefit of their investors.

If you force all fund managers to hold the same portfolio, what choices are left for clients?

APRA: that’s a ‘no’ from us

After only 2 years of tests, the expert advisory panel to APRA is recommending NOT extending this test to other types of superannuation.

Is the Heatmap another example of unintended consequences from overregulation?

The VFM guidelines published May 2022 indicate the Financial Markets Authority (FMA) seems to be going down a similar, increasingly prescriptive line to Australia’s Heatmap: regulators defining a basis upon which a fund or fund manager is doing a good job or not for their clients.

In my opinion this is moving beyond the ‘transparency’ approach.

One area of focus in this report is the payment of commissions to advisers, both initial and ongoing, on the basis that all fund members indirectly pay these, as they are a material cost to the fund manager, and as such they push fund fees up.

The guidelines indicate that for a trail commission to continue to be paid to an adviser:

1 advice should be received, not just offered

2 advice should be ongoing – at least annual – not just at on-boarding

3 the fee for advice should be reasonable

4 the fee for advice – the sum, and who receives it – should be disclosed to, and discussed with, members

While no contention over points 3 and 4, which are already covered by existing required adviser

disclosures, one of the design beauties of KiwiSaver is that the bulk of members do not need (though could benefit from) advice, except at times of material financial change.

We know they don’t wish to pay for that advice, however - nor do they wish to sit down with a financial adviser each year.

Given that an annual trail commission on a KiwiSaver balance of say $50,000 at 0.25% is only $125, then seeing and advising a client of this ilk is only economic for an adviser probably once

1 each bank and insurance under COFI giving each advisory firm with which they have a distribution agreement a questionnaire and attestation to ensure they can fulfil their new obligations,

2 similarly, for each adviser who receives trail commissions from a KiwiSaver/MIS manager, a questionnaire to justify why the adviser should continue to receive trail commissions for each client noted of theirs.

‘New regulations keep coming, with sometimes unintended consequences’

End of free money made 2022 a year most investors want to forget: Mercer

he era of “free money” definitely looks like it has come to an end, at least for now, according to Wellington-based Mercer consultant Neil Cannell.

His analysis of investment returns from 16 different asset clases in 2022 found only four generated positive returns that year, the lowest proportion of positive returns in the last decade and a sharp contrast

from the previous year when 14 managed to deliver positive returns.

TMercer periodic table of annual investment

Global Small Cap Equities (UH)

Global Equities (H)

Global Equities (UH)

Global Listed Infrastructure & Utilities (H)

Global Private Equity (IRR)(H)

NZ Equities

NZ Direct Property

Global Listed Property (H)

Australian Equities (UH)

Hedge Funds (Defensive) (H)

NZ Cash

Global Bonds (Aggregate) (H)

NZ Government Bonds

Emerging Market Equities (UH) Commodities (H)

Emerging Market Debt (UH)

Global Listed Infrastructure & Utilities (H)

Global Listed Property (H)

Global Private Equity (IRR)(H)

NZ Equities

Global Equities (H)

Global Bonds (Aggregate) (H)

Global Equities (UH)

Hedge Funds (Defensive) (H)

NZ Government Bonds

NZ Direct Property

Global Small Cap Equities (UH)

NZ Cash Emerging Market Equities (UH)

Australian Equities (UH)

Emerging Market Debt (UH)

Commodities (H)

NZ Equities

Global Small Cap Equities (UH)

Global Private Equity (IRR)(H)

Global Equities (UH)

NZ Direct Property

Global Listed Property (H)

NZ Government Bonds

Global Bonds (Aggregate) (H)

Global Equities (H)

Australian Equities (UH)

NZ Cash

Hedge Funds (Defensive) (H)

Global Listed Infrastructure & Utilities (H)

Emerging Market Equities (UH)

Emerging Market Debt (UH)

Commodities (H)

Commodities (H)

Global Listed Infrastructure & Utilities (H)

NZ Direct Property

Global Private Equity (IRR)(H)

Global Equities (H)

Global Small Cap Equities (UH)

NZ Equities

Emerging Market Debt (UH)

Australian Equities (UH)

Emerging Market Equities (UH)

Global Listed Property (H)

Global Bonds (Aggregate) (H)

Global Equities (UH)

NZ Government Bonds

Hedge Funds (Defensive) (H)

NZ Cash

“With few exceptions, the widespread rapid increase in interest rates across the globe, aimed at containing runaway inflation,

Emerging Market Equities (UH)

NZ Equities

Global Small Cap Equities (UH)

Global Equities (H)

Global Equities (UH)

Australian Equities (UH)

Global Private Equity (IRR)(H)

Global Listed Infrastructure & Utilities (H)

Emerging Market Debt (UH)

NZ Direct Property

Global Listed Property (H)

NZ Government Bonds

Global Bonds (Aggregate) (H)

Hedge Funds (Defensive) (H)

Commodities (H)

NZ Cash

Global Private Equity (IRR)(H)

NZ Direct Property

NZ Equities

NZ Government Bonds

NZ Cash

Global Bonds (Aggregate) (H)

Emerging Market Debt (UH)

Hedge Funds (Defensive) (H)

Global Listed Infrastructure & Utilities (H)

Global Equities (UH)

Global Listed Property (H)

Global Equities (H)

Australian Equities (UH)

Global Small Cap Equities (UH)

Emerging Market Equities (UH)

Commodities (H)

NZ Equities

Global Equities (UH)

Global Equities (H)

Global Small Cap Equities (UH)

Global Listed Infrastructure & Utilities (H)

Australian Equities (UH)

Global Listed Property (H)

Emerging Market Equities (UH)

Emerging Market Debt (UH)

NZ Direct Property

Global Private Equity (IRR)(H)

Global Bonds (Aggregate) (H)

Commodities (H)

NZ Government Bonds

NZ Cash Hedge Funds (Defensive) (H)

For more information call 0800 888 361

Returns

are calculated to 31/05/23. 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

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 Ballantyne announces her future plans

Following the sale of Partners Life to Dai-ichi, founder and managing director Naomi Ballantyne outlines her future plans.

02 Aurora pinged for misleading clients

Aurora Financial Group has been censured by the Financial Markets Authority for misleading KiwiSaver clients.

03 Budget boost addresses gender imbalance on KiwiSaver

Under the heading ‘backing parents of young children’ the government has taken aim at the on-average lower KiwiSaver balances of women compared to men.

04 Tax hikes make PIEs shine

Financial advisers can’t control the markets but they can control what their clients pay in tax.

05 InvestNow to expand term deposits, KiwiSaver ETFs

InvestNow is looking to add three more banks to those offering term deposits through its online investing platform.

06 New and cheaper PI insurance hits the market

A new entrant has joined the crowded professional indemnity (PI) insurance market for mortgage and financial advisers.

07 Aussie giant comes to shake up ETF market

Betashares, which has more than $27 billion in funds under management, is launching five funds in New Zealand.

08 Financial advice career pulling a younger crowd

The latest crop of would-be financial advisers is slightly younger than two years ago.

09 Sharesies KiwiSaver to include stocks in a self-select option

Online investment platform Sharesies will have a DIY option in its KiwiSaver scheme which it plans to launch this quarter.

10 FMA says monitoring isn't an audit or investigation

The Financial Markets Authority may select a financial advice provider (FAP) or person licenced to provide financial advice to provide responses as part of its role in monitoring the industry, the FMA's Crystal Burbery told LFG Group's conference in Christchurch last week.

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