APRIL 2019
Lessons
from the FADC
Why health insurance?
Responsible investment in spotlight
Cigna protecting New Zealanders
CONTENTS
FADC SLAMS ADVISER’S CONDUCT
14
Lessons to be learned on disclosure and record keeping.
24 Responsible Investing Social media concerns in the wake of Christchurch.
UP FRONT
FEATURES
04 EDITORIAL
12 GRTV
The surprise CGT decision – a tax change is still needed.
06 NEWS
SkyCity Auckland Reflect. Explore. Energise. Join us at Conference 2019. We’re excited to bring members and advisers a bold, energy-packed programme this year. It’s a big year for financial advisers, with plenty of change - and opportunity - ahead. So step out of ‘business as usual’ this August, and be ready to get a big dose of inspiration, learning and networking.
Updates from the New Zealand market.
GRTV speaks to Mint Asset Mint Asset Management's Rebecca Thomas on why advisers are crucial to the industry's future.
20 INVESTMENT
22-23 August 2019
Economy implications for the RBNZ’s capital lifting proposal.
22 THOUGHT LEADERSHIP
A programme to energise and inspire. Here’s a snapshot of what we have in store for you: • 37 speakers • A powerful line-up of international keynote speakers • 10 CPD points • Four exciting Icehouse business workshops • Bootcamp for new advisers • And more…
08 PEOPLE ASSET rounds up the main people stories from the past month.
10 PROFILE Cigna's Gail Costa on protecting New Zealanders.
Reality check for investors.
28
REGULARS 05 KIWISAVER
Do investors have a clearer picture of investment risk?
30 MIKE MOORE
REGISTER TODAY
Don’t miss the Super Early Bird Discount financialadvice.nz/conference-home
Adapting to the new future.
32 RUSSELL HUTCHINSON
Health insurance considerations and the need for advice.
ADVISER PROFILE Mann hits goals in memory of friend.
03
UPFRONT
KIWISAVER
From the Editor
By Michael Lang
Investors deserve clearer insights
Tax change still needed
The Government’s decision not to proceed with any sort of capital gains tax was a surprise to many people. While most had expected it to heavily dilute the Tax Working Group’s proposals, few I spoke to expected it to back away so completely and so quickly from a capital gains tax of any sort. While some corners have celebrated the decision – or at least felt relief that they wouldn’t have to update all their systems and processes to accommodate a new tax – and others have bemoaned the loss of a chance to rectify what they saw as unfairness in the tax system, some of the other topics debated through the process have slipped from prominence. The Tax Working Group was asked by many of its submitters to consider ways that long-term investment and savings in vehicles such as managed funds could be made more attractive to New Zealanders. It responded with some proposed
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changes aimed squarely at lower-income people – refunding the ESCT for people earning up to $48,000 a year and clawing back up to $70,000, cutting the lower PIE rates and changing the MTC on KiwiSaver so people received the full Government contribution faster. Those changes have been referred for further consideration. But I think they should still go further. If the Government is serious about wanting to redirect money to investments that it sees as more productive than housing, or to get more people to take responsibility for their own retirement income, it can still do that. KiwiSaver members could be allowed to salary sacrifice into their accounts at a lower rate of tax, or even exempt from tax. Returns could be left untaxed as savings grow to provide faster compound growth. Other incentives could be provided for those who use their money to help businesses start, or to grow. The end of the capital gains tax debate shouldn’t mean the end of all discussions about tax and how well the current system is working for us and the country. New Zealand’s tax policies might be simple and clean as they are – but perhaps a little untidiness is worth considering if it helps deliver better outcomes overall.
The risk with risk indicators
HEAD OFFICE 1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: philip@tarawera.co.nz PUBLISHER Philip Macalister EDITOR Susan Edmunds SUBEDITOR Dawn Adams CONTRIBUTORS Michael Lang, Miriam Bell, Brian Klee, Andrew Nuttall, Simon Pannett, David Beattie, Mike Moore, Russell Hutchinson DESIGN Amy Bennie ADVERTISING SALES Amanda Ellery P: 027 420 2083 E: amanda@tarawera.co.nz SUBSCRIPTIONS Jill Lewis P: 07 349 1920 E: jill.lewis@tarawera.co.nz ASSET is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and TMM – The Mortgage Mag
Susan Edmunds Editor
All contents of ASSET magazine are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited. ISSN 1175-9585
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It is disappointing that a decade after the global financial crisis, New Zealanders continue to remain vulnerable because of the rules around risk indicators. This is especially the case for bond investors, who are often conservative in nature and consider fixed interest a safe haven in times of volatility. Unfortunately, after a decade of low interest rates, bond investors are also prone to “reaching” for higher yields, sometimes without understanding the risk they are taking. This is when risk indicators play a vital role – by helping New Zealanders understand how risky their “income” product is. Given this backdrop, should a portfolio whose largest investment, comprising approximately a fifth of the fund, is an off-market, related party, private loan to a portfolio of shares, be given the same risk indicator as a term deposit from a major Australasian bank? Sadly, this is what is happening. A portfolio (which we’ve chosen not to name) contains in its top ten holdings, an off-market, related party “geared investment loan” which makes up 19.09% of the portfolio. Of the top ten investments, seven are unrated. Yet its risk indicator is one, the lowest possible. The fund is described as “entirely in income assets” and promoted as being “suited to investors looking for an on-call or term investment with a low level of risk and are willing to accept a relatively modest level of returns”. This is language which is commonly associated with bank accounts and term deposits. How is this possible?
movements in price either up or down (called volatility) are an excellent measure of the risk. This is the case for listed (not privately held) shares, property funds, unit trusts and most commodities.
WHEN IS IT MISLEADING?
The Financial Markets Authority have done an excellent job establishing a standarised formula for risk which enables an “apples with apples” comparison. Risk is measured through a score of one (lowest risk) through to seven (highest risk). Risk is assessed by taking the actual annualised volatility of the fund or asset class over the last five years.
Unfortunately, volatility is a poor indicator of the risk of loss for assets that are priced infrequently and this includes bonds. For a start, most bonds including New Zealand Government bonds, are not listed, they trade off-market by appointment. Next, unlike perpetual assets, bonds are binary in nature: interest is either paid, or not, and at the end of the period your money is either repaid, or not. In a 150-year study of corporate bond default risk, the authors found bond defaults were not normally distributed. Instead, there were long-periods of little volatility or default, which were then followed by short bursts of high volatility and a large number of defaults. The investment grade bond credit default index is an excellent measure of the episodic nature of bond volatility and is shown below. In the case of the income securities portfolio with its related party “geared investment loan”, the manager sets a “posted rate” in the same way as finance companies do. As a result, the volatility is low. Using the FMA’s current methodology for risk indicators, lower volatility equals a lower risk indicator.
WHEN IS VOLATILITY USEFUL?
WHAT IS THE ALTERNATIVE?
HOW IS RISK MEASURED?
Where an asset trades regularly, between a large number of willing buyers and sellers, with little transaction cost, then daily
The alternative is to have risk indicators which reflect the type of assets a fund holds. For example, a portfolio which is entirely
invested in listed shares should attract the highest risk indicator, whereas one that is equally divided between shares and bonds should have a medium to high risk indicator, say three to five. Funds holding cash, government bonds with a duration of less than three years, bank bills and investment grade bonds should have a lower risk indicator. In contrast, funds holding unrated bonds and related party loans should be required to have a higher risk indicator. Interestingly, the website Sorted, run by the Commission for Financial Capability, categorises funds by asset allocation and not with the FMA’s prescribed risk indicator. 1. For further details contact NZ Funds. 2. Giesecke, K., Longstaff, F., Schaefer. S., and Strebulaev, I., 2011. Corporate bond default risk: A 150-year perspective. Journal of Financial Economics 102 (2011), 2 33-250. NZ Funds KiwiSaver Scheme is designed for use by AFAs and RFAs and pays both planning incentives and an ongoing commission for advice. 96% of NZ Funds’ KiwiSaver members have a financial adviser. The average balance of members of the Scheme is $27,194 approximately one and half times the national average of $17,834. Michael Lang is chief executive of New Zealand Funds Management Limited (NZ Funds) and is a member of the NZ Funds KiwiSaver Scheme. Michael's advice is of a general nature, and he is not responsible for any loss that any reader may suffer from following it.
05
NEWS
FSLAB is go The Financial Services Legislation Amendment Bill has passed its final hurdle, clearing the way for a new legislative regime for all financial advisers. It has received Royal Assent to become law. Commerce Minister Kris Faafoi said it should mean New Zealanders have better access to high quality financial advice. “According to the Commission for Financial Capability, 68% of New Zealanders have money worries. Many are overwhelmed by the sheer volume of financial choices they need to make and the complexities in understanding financial language is often a barrier to making decisions. “The changes we will now put in place through this legislation are designed to make it easier for people to get advice, to better understand their options, and to ensure advice is of a consistent quality.” Faafoi said the bill would improve transparency in the financial advice sector to better serve consumers’ interests. “Financial advisers will be required to prioritise the customer interest, meaning their foremost consideration when recommending a product is how well it meets their customer’s needs. This will help address the problem of some advisers being incentivised to recommend a particular product because it has a higher commission attached to it.” Financial advice providers will be accountable for the advice provided to customers on their behalf, and will need to disclose key information to clients so they can make informed decisions. “Anyone providing financial advice to retail clients in the new regime will require a licence granted by the Financial Markets Authority. People providing financial advice will also need to meet new competency standards and comply with a professional code of conduct, which I expect to finalise in the coming months.” To ensure consistency in the standard of financial advice provided across the industry, the same basic protections for consumers would apply regardless of how they chose to access financial advice – whether that be in person or online.
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Financial Advice NZ seeks backers for missing piece of the puzzle Financial Advice New Zealand is seeking businesses to inject funds to help it create evidence of what quality financial advice is, and what it does for consumers. It has launched a new Business Partnership Programme. Business partners will pay $3,000 each. That funding will help the association deliver projects that promote the value of advice, inform legislators and regulators, encourage new talent into the industry and lift standards. Chief executive Katrina Shanks said providing evidence of the outcomes of quality advice would be the first initiative the scheme would enable. The money from the scheme was different to funding received from membership subscriptions because it could come from across the sector, not just members. Evidence of the impact of advice was the missing piece of the puzzle for the financial advice sector.
Business partners were sought who shared the association's goal of increasing confidence and trust with regulators, legislators and the public, she said. She said an independent body of evidence was needed to highlight the good consumer outcomes of quality advice, and what that looked like. It would support public awareness and understanding of the advice sector and give advisers information they could use to show the value of their work. "We would like to be able to get industrywide support of the business partnership programme to deliver these outcomes," she said. The money would be used to fund research "and other forms of evidence". "Until we have evidence to support what good advice looks like we are just talking about it." The partners could be anyone with an interest in the sector and in New Zealanders' health and wealth, she said. The programme was signed off by a board meeting last week and there had already been strong interest, she said.
Code: No surprises Advisers are being told there won't be anything to shock them in the approved code of conduct for the sector.
Now the Financial Services Legislation Amendment Bill has made it through Parliament, the code of conduct is not far away. Commerce and Consumer Affairs Minister Kris Faafoi said work was progressing on the code, which will apply to all financial advisers under the new rules. “We aim to have a final code within the next few weeks.” Advisers should not expect any major changes from the draft code that was consulted on. “There won’t be any major surprises essentially it’s a common sense approach and at the heart of it is good customer outcomes.”
A spokesman for the Ministry of Business, Innovation and Employment said its timeframes for the implementation of the new regime had not changed. Transitional licensing should begin in the last quarter of this year, and run for at least six months before the new regime started with full licensing applications opening in the second quarter of next year. There will then be a two-year transitional period for all adviser businesses to choose to apply for full licences, or go within the umbrella of another licensed provider. The new code of conduct will apply for the transitional period with a competency safe harbour for previous participants. There has to be a period of at least nine months between when the new code is signed off and full licensing opens under the new regime.
ANZ loses court bid over Ross files ANZ has lost its court battle to keep the Financial Markets Authority from sharing information about its Ross Asset Management files. ANZ was the banker for the Ponzi scheme, which failed in 2012, taking millions of dollars of investors’ money with it. The bank and FMA have been locked in a court battle for years over the regulators’ desire to access its files relating to the business. It had formed a view over the course of its investigation that ANZ could be liable to investors in knowing receipt and dishonest assistance. It wanted to be able to access documents
and disclose them to the Ross Asset Management liquidation committee, as a proxy for investors. That would be done for the purposes of obtaining responses to the information received from ANZ and any additional information from the investors, determining the next steps that should occur to enable the investors to evaluate the merits of a claim against the bank and to consider their position with regard to that claim, and enabling the regulator to determine whether to exercise its powers under s34 of the FMA Act. The bank had argued that the FMA was acting outside its remit. The High Court initially supported that view, but the Court of Appeal rejected it and now the Supreme Court has denied it leave to appeal that decision.
A statement from the FMA said it was pleased with the Supreme Court decision. “Now that the restrictions on confidentiality over all these matters has been lifted, the FMA will be able to engage with the liquidation committee of Ross Asset Management and the liquidators of RAM on the substantive matters at the heart of this case. “ANZ’s decision to judicially review the FMA and to seek confidentiality over the High Court and Court of Appeal judgments meant our ability to talk to investors was curtailed. “The FMA at this point has made no decision on the use of its section 34 powers under the FMA Act. A significant part of our consideration of our section 34 powers involves engaging with the appropriate representatives of impacted investors first."
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Morningstar Awards 2018 and 2019 ©. Morningstar, Inc. All Rights Reserved. Awarded to Nikko Asset Management for Fund Manager of the Year 2018, New Zealand. Fund Manager of the Year Awards are announced by FundSource, the investment strategy and research company. These awards should not be read as a recommendation by FundSource. For further advice on the relevance of this award to your personal situation consult your authorised financial adviser, or visit www.fundsource.co.nz.
07
PEOPLE
For the latest people news go to www.goodreturns.co.nz If you have a new appointment email details and a picture to editor@goodreturns.co.nz AIA/Sovereign is recruiting from Hong Kong to fill a chief partnership officer role after the resignation of a long-standing staff member. Patrice de Marigny has decided to retire to spend more time with his family. He joined Sovereign in 2011 and has held a number of senior roles in operations and sales. The insurer has appointed Sam Tremethick to the role. He will join from the group office in Hong Kong, where he has been the regional head of IFA and high net worth, responsible for driving and leading the group’s high net worth, brokerage and IFA strategy across 18 regions. “Sam will move to New Zealand with his family and start with us soon. I know he is looking forward to meeting the team and visiting with many of our advisers and partners over the coming months,” AIA/Sovereign chief executive Nick Stanhope said.
CHIEF INVESTMENT OFFICER APPOINTED
Mark Todd
FMA APPOINTS FUND MANAGER
A fund manager is among new faces on the Financial Markets Authority’s board. Commerce and Consumer Affairs Minister Kris Faafoi has confirmed Mark Todd as the new chairman of the Financial Markets Authority (FMA), and Chris Swasbrook as an associate member. Todd takes over from Murray Jack, whose term expires at the end of April 2019. “I want to thank Murray for his contribution to the FMA since he was first appointed as a member in 2011 and his strong and steady leadership after he became chair in 2014,” Faafoi said. “Mark’s appointment will provide the FMA with continuity as he has been on the Board for the last three years playing a key role on the Audit and Risk Committee. His experience will be highly useful for the FMA’s work across the financial sector.” He said Swasbrook had a strong understanding of international and New Zealand capital markets and the broader industry. Swasbrook is currently managing director
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of Elevation Capital Management and a member of the NZX listing sub-committee and NZ Markets Disciplinary Tribunal. Todd has been a member of the FMA Board since 2015.
PARTNERSHIP OFFICER STEPS DOWN
Sam Tremethick
Clarity Funds Management has appointed a chief investment officer from NZ Funds Management. Josh Wilson, formerly portfolio manager for Australasian equities for eight years with NZ Funds Management, has been appointed to the role. Clarity said he brought a proven track record in the management of Australasian equity strategies. Before NZ Funds Management, he was in local and international research and analysis roles. Clarity is a subsidiary of the $5.4 billion Investment Services Group (ISG), which also includes Devon Funds, JMI Wealth and Select Wealth. ISG chief executive Richard O’Brien said: “Clarity has experienced significant growth in recent years, and now has approximately $500 million in client funds under management. We felt that now was the right time to bring a senior investment professional into Clarity, to both assume overall responsibility for our existing investment strategies and to focus on our growth opportunities with new strategies. We are delighted to secure a candidate of Josh’s calibre and experience to help us execute on these focus areas”.
He said, given the capacity constraints in the local market, "we believe that the addition of Josh will allow Clarity to be a genuine alternative to the incumbent providers”.
ADVISER SUPPORTER SIGNS OFF
One of the staff who kept the Institute of Financial Advisers running smoothly for more than a decade has signed off from adviser associations. Karen Garner, formerly business manager at the Institute of Financial Advisers, has decided to follow a new path. She was with the IFA from 2003 until June last year when Financial Advice NZ was formed. She then transferred over to a role as business and operations manager, which she held until this February. Financial Advice NZ confirmed in an email to members this month that she had moved on. She said she had made the decision for a lifestyle change and had relocated to Tauranga.
FIDELITY LIFE ADDS SUPPORT STAFF
Insurance company Fidelity Life has added faces to its teams that support advisers. It has hired Kenny Kaushish as a business account manager. He will join Anna Frecklington and Ciara Thompson in the team of three Auckland-based business account managers from April 1. He is currently a key accounts manager at Sovereign. It has also appointed Mike Whitehead as a business manager for Auckland and Northland. He will help to run the adviser support programme Building Better Business when he starts on April 8.
NZX HIRES INVESTMENT BOSS
NZX has hired a chief investment officer for Smartshares. Stuart Millar has been appointed to the role. He was previously head of diversified portfolio management at ANZ. Before that, he was with ING.
Kenny Kaushish
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PROFILE
By Susan Edmunds
Protecting New Zealanders – the ultimate goal
Cigna’s chief executive Gail Costa says she needs to win the hearts and minds of advisers.
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Gail Costa has something that many other insurance executives don’t – first-hand knowledge of how almost every level of an insurance company works. Costa, now chief executive of Cigna Life New Zealand, which last year finalised the deal to buy ANZ’s OnePath business, started her working life in a junior clerical role with Colonial Mutual, posting cash payments to the back of customer card records. The company was supportive of her completing further study, so she went to university to do an accounting degree. “I thought I’d better do something meaningful.” While she was studying, her career started to progress quickly and she ended up doing different roles throughout the company. By the time she had finished the degree, she had progressed to a senior level. Pondering her next step, she knew she did not want to be an accountant. “I moved out of the [insurance] industry for three months and hated it.” She quickly returned and took up a position as Royal Sun Alliance operations manager, moving on to become general manager of operations. Global insurer Cigna then approached her 15 years ago and she has been with the company ever since, working as chief executive of Cigna Europe, then taking the role of chief executive for Cigna Life in New Zealand, then spending five years overseas including at the helm of businesses in Hong Kong and Turkey. She returned to New Zealand last year for her current position. “Turkey was fantastic, the way they operate, the language, the pace, the dynamics of the market and culture, it was incredible. Every day I was racing off to work. I didn’t want to leave but it was time to come home and then this opportunity came up. It was fantastic.” Cigna completed the deal with ANZ at the end of November last year and the focus has been on bedding in the new business, including 220 staff, ever since. Costa said it had gone well and much more quickly than the bank had expected. ANZ is yet to complete the sale of its Australian business. Now Cigna and ANZ are working through IT separation and amalgamating the businesses so that there are not two governance regimes and related inefficiencies. When the deal completed the OnePath systems were put in a virtual data environment that was still managed by ANZ. Cigna has to pull over 50 different systems over the course of the year, ensuring that as each one is migrated, the
others do not stop working. Costa said it would draw on the company’s international resources to help that process. She said she wanted to see Cigna leverage the synergies that the business now had and refresh products across all of its distribution channels. OnePath had not made any investment in product in the
We’ve got so many things that we want to do it’s picking the right one. past five years, so there was opportunity for change, she said. A suite of changes for the adviser channel has already been rolled out, including product updates, alterations to its client benefit scheme which offers access to other services, and changes to the application form. Costa said it was hard to do because the insurer was still working on a legacy system. She said the aim was for Cigna to be “really easy to deal with” for customers and advisers and it was investing in technology what would help it to achieve that, as well as help Cigna to get changes to the market more quickly. “We’ve got so many things that we want to do it’s picking the right one.” Costa said Cigna was well-positioned because it now had access to every channel that a customer could use to purchase insurance, including direct and adviserled. Working well, each option should complement the ones around it, she said. The OnePath deal appealed because it came with a 20-year strategic alliance with ANZ, cementing a business relationship between the two companies that had already existed. OnePath was a strong and well-run business and gave Cigna the sort of scale that it could not have achieved with organic growth, she said. “It made a lot of sense and meant we could get access to the adviser channel.” She said she believed strongly in offering a faceto-face service for clients, and it was necessary to stand out as a credible insurer in the market. The company is entering serious expansion and growth mode just as the sector comes under increasing scrutiny from regulators. The Reserve Bank and Financial Markets Authority recently completed their report on the life insurance sector.
Costa said, while she was initially concerned about what that might mean for the business, it now seemed to provide an opportunity. Cigna has a workstream titled “change the business” where new initiatives are developed and each new one would have a consumer conduct piece woven in, she said. When new products were developed the insurer would make sure there was a customer lens on them. When changes were implemented they would be passed back to existing customers, too. The business has also been given money to invest so it could afford to make changes as required by the regulators. “Others have to but it’s going to be costly – I think it’s a significant opportunity for us.” Costa said she wanted to ensure that Cigna was significant in the adviser channel. “We have to win their hearts and minds because OnePath for one reason or another wasn’t significant there. We’ve got to show them that we mean it and we can do that with good customer outcomes.” As a market, New Zealand was underinsured and more customer confidence was needed to address that, she said. Compared to others around the world, Kiwis were still focused on taking care of themselves, she said. “People generally don’t trust us.” For their part, insurers could help by trying to demystify some of the process, she said. Customers were still being handed policy documents that were too dense and full of legal jargon to understand. “We need to challenge ourselves to make the product a bit less complex and more certain in terms of outcome with fewer exclusions, ‘what ifs’ and ‘thou shalt nots’.” Some more education was needed in the wider market, she said, so people would understand how insurance worked. “There are really positive stories of people who have had a claim and how that has helped and equally there are other experiences where someone has passed and there hasn’t been the money.” Advisers were also worried about the future in an environment of significant change, she said, and that was a challenge. Costa said she wanted to see the adviser channel remain significant in the New Zealand market and get through the upcoming rule changes. “Most I talk to are very optimistic and are doing a good job and know the value they bring. They just want some certainty around the future.” Those who engaged with the process and what they needed to do to adapt would be well-positioned for the future, she said. “How do we get to protect more New Zealanders? That’s the ultimate goal.” Costa said her initial experience working up through almost every part of an insurance business gave her a unique insight into how it worked. “I really like the people side, seeing people learn, develop and grow and meeting advisers and I also like making a difference, being challenged by what we could achieve. It’s very satisfying.”
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GRTV
Mint takes lead Rebecca Thomas, of Mint Asset Management, told GRTV why she’s removing performance fees – and why advisers, and how they are paid, are crucial to the future of the industry. GRTV: THE RESERVE BANK INDICATED THAT IT’S GOING TO MAYBE CUT THE OCR AGAIN AND WE'VE SEEN PREDICTIONS OF MAYBE THREE CUTS IN TOTAL. WHAT DOES THAT MEAN FOR INVESTORS WHO ARE RELYING ON INCOME? RT: Things will become even more difficult for those people who are in term deposits or cash type situations. So very, very hard to meet the costs that are going up by more than the rate of inflation in those sort of investments. So, great for house-buyers, yes potentially getting new people on the ladder but very, very bad for savers. I think investors need to recognise they're going to have to include at least a portion of growth assets in their portfolios, if they're going to meet the requirements of those increasing costs. GRTV: HOW DOES AN ADVISER SELL THAT STORY TO A CLIENT? RT: One of the things I don't think we do well is actually talk about how well New Zealand’s equity market has done in a global context. Our long-run rates of return in New Zealand are very, very high by international standards. So yes, we have got a relatively conservative equity market here with a lot of
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yield plays, but the total return from equities has done very well. I know that's a very hard conversation and the psychology of the New Zealanders in their preference for property over shares, is something that we can't solve, it’s a generational problem, I think. There needs to be a lot of work done on the value of compound interest, and the value of those very, very good long run returns. I still think there is growth in the market here, over the next 12 months or so. I think there's growth in the listed property market as well, which is a strong component of the overall
The area where there's no place for performance fees really is in locked in, or superannuation, or KiwiSaver, in my view.
equity market here, which has very strong yield characteristics because they pay out a lot of their earnings in the form of regular dividends. We do think it’s going to be more volatile, so the one thing that advisers have got to really say to their clients is, this isn't going to be a smooth curve north. There is going to be a lot more volatility at this late stage of the cycle. GRTV: ONE OF THE OTHER THINGS THAT YOU'RE INVOLVED IN AT THE MOMENT IS THE CAPITAL MARKETS TASKFORCE. CAN YOU TELL ME A LITTLE BIT ABOUT THAT, AND WHY ADVISERS SHOULD BE THINKING ABOUT WHAT'S HAPPENING IN THAT SPACE? RT: It’s a joint initiative between NZX and the FMA, but it’s an industry-led forum. The industry themselves and representatives of the industry looking at, "How do we make the boat go faster in New Zealand?" Can we improve New Zealand's productivity? Which is maybe something that the Government should be concentrating on as well as the private sector … is there enough capital for those great ideas to access and in order to be successful? And of course, globally, we've
seen this very strong rise, particularly with support from international pension funds, and sovereign wealth funds of private assets over public assets. And we've seen that in New Zealand too, with people choosing to go to private markets rather than listed markets. GRTV: AND YOU WERE TALKING BEFORE ABOUT SOME OF THE ISSUES THAT HAVE BEEN DISCUSSED AROUND HOW MUCH RESEARCH THAT YOU NEED WITH A PRODUCT. RT: A part of the improved investor literacy is really making sure that people have access to advice. I think that's incredibly important and advisers have a key role to play in that. We as fund managers have got to find ways to support advisers, and we're an independent manager and we only manufacture products so we're not involved in the distribution space. So, independent advisers are very important to us. I think they need to have the confidence to make recommendations to their clients under the law, and one of the things that we're looking at is whether or not having reasonable grounds for making recommendation, necessarily means they need to be able to point to an independent piece of research. Whether that's a Morningstar Fund Rating for a fund, or whether it’s a piece of Forsyth Barr individual stock or security research, really we need to have a broader discussion about investors having confidence to put their clients into earlier stage investments. Of course, making sure that they're suitable from a risk profile, having said that, but they can explore smaller growth opportunities with confidence. GRTV: OFTEN THEY THINK THEY CAN'T USE A PRODUCT BECAUSE THEY DON'T HAVE ANY RESEARCH BEHIND IT, SO THAT WOULD BE A GOOD THING. I KNOW YOU'VE GOT A FEW LITTLE THINGS GOING ABOUT HOW ADVISERS CAN GET REMUNERATED. DO YOU WANT TO TELL ME A LITTLE BIT ABOUT THAT? RT: We genuinely believe that there is a need for advice, we think that if we're going to grow the overall pot then we've got to get better at getting advice to people that need it. We all know that economically that is very difficult for people under certain balances and certain size. So we're looking at what we can do in order for us, as a manager, to support advisers in terms of giving advice on whether that's possible with us doing some sort of fee rebate type arrangement. So we're working through consulting with the FMA, working through different ways that we might
do this, which don't stray into commission or commission by another name. We don't know what's coming down the pipe from the FMA in terms of post-Royal Commission, what their views will be on the landscape in New Zealand as far as commission goes, and they haven't made any comments on that. Obviously, advisers would be very sensitive to commission, and lots of advisers are absolutely keen to keep the feefor-service model going, and have chosen deliberately to keep their independence and don't want to muddy the waters with any sort of payment from a fund manager.
We genuinely believe that there is a need for advice, we think that if we're going to grow the overall pot then we've got to get better at getting advice to people that need it. GRTV: SO ARE YOU SEEING A BIGGER TREND OF INVESTMENT ADVISERS MOVING MORE TO A FEE-FOR-SERVICE BASIS? RT: I don't know the answer to that question. Certainly, the ones that deal with Mint are on a fee-forservice, because we haven't paid commissions since 2016. But what we are trying to address with this initiative, is the advisers with balances, say, below half a million dollars, how can they provide an advice service to those clients across a range of assets? So, a multi-asset solution which requires the investors to have, let's call it, a lighttouch approach to financial advice. Can we make something available in that space which would encourage advisers to make the effort with those balances below half a million? GRTV: YOU'RE REMOVING PERFORMANCE FEES ON YOUR FUNDS? RT: Yep. We are removing performance fees, we only added performance fees once in the last 14 years despite never having underperformed
our benchmark index in the last 14 years. That is because we had a very fair hurdle. There is a degree to which explaining that is a bridge too far and too complicated for people to understand a high watermark and a constantly ratcheting fee-base. We just think it's cleaner, and simpler and easier for people to understand. So we don't get involved in the argument about the value of whether performance fees are justified, and whether there's a fair share of return between the investors and manager. We're getting rid of them altogether. I'm actually more worried about this trend that's developing by looking at different fund managers’ documents, whereby the hurdle for a performance fee is different from the hurdle for the return on the fund. So where you have an OCR-plus, or a nominal rate of return hurdle for the performance fee, but the FMA is requiring a relevant market index for each individual product, and that index is usually a composite of the asset classes where the fund can invest. So on the one hand, the reference point for investors would be a composite MSCI-type index, but the manager is taking their return based on 10% or something like that. That's a complete mismatch around the manager's drivers to generating and what the investor's supposed to be looking at in terms of judging the overall return. GRTV: DO YOU THINK PERFORMANCE FEES SHOULD BE BANNED FROM THE MARKET, OR REMOVED? RT: If the manager's focused on an annual performance fee, and it’s meant to be a very long-term investment of five years or more, then you do have a mismatch. The area where there's no place for performance fees really is in locked in, or superannuation, or KiwiSaver, in my view.
To watch the full interview, download an audio podcast or to read the full transcript, visit goodreturns.co.nz/grtv 013
LEAD
By Miriam Bell and Susan Edmunds
FADC slams adviser’s conduct Insurance adviser should have pushed harder to get client to disclose medical history, committee says.
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An adviser at the centre of a Financial Advisers Disciplinary Committee ruling says the case sets a concerning precedent for the industry. The Auckland adviser, who specialises in insurance advice particularly for the construction sector, had name suppression at the time this magazine went to print. But he said there were issues raised by his case that the industry as a whole should understand and learn from. At the end of March, the committee ruled that the adviser had breached code standard eight (CS8), which requires advisers to ensure personalised advice is suitable for clients, in relation to two clients. Originally, the complaint about the adviser related to seven clients but five were dropped as the investigation progressed.
THE CASE
The case was brought by the Financial Markets Authority, which referred its complaint to the committee in June 2018. The FMA’s counsel alleged the adviser breached CS8 by failing to ensure fulsome disclosure of his clients’ medical history and said that this meant he did not provide good, personalised service to them as required under the code. While the case was of a “lesser order of seriousness”, it was one that has important consumer protection issues and is significant in the financial advice context, he told the hearing. “Failure to ensure that fulsome disclosure is given is a common reason why insurance might be declined when claimed. So financial advisers must do their best to insure it occurs. “Otherwise, a situation might arise where a policy is given that doesn’t meet requirements. And the consumer ends up paying for a policy that is useless.” The first client did not make any medical disclosures in his application to Partners Life. He only realised that he should have when he went to another adviser later on who put him through more thorough questioning when issuing a new policy. The client understood at that point that his earlier policies had been issued with a lack of information – including about a previous ankle injury. The client described his meetings with his former adviser as rushed and conducted under time pressure. The committee said it was left with the impression the meetings were quick, partly because they happened on a work site during a work day. The committee said knowledge of the client's medical history was necessary to put together an up-to-date risk profile for the client. It was irrelevant that, even once the
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client gave the disclosure that he realised he should have with the adviser initially, the new insurer still offered cover without limitations. “Whether or not an underwriter might have limited cover is a red herring. The issue is whether disclosure could have been obtained by reasonable inquiry. We have concluded that the matter of the ankle injury and [the client’s] other medical conditions did not come out because the client was not made sufficiently aware of the need for full disclosure,” the committee said. "The issue is whether the [adviser] can be said objectively to have made reasonable inquiries about [the client’s] risk profile at the time the application to the former insurer was made. It is clear that more could reasonably have been done to ensure up-to-date knowledge.” The committee said the "asserted lineby-line examination of the list of conditions as a prompt for past medical history" might have been a method the adviser aspired to but it did not happen with this client. The second client also said he had meetings with the adviser that were never more than 30 minutes. He met the adviser while covered by a Sovereign policy, which had an exclusion relating to back pain. But when he applied for a Partners Life policy with the adviser in question, that injury was not disclosed. The policy was later cancelled when the full extent of his medical history was revealed. The client told the committee that he had told the adviser about a back ache as a result of putting up a curtain rail. The adviser’s counsel said he mistakenly took the client at his word. “The witness told my client there was no back ailment and that it was, essentially, a mis-statement on the earlier policy.” Despite advising him of the significant risks that came with such non-disclosure, the adviser did not disclose the back ailment in the application. The adviser said that it later emerged that the witness had not disclosed a number of other ongoing medical issues to him, or Partners Life. These were an arm injury which had required surgeries throughout his life and minor cardiac issues going back 10 years. In this case, the committee said the client's approach to medical disclosure was that he would disclose what he thought was relevant. "[The adviser says] and we accept that he took [the client] at his word about the fact that he did not have a back injury and so included no reference to it [in his application to Partners Life]." The committee said, assuming reasonable inquiries were made, an adviser could rely on what he or she was told by a client. But they could not ignore other information that was otherwise known
Advisers need to take real care with disclosure. But if there is someone who won’t agree to disclose, there is not much you can do about it.” to them – and in this case, he knew the exclusion had been there and was obliged to take it into account. That meant he had breached CS8 in respect of that client, too. The paper file for the client had been destroyed so there was no evidence of the way the adviser responded to the client's insistence that there was nothing to disclose. Several expert witnesses provided evidence for the FADC hearing. One said that, although the landscape has changed following the code revamp in 2016, it would still have been good practice prior to that for an adviser to refer back to his clients’ medical history when providing advice. Under the principles of the 2016 code advisers do have a wider remit and disclosure obligations have become far more important, he told the FADC in response to questions. “But, even under the older code, I think the requirement would be for fulsome medical history disclosure because it is implicit under good practice.” The other
expert said he would expect that an adviser would have strongly recommended that the first witness’s back ailment be disclosed, especially given the Sovereign exclusion. In a situation where the client refused to agree to disclosure of the issue, he would advise them to change their mind and advise them of the risks they are taking by not doing so, he said. “I would make a file note about the refusal and probably advise the insurer, which would prompt closer examination by the insurer. There is a responsibility to not allow a mis-statement to be made to an insurer. “Advisers need to take real care with disclosure. But if there is someone who won’t agree to disclose, there is not much you can do about it.”
THE PROCESS
The adviser said he knew that the FADC process would be different to a normal court case but there were still some surprises. It was less of an adversarial set-up, he said, where one side would state their case and the other respond. The committee seemed to play a more active role. “It was going very badly for the FMA until lunch time then the FADC almost took over the prosecution and the FMA’s lawyer sat back and let them do it.” He said, unlike any other court case, the committee was able to go and find other evidence beyond what was presented. ”Part of their ruling included information I was never given the opportunity to defend and had evidence that would have discredited it.” He said his professional indemnity insurer would pick up a bill for about $80,000 as a result of the process and his own excess was $5,000. A lot of time had been spent on the case over the two years it was being Investigated. “They needed to send a
message to the industry and I was it.”
LESSONS
The adviser said there was much for others in the industry to learn from his experience. He said a clear message for other advisers was about holding on to records. When they sold their client books they needed to make sure they retained all their client records and file notes and refuse to delete anything, no matter what the purchaser may request. “When selling clients to another adviser the vendor must refuse to destroy their client records as they are giving away custody of evidence that could protect them against a claim later.”
When selling clients to another adviser the vendor must refuse to destroy their client records as they are giving away custody of evidence that could protect them against a claim later. In this case, the adviser who took over his client had scanned all the client files associated with every customer on the books except the one in question, he said, so he was not able to argue the points. “The physical file contained the fully completed fact-find, a photocopy of the complete 49-page statement of advice, including attachments, the signed adviser and customer acknowledgement, which would have recorded discussions about the client's refusal to disclose his back issue.” He said the industry could also help by looking at the way insurance policies were applied for. “Insurance personal health disclosure forms that only require a tick for 'yes' and nothing for 'no' leave the adviser exposed to a claim later that they didn't take a client through the form thoroughly.” Advisers, especially those who were currently registered financial advisers, would need to be prepared to do more extensive investigation when policies were issued under the new advice laws, he said. “If you simply accept what a client tells you in an interview, without making further inquiries elsewhere, you could potentially be found to be in breach – especially when it comes to health disclosures.” The slightest suggestion some information might be being withheld should
be sufficient to encourage further digging, he said. “Tell the insurer of your suspicions. This was the case with [one client] – he was actively trying to non-disclose as he had done with another application and I allowed him to convince me. I should have gone back to the insurer and said ‘this is what’s happened’. Had they written to the doctor they would have discovered a history of coronary things he was not telling me.” He said it was better to go around a client to give information to an insurer, and to risk losing the client, than it was to withhold potentially important information. “Start electronically recording all of your interactions with clients because, when push comes to shove, the blame could very well be yours no matter how many 50-page statements-of-advice you write.” Steve Wright, general manager of product at Partners Life, said the case should not be alarming to other advisers. Some things were a little surprising, he said, such as the committee referring to CS8’s reference to a client’s tolerance for risk, which is more commonly thought of in regard to investment clients. The committee also made it clear that advisers must warn clients that refusal to disclose would limit their ability to determine whether the adviser’s service was “suitable”, as the code requires. It also showed advisers had to make a very concerted effort to warn their clients not only about their duty of disclosure but the potential consequences associated with it, he said. “You can’t just do that the first time you meet them, you have to keep reminding them. And you can’t leave it up to the client, you have to question them.” In all but the most peculiar circumstances, advisers should not leave the client to fill in an application form on their own, he said. Help with completing the application was as much part of the advice service as finding the right products. Advisers who knew information about a client had to disclose it to the insurer or the insurer could “go after them” in any claim, Wright said. In the case of the client who refused to disclose, the adviser should have understood that he was not free to say that it was up to the client. Some advisers would need to document more of their process, he said, and make sure they had systems for retaining their files. But he said most advisers who were operating properly would have little to worry about. “It’s really pretty much what many advisers are doing anyway.” The adviser said he would register an appeal because there was limited time between the committee making a decision and the cut-off for appealing. Whether he proceeded with it would depend on what penalty the committee decided was appropriate.
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LEAD By Brian Klee
OPINION
Industry standards versus adviser remuneration There is a call on the industry to lift their conduct standards and to review levels of commission in New Zealand. Accepting we are about to be provided with new legislation and code, I hold a view that all financial advisers should be governed by the code of professional conduct, not just AFAs. If this does not occur, I’d suggest there is a compelling case for AFAs to be paid a higher commission level because of their greater responsibilities for both the insurer and client. As an AFA, they are acting for two “masters” – the insurer who pays the commission, and the client who is seeking personalised advice. It is not well-known that the Insurance Law Reform Act 1977 has not been totally repealed and here is what it currently says:
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A representative of the insurer who acts for the insurer during the negotiation of any contract of insurance, and so acts within the scope of his actual or apparent authority, shall be deemed, as between the insured and the insurer and at all times during the negotiations until the contract comes into being, to be the agent of the insurer.
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In this section the term representative of the insurer includes any servant or employee of the insurer and any person entitled to receive from the insurer commission or other valuable consideration in consideration for such person’s arranging, negotiating, soliciting, or procuring the contract of insurance between a person other than himself and such insurer. Regardless of what type of adviser you are, at the time of underwriting, you are a representative of the insurer. • Presently, an RFA or QFE is not bound by all standards within the code, which include: • Acting in the best interests of clients • Independence, objectivity and managing conflicts of interest (like commission) • Professionalism
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• Suitability • Safekeeping of client information • Capability and capacity • Communications standards. However, both CS6 and CD9 are two code standards that all advisers are expected to comply with:
CODE STANDARD 6 An authorised financial adviser must behave professionally in all dealings with a client, and communicate clearly, concisely and effectively. D. MINIMUM STANDARDS OF CLIENT CARE When providing financial adviser services to a client, an AFA must: (a) provide only services that the AFA has the competence, knowledge, and skill to provide; and (b) provide the services and perform the AFA’s obligations in a timely way; and (c) make recommendations only in relation to financial products that have been assessed or reviewed by the AFA to a level that provides the AFA with a reasonable basis for any such recommendation, or by another person if it is reasonable in all the circumstances for the AFA to rely upon that other person’s assessment or review. Communicating "effectively" for the purposes of the Code requires an AFA to take reasonable steps to ensure the client understands the communication. When transmitting the financial advice of another person to a client, an AFA must take reasonable care to ensure that the person providing the financial advice has an appropriate level of competence, knowledge, and skill to provide that advice, and either: 1) ensure the client is aware that the AFA has not prepared the financial advice or assessed its suitability for the client; or 2) accompany the financial advice with the AFA’s own financial advice in relation to the same subject matter (in which case the AFA may have further obligations under Code Standards 8-10).
CODE STANDARD 9 When providing a personalised service to a retail client an authorised financial adviser must take reasonable steps to ensure that the personalised service is suitable for the client, having regard to the agreed nature and scope of the personalised service provided.
Although based on the more prescriptive CS8 of the 2014 Code of Professional Conduct, the recent Financial Advisers Disciplinary Committee decision lifts the bar around what is expected when providing the personalised service and advice. The committee said that when recommending the replacement of an existing insurance policy, an AFA must not only show a comparison of insurance product benefits but must determine suitability based on the information provided by the client and information otherwise known. They must make reasonable inquiries to ensure they have up-to-date understanding of the client’s financial situation, financial needs, financial goals and risk profile when providing a personalised service. The noteworthy issue here is the code does not limit risk profile to investment products but also extends to insurance risks as well. What then is now required from an AFA concerning ethical behaviour, client care standards and risk assessment? Here is a list of the recommended standards: Ensure you allocate enough time with the client to provide the required standards. With care and avoiding time pressures, complete a comprehensive fact-find to include all known medical, occupational and pastime risks a client has. All this information is carefully considered and included in the statement of advice. This documents the personalised service and advice being provided. If recommending an existing insurance contract be replaced: • provide a comparison of benefits, backing up with independent research, then • carefully explain in writing why this is being recommended, and the existing contract is unsuitable, and • the consequential risks of cancelling an existing contract. In completing the insurance application form, it is necessary go through this carefully with the client, assisting with the questions, their meanings and explaining what their duty of disclosure means. Send them a copy of their completed application and remind them of their Duty of Disclosure and the risks of not doing this. If you have reason to suspect, or the client elects to withhold any information to the insurer, a second statement of advice must be issued, clearly stating your updated advice, and particularly if it is now limited advice. Finally, as the insurer’s representative, it’s your duty to disclose any material evidence that may affect the risk to the insurer. This may include the reason why you have limited your advice. In summary, when bearing in mind all the existing code standards, and the FADC finding, it amplifies the expectations and responsibilities on an AFA. Therefore, my conclusion is that they should be compensated with a higher level of commission than other advisers.
By Andrew Nuttall Cambridge Partners
The seven hats
of financial advisers Helping with decisions is just the start.
When people approach us for investment advice at a personal level, or in their capacity as trustees, they can be inclined to see us as playing just one role – delivering market beating returns year after year. Unfortunately, we don’t have a crystal ball that allows us to always select the top-performing fund or security without the benefit of hindsight. However, helping trustees and other clients make sound decisions about their investments is our core role, and we have found that there are seven hats we aspire to wear without ever having to try and predict the future.
1 THE EXPERT:
Investors need advisers who can provide an objective assessment of the state of their finances and then develop risk aware strategies to help them meet their goals.
2 THE INDEPENDENT VOICE:
Our clients value an independent and objective voice in a world that is sadly still dominated by people either promoting their employers’ products or other securities that pay a commission and encouraging clients to buy and sell securities.
3 THE LISTENER:
The emotions triggered by financial uncertainty are real. A good adviser will listen to client’s fears, tease out the issues driving those feelings, and provide practical longterm answers.
4 THE TEACHER:
Getting beyond the fear and flight phase often is just a matter of teaching investors about; risk and return, diversification, the role of asset allocation, and the virtue of discipline.
5 THE ARCHITECT:
Once the above lessons are understood, the adviser becomes an architect, building a long-term wealth management strategy that matches each person’s appetites and lifetime goals.
6 THE COACH:
Even when the strategy is in place, doubts and fears inevitably rise. At this point, the adviser becomes a coach, reinforcing the first principles and keeping the client on track.
7 THE GUARDIAN:
The long-term role of an adviser is that of a light-house keeper who scans the horizon for issues that may affect clients and keeps them informed. Our industry (I believe that one day it will become a profession) is rapidly moving in a positive direction. The provision of prudent investment advice involves much more than making predictions on tomorrow’s winning asset classes, securities or products. There needs to be greater emphasis and focus on process, governance and investor outcomes. This article was adapted from an original idea by Jim Parker of Dimensional Fund Advisors. This article is in the next edition of Canterbury Tales – our local Law Society publication – and is written by one of our directors, Andrew Nuttall. Although aimed at the legal profession, it does a great job of explaining the many ways we help our clients, which go far beyond investment advice. This article was adapted from an original idea by Jim Parker of Dimensional Fund Advisors.
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Lifting bank capital requirements
NZ registered banks are currently required to hold equity capital equal to at least 8.5% of their risk-weighted assets. In addition to more stringent definitions of risk-weighted assets, the RBNZ is proposing to increase the required minimum to 16% for large banks and 15% for their smaller counterparts. The proposal will be phased in over five years.
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To put this into perspective, the 2014 Murray Inquiry into Australia's financial system recommended that in a small open economy reliant on offshore funding, Oct 18 it was important that the banks were “unquestionably strong”. APRA has recently defined “unquestionably strong” as a capital ratio of 10.5%. From a starting point of roughly 11.5%, the NZ banking sector may have to raise a Govt policy lot of capital. Labour costs Given the proposal is aimed at Consumer confidence strengthening bank capital, it would be Availability of labour natural to view this as a credit quality Margins story. While higher capital will enhance Uncertainty the creditworthiness of the banks, the Workplace regulation impact on bank debt yields may be muted. Demand We don’t think this is where the big story Global outlook lies. We think that banks may receive a Exchange rates standalone credit rating upgrade. However, Local govt this won’t impact the credit ratings of Interest rates securities issued by the big four AustralianHouse prices owned banks, as these debt security Energy costs ratings already receive a ratings uplift Business reflecting theoutlook strength of the Australian Tax rates balance sheet. Instead, our eyes are on the economic Weather impact of the proposal. The RBNZ’s Other proposal is supported by analysis that 60% 70% 0% 10% 20% higher capital will have a modest negative impact on steady-state economic activity. Whilst there is room to debate the longterm impact we think the transition costs may be significant. The banks are being asked to stump up more cash and are going to want a return on that cash. On one hand, the banks’ shareholders, sitting in Sydney and Melbourne, may accept the theoretical argument that with more capital their NZ subsidiaries are less risky and therefore deserve a lower return target. On the other hand, they may deem profitability inadequate compared to their other options and instead shrink their lending to achieve returns consistent with a larger capital base. Shrinking their balance sheets would mean removing access to growth capital for NZ businesses and lessening the lubrication in the property market. Which path the banks take will also be influenced by the extent to which they can
AUSTRALIA & NEW ZEALAND HOUSING CREDIT GROWTH
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The Royal Commission and bank capital rules have contributed to a decline in credit growth in % Australia, will NZ follow? Source: RBNZ, RBA 3.50
recoup profitability via higher net interest margins. Overseas experience has shown that increases in capital requirements lead 3.00 to a reduction in lending to riskier sectors and sectors that are hard to reprice interest rates. This could mean less lending in sectors like agriculture and commercial 2.50 property and, somewhat ironically, given the already higher concentration, perhaps more focus on housing. 2.00
Which path the banks take will also 1.50 Jan 17 Apr 17 Jul 17 by Oct 17 be influenced the extent to which they can recoup 30% 40% 50% 60% 70% profitability via higher net interest margins. With equity comprising a larger share of total funding, there may be less need to compete for term deposit funding in order to meet the RBNZ’s stable funding ratios. Falls in term deposit rates therefore could do some of the work to recoup profitability. The proposal creates opportunity for non-bank lenders and, to an extent, greater corporate bond issuance. It would take a significant period for the non-bank sector, which we estimate comprises less than 2% of assets, to take meaningful market share from the dominant banks. Compared to pre-GFC, in 2019 this sector also receives very little funding from NZ households. It therefore poses less systemic risk; however,
as a sector that escapes direct regulation by the RBNZ, it becomes a sector to watch. Public confidence in the financial sector can be impacted even by a small financial institution failure. In our read of the RBNZ’s proposal, it looks increasingly unlikely bank Tier 2 capital will remain a feature of NZ’s debt capital markets. As these securities have matured it has been difficult for holders to find replacement securities with meaningful yield. This has helped keep a bid tone in the higher yielding part of the market and is aiding the development of a nascent high yield market in NZ. In Australia the opposite dynamic may unfold; Jan 18 Apr 18 Jul 18 Oct 18 the Australian regulator is consulting on a proposal to meaningfully increase the amount of Tier 2 capital on issue. The Harbour Income Fund, whose mandate permits a modest allocation to high yield, is currently finding Australia a more fruitful hunting ground as the market absorbs greater supply. We are watching carefully to see how the proposed changes unfold, and what actions the RBNZ and banks will take. The banks are incentivised to dissuade the RBNZ from fully implementing the proposal. Therefore, we are currently less focussed on what they are saying, and more on what they are doing. By the time this goes to print, you should be able to find the Reserve Bank’s new credit conditions survey on their website. This data will give some insight into the banks’ reaction function. This does not constitute advice to any person. www.harbourasset.co.nz/ disclaimer. Simon Pannett is Director & Senior Credit Analyst at Harbour Asset Management.
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THOUGHT LEADERSHIP
David Beattie
The time to invest responsibly is now Responsible Investing (RI) is an important part of the investment advice discussion and gives advisers an opportunity to ensure their clients investments align with their ethical values.
Kiwis have never been afraid to demonstrate loudly where we stand on issues and express strong ethical values. This was demonstrated in the response to the Christchurch terror attack on March 15, where New Zealand came together in solidarity to express our empathy and kindness in the face of adversity. When Kiwis believe something is not right, we are not afraid to make our voices heard. The values and actions of New Zealand society during this time have been championed globally, but to us, our response was not extraordinary. It’s what we do.
Given the strong values held by all New Zealanders, now is the time to take positive action on RI. Even before the terrible events of that Friday, which have now quickly led to a fast-tracked ban on assault weapons, we don’t have to go back far in history to see evidence of Kiwi values in action. The divisive anti-apartheid protests during the 1981 Springbok tour; the strongly supportive anti-nuclear sentiment surrounding the 1984 Lange Government’s decision to make New Zealand nuclear free; and the concern in 2016 about the possible investments of KiwiSaver funds in cluster bomb manufacturers are just some examples that demonstrate how New Zealanders engage in ethical issues when they see our values contradicted.
DEMONSTRATE VALUE
As a rule of thumb, Kiwis have generally expected their money to be invested responsibly. However, following increasing media coverage on Responsible Investing (RI), we are more vocal about this issue than ever before. Financial advisers have the opportunity to tap into the growing awareness of RI by aligning clients’ individual values and views more closely with their investments. As a result of this alignment to core values, clients are likely to be loyal and less likely to be tempted away by superficial enticements, such as short-term performance chasing or the “convenience” offered by some institutions that don’t believe in the importance of quality advice.
ASK QUESTIONS
A necessary part of developing a deeper understanding of Responsible Investing (RI) is the need to ask more searching questions before recommending funds.
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These questions should start with the fund managers themselves. If you want to gain important insights about how serious a fund manager is regarding their approach to incorporating environmental, social and governance (ESG) considerations into their investment decision-making, first ask to see their own ESG policies. These may include areas such as their employment practices (eg living wage), environmental waste practices (eg recycling) and their own Board governance structure. Gaining a better feel for how they run their own businesses will provide a useful guide as to how genuine and committed their responses are to your questions on RI.
DISPEL THE PERFORMANCE MYTH
One of myths that needs to be dispelled is that long-term investment returns might be compromised in the pursuit of RI. Not only is there a growing body of evidence supporting the contrary notion, ie that investing in companies with a strong ESG focus leads to better risk/adjusted long-term returns, but it is difficult to imagine a world where shareholders will continue to support companies that are not “producing the right things in the right way".
ENGAGE
Increasingly, engagement is seen as providing the most effective means of driving positive change. Fund managers engaging in conversations with companies they invest in; financial advisers engaging in conversations with fund managers. Fund managers are increasingly determining that better risk adjusted return outcomes are more likely by working with companies to foster change. Likewise, financial advisers may find they too can better achieve positive change for their clients by working closely with their preferred fund managers.
ACTIONS SPEAK LOUDER THAN WORDS
Late last year, a group of institutional investors led by the New York Common Retirement Fund and the Church of England’s investment fund, filed a shareholder resolution asking Exxon Mobil to disclose and establish greenhouse gas reduction targets for all its operations and products. Here in New Zealand, a group of 23 institutional investors, including three British pension funds, have joined the NZ Super Fund led initiative demanding that Facebook, Google and Twitter take more action in dealing with violent or extremist content published on their platforms following the Christchurch attack. It remains to be seen how effective this “engagement” will be, but it sends a clear expression of intent, which will be difficult for the companies to completely ignore. Similarly, financial advisers owe it to their clients to express their client’s point of view to fund managers. Given the strong values held by all New Zealanders, now is the time to take positive action on RI.
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RESPONSIBLE INVESTING By Susan Edmunds
Fund managers get social Recent concerns over Facebook’s role in Christchurch tragedy have highlighted role responsible investors can play.
If New Zealanders wanted to see responsible investment in action, the March 15 mosque attacks in Christchurch gave them the chance. The shooter livestreamed his attack on Facebook and the video circulated to millions of people before it was contained. That has resulted in pressure on the social media giant to improve its processes to identify and stop the spread of such content – a drive that has been led in New Zealand in part by some of the country’s biggest managers of money. Within days of the attack, the New Zealand Super Fund, ACC, Government Superannuation Fund Authority, National Provident Fund and Kiwi Wealth said they would use their investment heft, with assets worth $90 billion between them, to drive engagement with the companies and seek change. “We have been profoundly shocked and outraged by the Christchurch terror attacks and their transmission on social media,” said Super Fund chief executive Matt Whineray. “These companies’ social licence to operate has been severely damaged. We will be calling on
Facebook, Google and Twitter to take more responsibility for what is published on their platforms. They must take action to prevent this sort of material being uploaded and shared on social media. An urgent remedy to this problem is required.” By mid-April, a total of 44 local and international investors representing assets under management of more than $1.5 trillion had joined the push to convince Facebook, Google and Twitter to take extra steps to prevent it happening again. International fund managers who have joined the group included AMP Capital, Australian Ethical, Church of England Pension Fund Forum, Merseyside Pension Fund and Vic Super. Locally AMP, ANZ, ASB, BNZ, Booster, Devon Funds, JMI Wealth, Select Wealth, Milford Asset Management, Clarity, Juno, Rata, Simplicity, Westpac, Pie
Funds and Mercer joined the group. The Super Fund commissioned a report into whether the social media firms had "under-invested in safety measures and human-based content moderation" and whether "checks, delays and circuit breakers" could limit the spread of objectionable content. David Beattie, principal at Booster, said it was a good example of how fund managers could take the lead on a social issue. “There hasn’t been enough positive engagement by fund managers globally and New Zealand is no exception to that. We tend to sit back a bit – the instinctive reaction is that if you don’t like something you vote with your feet but more people recognise now that an effective approach if you are a shareholder is to engage with the company as a way of making a difference, as opposed to walking away.” Beattie said the industry was still waiting for something substantial to come out of the Super Fund group’s engagement with Facebook. “It would need follow-up but through the New Zealand Super Fund that will happen.” Andrew Bascand, managing director of Harbour Asset Management, said, while his firm did not invest in global equities directly, he was able to connect with the process through the fund manager’s
Investing a better world We know a thing or two about socially responsible investing. We were the first to offer certified SRI funds for KiwiSaver. Talk to us about our investment options. Booster SRI funds. Making ethical investing easy. www.booster.co.nz/ethicalinvesting Booster KiwiSaver Scheme is issued by Booster Investment Management Ltd. The Product Disclosure Statements are available at www.booster.co.nz
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RISERI relationship with T. Rowe Price. “T. Rowe Price has a direct link to all the chief executives, including Mark Zuckerberg.” He said a number of meetings had been held and he had been told that Facebook was aware of the issues and doing its best to tackle them. It had 15,000 employees involved in security clearing and analysing the content that was on the platform. Bascand said, while it was reasonable to argue that such a situation should not be repeated, Facebook’s response was faster than many other platforms on the internet. A crackdown on Facebook would backfire if it drove content underground. Bascand said it highlighted the importance of considering environment, social and governance (ESG) factors in investment decisions. Investors wanted to be able to invest in businesses that were improving the quality of their service to society, he said – “to the extent that they didn’t get that message before, my understanding is that message has been received at Facebook". Investors could not and should not ignore social issues in their investment decisions, he said. “A year ago, I don’t think the majority of our clients would have anticipated the level of engagement we have on environmental and social matters. Now, the majority of clients agree this is something we need to put more and more resources into.” He said, as a business, Harbour had paused its own advertisements on Facebook. Mike Taylor, of Pie Funds, said the question of whether New Zealand fund managers would remove their investments in social media companies led to a larger question of social media in general and whether that had a positive or negative effect on society. “I think that is still up for debate. Once the public has formed a majority view on this then we as fund managers will act accordingly.” John Berry, chief executive of Pathfinder, which has a focus on responsible investment, said his Global
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LEADERS GROUP (CROWN-OWNED INVESTORS) • • • • •
New Zealand Super Fund (NZSF) Accident Compensation Corporation (ACC) Government Superannuation Fund (GSF) National Provident Fund (NPF) Kiwi Wealth (KW)
CONFIRMED PARTICIPANTS – NZ • • • • • • • • • • • • • • •
AMP Financial Services ANZ New Zealand Investments ASB BNZ Booster BTNZ Fisher Funds Foundation North Generate KiwiSaver Harbour Asset Management Investment Services Group (Devon Funds, JMI Wealth, Select Wealth and Clarity Funds) JBWere MAS Mercer NZ Milford Asset Management
Responsibility Fund had never invested in Facebook because of its governance structure. He said it was governed like a private company, which was inappropriate for a massive global social media business. “We screen companies in the fund for environmental, social and governance risks, and Facebook has a very poor governance score. "A low governance score indicates to us that there will be issues around risk management – which came to light with the Cambridge Analytica scandal and the lack of data protection and is again reflected in the groundswell of support in the US for regulation to rein in large tech companies like Facebook.” Alister Van der Maas said ESG principles should add value to investment strategies
• • • • • •
PIE Funds/JUNO KiwiSaver Scheme Rata Foundation (previously Canterbury Community Trust) Simplicity Smartshares Trust Management Limited Westpac / BT Funds Management
CONFIRMED PARTICIPANTS – INTERNATIONAL • • • • • • • • • • • • • • • • • •
AMP Capital (NZ and International) AP1 AP2 AP3 AP4 Australian Ethical BMO Global Asset Management Church of England Pensions Board Church Commissioners Greater Manchester Pension Fund HESTA LG Super Local Authority Pension Fund Forum (LAPFF) Merseyside Pension Fund Pantheon VFMC VicSuper West Yorkshire Pension Fund
but there had to be a process to assess the impact of decisions to exclude any company or industry, and to ensure that was adequately communicated to clients. “There is a consequence.” Excluding Facebook from an investor’s portfolio over the past year would have made a material impact on returns, he said. Last year, until the end of September, Facebook, Amazon, Netflix and Google contributed 1.8% of the total return of 3% of the MSCI World index “The more you exclude, the greater the range of outcomes. If we exclude in aggregate 5% of our portfolio, existing return expectations and “tracking error” become unreliable and unpredictable and more active management of the portfolio is required.” Managers had to brief their clients appropriately and ensure they understood the funds they were investing in, he said. “My observation is that a lot of fund managers and providers have made changes to their portfolios and I don’t know if they have communicated these to their members and investors in advance of making those changes.” Van der Maas said the key thing for advisers would be to understand clients’ needs and beliefs and align them with the products that were available that would allow them to express those beliefs.
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Why ESG matters to investors and investing We believe that embedding ESG factors into an investing strategy can accomplish dual mandates of delivering value and aligning with investor values. Here's why.
Values vs. value Many investors still see environment, social and governance (ESG) factors as values-oriented and either: • The primary object of focus, with investment outcomes somewhat less important; or • Distracting from the focus on delivering investment outcomes. Such a view can be very limiting. In fact, there are different ways of incorporating ESG into portfolios. Some options may, indeed, change short-term performance. However, in many cases, the performance differential may be a positive one. While it is certainly possible to erode investment returns when strong performance is a subjugated goal, one needn't start with the assumption that incorporating ESG into the investment process is anything but value-adding when the primary target of the investment process is performance. We believe investing should have sustainable practices embedded within a strategy – with sustainable performance as a primary outcome objective. Investors can incorporate ESG into their investments in a variety of ways, and all of them can accomplish the duality of values and value.
Having an awareness of how ESG factors can improve or erode security value Pure investment focus Every active investor seeking value should be aware of how environment, social and governance factors can improve or erode security value. Ultimately values matter, therefore they matter to investing. An exploding oil rig in the Gulf of Mexico will cause many problems for the rig owners, the insurance providers, the fishing suppliers close by, the tourist companies along the shores ... and anyone who is charged with the clean-up, including the
competitors who will replace the intended supply AND offer safer and cleaner alternatives to the choice of oil as an energy source. Some will win, and many will lose with such an event. Understanding who the winners and losers will be from this sort of event is a hallmark of seizing potential investment opportunities that may propel portfolios toward strong excess returns. We believe skilled investors should always incorporate an awareness of how to manage risks and capture opportunities from ESG factors in their portfolios. However, a pure investment focus, without expressing a preference for values, may be unsatisfying for many investors.
Avoiding and advancing focus Many investors seek to avoid securities that are inconsistent with their values while advancing securities that are consistent. While these practices are unlikely to change how companies operate, drive anyone into bankruptcy or improve any organisation’s balance sheet, there may be merit to raising awareness or exerting political pressure through investment decisions. What is more pertinent to the tie between values and value is often missed. Many will dismiss avoidance and advancement as value-reducing because of a limited choice set and argue that an optimal outcome cannot be achieved. This value-reduction is not necessarily real in all cases. Where investors need to exercise caution is in how such a strategy is implemented and what outcomes they seek to achieve. • Implementation is critical to maintain investment value. Ultimately, avoidance and advancement can introduce material unintended risk if not managed well. Therefore, investors should pay special attention to how their investment professionals manage around portfolio restrictions. A skilled investment manager should be able to deliver value to investors while incorporating values. In addition, skilled investors have many opportunities to add value to portfolios and should not be intimidated by challenging assignments.
Unintended risks need not drive portfolio performance, and opportunities to add value may exist in organisations aligned with investors’ values. In some cases, a longer-term focus may be appropriate for measuring investment outcomes, and appropriate expectations should always be an element in measuring impact.
Active ownership of securities is an effective tool for improving investment outcomes Ownership focus Owning shares comes with the potential opportunity to influence how a company operates through active engagement. Owners can support management on wise decisions and oppose them on poor decision – proxy voting allows for this opportunity. Owners can band together to require decisions that would not have been made in their absence – shareholder engagement allows for this opportunity. Through active ownership, investors may be able to improve both the investment value the company brings, and the values expressed in the operation of the company. Moreover, active ownership may raise the bar for entire industries and foster sustainability along several dimensions. Because large investment shops will always own the market, active ownership can be used vigorously regardless of passive, systematic or active investment type. However this engagement must come with clear governance processes that are transparent and aligned with investor outcomes. Ultimately, ESG is now part of the investing toolkit and it is an important contributor to improving and maintaining value-add. For over 20 years, thousands of advisers around the world have partnered with Russell Investments to work together on building better businesses. We are committed to helping you establish business goals and vision, elevate your client service and efficiently grow your business. To find out more about our commitment to responsible investing, contact us or visit: www.russellinvestments.co.nz
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ADVISER PROFILE
By Susan Edmunds
Pioneer challenge for a mad Mann One adviser raised tens of thousands of dollars in memory of his mate Mark Frecklington. Garry Mann and Mark Frecklington used to joke that the Pioneer Mountain Bike Race was something only a mad man would attempt. Mann is an Auckland insurance adviser with Lifetime and Frecklington headed up the Asteron Life financial adviser distribution channel. “We had done quite a bit of mountain biking together over the years and had said we needed to challenge ourselves a little more, do something a little crazy … that was the sort of person Mark was,” Mann remembers. “We had talked about the Pioneer and he was showing keenness.” The stage race, which is held over six days in the Southern Alps each year, is attended by more than 300 teams and thousands of spectators. It involves 424km of riding, climbing 15,124 metres. The pair never quite turned the idea into reality and Frecklington was killed in a motorbike accident in January. Mann then decided that Frecklington was right – a mad Mann would attempt it in his memory.
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Mann and others of Frecklington’s close friends originally thought they would erect a memorial for him at his favourite stop-off point at Kinloch but council regulations made it impossible. The race was a good fit with Frecklington’s passion for mountain bike riding and the outdoors and completing the Pioneer seemed a good tribute to a man who was known as a passionate advocate for the insurance industry, a genuine friend and a loving husband and father. Mann asked Cris Knell, executive manager of distribution at Suncorp, which owns the Asteron Life business, about Suncorp supporting a team with branding on uniforms. Knell suggested that the staff might like to also sponsor the team with a donation per kilometre, matched by the company, to then be donated to Frecklington’s daughter Anna’s choice of charity. In the end, Asteron, Suncorp, Rothbury’s and Lifetime all supported the event. Mann’s original teammate, Ken McInnnes, had to withdraw two weeks before the event because he broke his shoulder. He was replaced by Will Walker riding and Rodger Sutherland as
ground support. Mann said he was able to raise more than $25,000, including through a Givealittle page set up for the event. The money went to Recreate NZ, a charity that helps young people with intellectual disabilities. This allowed the charity to purchase a much-needed van for the Auckland area – appropriately named Freck’s. Mann joked that the experience of the race itself was “horrendous” – the race is considered the toughest endurance mountain bike race in New Zealand. Most competitors were younger than the now 62-year-old Mann. “It’s about the equivalent of going twice up Mt Everest in six days. You see some fantastic views – it’s mindboggling really. There was time to think about yourself and life – many times when I was thinking about Mark, to be honest. It was really good to reflect.” Mann met Frecklington when he, then regional manager for AMP, recruited him in 1987. The pair
quickly became friends. “He was my mentor and my friend and we have been close ever since, in business and personally.” They would holiday with their families in Kinloch over the years. Mann said, while his wife had asked him to give it a rest this year, he would like to do another event in memory of Frecklington. “Whether we fundraise or not, I’d just like to do it as long as I keep my fitness up … some of my workmates think I’m crazy but I look around at some of them and think if you did a bit of this yourself you would be physically fitter and mentally it might help as well.” Mann sold his business in 2017 to Rothbury Life, which then merged with Lifetime. He said financial advising had been a fantastic journey. The interaction he had had with people over his career was the highlight. “Helping people and seeing our products respond to a client’s needs when most needed is what really spins my wheels.” Being in the Lifetime model at this point of
It’s about the equivalent of going twice up Mt Everest in six days. You see some fantastic views – it’s mindboggling really. his career brought more structure, he said, and back-up as the industry went through changes. It was a much easier model with which to navigate the last years of his working life than a solo advice firm would be. He plans to retire in about five years. “With the business so well structured it makes it quite exciting and enjoyable … Lifetime is a bit of a family.”
More advisers could take tips from that sort of well-tuned planning. “[It] does not have to be difficult. Processes can be quite simple if you follow them. A lot of advisers get into trouble because they take shortcuts.” He said being part of Lifetime helped him to ensure that he left the industry on a high. “I want to finish with a smile on my face, I don’t want to go out like some have thinking it’s all too hard … for me to go on to a salary after 30 years is interesting but it’s a nice way to finish.” Mann said, given the chance, he would pursue the same career all over again. “I would build better structure around the business but I would definitely come back to the business.”
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PRACTICE MANAGEMENT
By Mike Moore
A new future awaits There are huge opportunities ahead if you’re willing to adapt to take them.
With the old culture now almost completely eradicated, we are well into the building of a new culture. Advisers will no longer be sales mavericks, with little or no formal knowledge but instead will need to be well qualified and educated. The previous culture, where you became an adviser overnight simply by making the decision to do so, will now become one of education, training and compliance before you are able to strike out on your own account. This will likely mean that most new recruits will start with an institution or a reasonably scaled-up adviser group. Hence, we are now seeing a lot of interest among adviser groups wishing to build that scale. Through either mergers or acquisitions, they are creating an environment. Bringing together the various disciplines of insurance, savings and investment means that having a decent-size client base and a good administration makes for a steady, dependable and long-term business. Fortunately for those groups, there are a number of advisers planning to retire shortly, some of them because they do not wish to go through any more training and regulatory
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hoops, others because it is frankly just time to retire. I salute all those successful advisers who have managed their way through the last 20-odd years and I hope they enjoy a happy and secure retirement. After all, that is one of the things they have been giving advice on for the last decade. In these situations, the new adviser group has more options and capacity to provide the clients concerned with a different approach. Firstly, most of them, either in-house or through consultative arrangements, can offer a wide range of services for each client. Whether their need is advice on investment, savings, insurance, mortgages etc, the
new adviser group is likely to have one or more specialists who can bring that skill to the client. Secondly, they will be specialists. The days of the general practitioner who gave off-thecuff advice on almost anything is now gone. The need to stay current with your particular speciality and the regulations requiring you to do so means that a composite group will have more to offer than any one individual in it. We have already seen a substantial number of these groups, either fully mature or being formed. They will be taking up their baton from their predecessors and making sure that all Kiwis have access to affordable and professional advice. The recent introduction of roboadvice fills a gap for many people who need simplistic answers and do not have a great deal at stake financially. The larger institutions are starting to realise that it is becoming a bad idea to try and run their own advice platforms and it is noticeable that many banks are selling out of insurance, mortgage and other relationships. They have discovered that there is an enormous potential for damage to their brand and also, potentially, huge fines from the regulators if an adviser who is in their employ, following their instructions, gets it radically wrong. In addition, it is no longer that profitable to run an advisory channel unless it’s your key focus.
TO THE FUTURE
There will be a flurry of activity around retiring advisers and the sale and merger of some of the smaller group businesses. The minimum size of the profitable and practical has gone up substantially over the last 10 years and this trend will continue. In much the same way that the corner stores and individual accountants are now rare beasts, what we will end up with is several dozen larger scale groups, populated by a whole range of specialists and supported from a central hub. They may be local, regional, or national. The people running those businesses will be just that, businesspeople. Most likely they will have come from some sort of advisory capacity, but the issue is not around the advice but the model. Being able to have a client-centred
business, with a whole range of services wrapped around it, is in itself a full-time job. Like everyone in the advice business, we must all improve and modify. It is no different in our business than any other. After 15 years helping individual advisers retire, improve or grow, we can easily imagine that the future will be more around a more formal merger and acquisition model. There will be discussions among groups about gaining scale or geographic spread through mergers and we anticipate that we will be part of that conversation. Also, some very large adviser groups may wish to go from being regional to national and may look to us to assist them with those goals.
In much the same way that the corner stores and individual accountants are now rare beasts, what we will end up with is several dozen larger scale groups, populated by a whole range of specialists and supported from a central hub.
In any event, as is the case with all types of business, financial and otherwise collaboration, mergers and acquisitions will form part of the mix. Here are two examples that you may be interested in if you are planning to expand your existing business or want to move into a different area Manawatu. An excellent small book is for sale. Primarily in the risk life insurance arena with Partners Life however there is some savings and investment involved. An efficient business model with very experienced and competent administrative people. The adviser will be offering a full restraint of trade in respect of all clients. If you have any interests in the Manawatu or plan to move there please email maree@ mikemoore.co.nz as an expression of interest. Auckland. A large book is up for sale as the adviser is retiring completely. Primarily in Auckland, well over 1,000 clients, mainly risk but with a scattering of KiwiSaver, investments and savings business. Most of this book is Fidelity and Sovereign. Also has provided some advice on mortgages. The sale price will be north of $650,000. Again, if you think this is an opportunity to be investigated, please write to maree@mikemoore.co.nz. Mike Moore is the principal of Mike Moore Marketing Limited. They specialise in giving advice and consultancy services to professional financial advisers. Those services cover advice on sale, purchase and improvement of client bases. www.mikemoore.co.nz
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PRACTICE MANAGEMENT
By Russell Hutchinson
Why health insurance? There are many considerations to make when deciding whether or not to insure your family’s health – and many options when it comes to which level of cover to buy. Good advice is an important part of the process.
Recently I was asked to make some suggestions for people keen to save money on their health insurance. That is a great catch, right there, and I hope I did not fail to meet the brief by too much because when I reflect back on the list – which is below – I realise that this was much more a list of why I bought health insurance, and probably, why so many other people choose to do so as well. The first big theme is about life and death. We all know we are going to die. It’s the only thing as certain as taxation. But the big news from the 20th century that is still worth celebrating is the incredible increase
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in the length and quality of human life. At the start of the 20th century reaching what we think of as retirement age was very, very rare. In 1900 global average life expectancy was just over 30 years. In the UK it was about 50. Today the global average is over 70. In New Zealand life expectancy is now well over 80 years at birth, and longer for most people who are in middle age. That incredible turn around has been a result of all sorts of things: public health, sanitation, vaccination, better diet, antibiotics, and so on. In fact, people have got so used to not dying, that many of those are now being taken for granted, or even omitted. That is probably a big mistake. Since you are probably going to live, you should buy some insurance that helps you
stay alive and well. Back when I first got health insurance as part of my employment package I was just glad to have it – and it was free. Today, it’s very expensive, as it covers a family of five, and we are a lot older. So, we have thought hard about whether we get good value from health insurance – and we would not be without it. Although personal preference, age, and family (do you have kids?) may all play a part in your decision the single biggest factors have to be income and budget. Do you have other things you should really spend the money on? A really good financial adviser can help you answer that question – and it’s a big one, because it is not just about “other insurance” or “invest versus insure” it is also about life choices – like whether you should
invest more in your education, or your kids’ education. It comes back to values, and risk. Two hard things to think about on your own. You need good financial advice. When I first bought the cover, I think I barely understood what I was getting. Today I think I do. Of course, there is health insurance, and health insurance. The range of plans available in New Zealand is not huge, but between payments for GP visits and prescriptions, to extensive elective surgical and non-Pharmac drugs coverage, there is enough choice to confuse the average soul. For us, knowing what the plans do, many of our needs were more efficiently covered by our budget than by a policy. We do not buy cover for eye-glasses, or visits to the doctor, or day-to-day prescriptions.
Learning a bit about the health sector is also useful to being a good customer of health service, not just as a buyer of health insurance. That has made a difference to the value I get out of visiting our GP. Good advice can help, talking with two Aucklandbased insurance advisers they explained how they encourage clients to ask more from their doctors. Can you reduce your risk and so avoid the need for cover? Hardly. In the name of having a good time we can make choices that damage our health. It is amazing just how “normal” unhealthy eating is. I am pretty careful with what I eat, and it is hard – increasingly hard as I age – to keep the diet balanced. Compare what dieticians and nutritionists say about food with the average family shopping. Compare what the “ideal” weight is with the average for our population – or, if you are brave, your own weight. Obesity is just one issue. New Zealand also suffers from high levels of mental health problems compared to the nations we think of as our peer group. Related to both issues, perhaps, is a different “disease”: a sedentary lifestyle. The very modern disease of sitting around too much – or not getting enough exercise – has an effect on people. It is part of the obesity problem, and to a lesser extent, may be part of the mental health problem too. I’ve heard about the moral hazard of insurance. But most people want to buy private medical cover because they care about the health of their family, not live an unhealthy life, and fail to meet their goal. Spending time and effort on improving your health is worthwhile, it may make one more comfortable with choosing higher excess options, but it did not put me in a position where I felt comfortable choosing not to have health insurance. Could I save up an emergency fund? Well, I have. Arguably, I have enough not to buy health cover for most risks, but not the most catastrophic. Having a good old-fashioned emergency fund can make a huge difference to the way one views insurance. Having that cushion also enables higher excess levels, or buying products that require co-payments, and more. All my favourite advisers recommend clients save and insure, rather than treating insurance as the only option. But how big would the fund have to be to cover a long course of non-Pharmac drugs? That question is almost without answer – because it depends on the drugs, and how long you need them for. That’s a big risk, and having had it pointed out to me, I don’t like it one bit. I prefer to transfer that risk to the insurer. Of course, one can save a lot of money by getting someone else to pay. I pay for my kids cover, and a long time ago, my employer paid for my cover. In fact, lots of employers have medical schemes, but many of us are
not as good as we should be at checking out our employee benefits. One adviser I know always asks their client to check with their employer. Their next suggestion is to check if a wife or husband has access to a scheme. Then check the rules – often a partner can be added, and children. But I’m self-employed, and I wasn’t about to go shopping for an employer just to get medical coverage. Plus, your own plan is one you get to choose, and to keep. All told, I think that dispensed with the idea that I could either avoid buying cover or get someone else to buy it for me. So, I considered: could I make it cheaper? The easiest way is, of course, to increase the excess. I know that some advisers are uncomfortable with this, especially with those clients that have trouble budgeting and saving. For those that do not, you may be interested to hear the proportion of clients that now choose an excess of $500 is about 40% of all the quotes on Quotemonster. A further 20% of quotes are done with even higher excess figures.
Most people buy private medical cover because they care about the health of their family. Sovereign, at one point, promoted the idea of buying specialists and tests cover without full medical insurance, where the client’s budget would not extend that far. This is a smart idea and deals with some of the implicit rationing in our public system. By giving access to diagnostics, specialist opinions, and tests, the client could often then access appropriate treatment from the public sector after that. It is a radical budgeting option, and one which I believe is little used, but also worth contemplating with a client that really wants some form of cover. It could be achieved with the products of several insurers, of course, not just Sovereign. To go beyond this point would be to run into the boundary between health insurance and trauma cover, on one hand, and income protection insurance on the other. The budget envelope is always limited – and the question of whether premium should be allocated to health insurance in preference to other areas is often hotly debated. I remember one workshop where we were fortunate that the two advisers concerned were on opposite sides of the room. But increasingly – due to advances in healthcare – health insurance is demanding its place in the planning process.
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For more information call 0800 888 361 Name
Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price %
NZ Fund Miscellaneous AMP ARS-UK Cash 0.74 KTAM NZ Australian Long Short Equity 1.41 Nikko AM Income 1.23 NZ Funds Core Inflation 1.44 NZAM Alpha Fund 1.09 NZAM Global Growth 1.42 Pathfinder Commodity Plus Fund 0.97 Salt Long Short Fund 1.41 NZ Insurance Cash AMP KiwiSaver Cash Fund 1.53 AMP NZRT Cash Fund 1.52 AMP Prem PSS OnePath NZ Cash 1.62 AMP PSS Select Cash 1.52 ANZ Default KiwiSaver Scheme-Cash 1.46 Aon KiwiSaver ANZ Cash 15.59 Aon KiwiSaver Nikko AM Cash 14.63 ASB KiwiSaver Scheme's NZ Cash 1.49 BNZ KiwiSaver Cash Fund 1.18 Booster KiwiSaver Enhanced Income 1.54 Fidelity Life Super-Super Cash Portfolio 2.83 Fisher TWO KiwiSaver Scheme-Presv 2946.26 Kiwi Wealth KiwiSaver Scheme Cash -Mercer KiwiSaver Cash -NZ Defence Force KiwiSaver Cash -OneAnswer KiwiSaver-Cash Fund 1.41 SIL 60s + Sup Cash Fund 2.25 Westpac KiwiSaver-Cash Fund 1.42 NZ Insurance Equity Region Australasia Booster KiwiSaver Trans-Tasman Share 1.73 OneAnswer KiwiSaver-Australasian Share 2.18 NZ Insurance Equity Region Australia AMP KiwiSaver Australasian Shares 1.29 NZ Insurance Equity Region NZ AMP Prem PSS ACI NZ Shares 3.04 AMP Prem PSS ACI NZ Shares Index 2.81 Fidelity Life NZ Shares Portfolio 7.73 Fidelity Life Super-Super NZ Share -NZ Insurance Equity Region World AMP Prem PSS ACI Global Shares Index 2.47 AMP Prem PSS FD Intl Share Fund 1 Value 1.45 Mercer KiwiSaver Shares -NZ Defence Force KiwiSaver Shares -OneAnswer KiwiSaver-Intl Share 2.10 OneAnswer KiwiSaver-Sustainable Int Shr 1.96 SIL 60s + Sup International Share Fund 4.00 NZ Insurance Equity Region World - Hedged AMP KiwiSaver International Shares 1.34 AMP KiwiSaver Passive International 1.36 AMP Prem PSS ACI Global Shares 2.52 Index Hdg Booster KiwiSaver International Share 2.14 FANZ Lifestages KiwiSaver High Growth 1.28 Fidelity Life Aggressive 3.99 Fidelity Life International 2.79 Fidelity Life Super-Sup Intl -Fidelity Life Super-Super Aggressive -Fisher FuturePlan - Intl Coms 3.45 Fisher TWO KiwiSaver Scheme-Eq 5003.90 NZ Insurance Equity Sector Global - Real Estate AMP KiwiSaver Property 1.16 OneAnswer KiwiSaver-Intl Property 1.52 NZ Insurance Equity Sector NZ - Real Estate MFL Property Fund 4.49 OneAnswer KiwiSaver-Australasian Prpty 2.15 NZ Insurance Fund Miscellaneous Booster KiwiSaver Capital Guaranteed 1.13 Kiwi Wealth KiwiSaver Scheme CashPlus -NZ Funds KiwiSaver Growth Strategy 1.81 NZ Funds KiwiSaver Income Strategy 1.39 NZ Funds KiwiSaver Inflation Strategy 1.47 Westpac KiwiSaver-Capital Protect Plan 2 2.44 Westpac KiwiSaver-Capital Protect Plan 3 2.34 Westpac KiwiSaver-Capital Protect Plan 4 2.42 Westpac KiwiSaver-Capital Protect Plan 5 2.10 NZ Insurance Global Bond
034
-1.83 --8.03 -1.67 -0.61 -2.92 -10.23
-3.22 --4.93 -2.72 -0.49 1.48 1.44
-0.51 --4.29 0.57 1.38 0.24 --
7.51 22.42 13.47 101.62 8.27 27.17 8.11 174.27
---------
1.60 0.57 1.73 1.53 2.31 1.83 1.94 2.06 2.35 1.94 1.42 2.32 2.66 2.04 1.85 2.18 2.23 2.15
1.63 0.60 1.88 1.68 2.28 1.85 2.16 2.11 2.45 1.94 1.36 2.28 2.71 2.08 1.91 2.16 2.12 2.21
2.16 1.15 2.37 2.17 2.69 2.25 2.60 2.63 2.66 2.45 1.51 2.71 3.07 2.60 -2.60 2.40 2.65
84.34 100.47 3.49 0.84 9.57 4.54 1.90 466.86 158.02 17.09 4.76 27.29 190.59 18.24 0.78 44.21 1.41 357.98
-------------------
15.20 12.72 10.04 7.82 17.90 12.55 12.94 33.71
3 4
13.71
--
--
2.26
--
14.52 18.97 4.29 14.69
11.27 13.76 11.52 12.09
13.80 14.44 11.81 12.15
8.27 8.26 1.36 8.36
3 4 1 2
10.73 7.91 7.35 7.16 9.64 9.61 9.73
10.77 8.63 11.24 11.03 11.89 9.23 11.87
11.78 8.97 --12.84 10.00 12.59
8.44 10.43 23.26 8.79 51.35 8.40 15.02
3 2 5 4 4 2 4
5.38 8.34 5.04 7.22 -3.61 5.69 6.94 8.41 5.58 9.87
--11.30 10.78 -7.47 9.18 10.86 9.29 9.71 11.19
--8.17 9.92 -9.03 8.11 9.10 10.13 6.87 9.70
4.01 3.71 9.81 13.44 132.20 0.50 0.44 22.79 23.32 24.37 133.03
--3 4 -2 2 3 3 2 4
18.96 -14.75 5.19
-8.87
2.24 8.75
-4
14.11 7.13 10.55 486.41 20.62 9.30 13.44 22.85
3 4
2.37 3.29 4.04 4.49 5.82 7.79 7.77 7.78 7.79
----------
2.42 2.83 7.73 3.61 4.79 10.68 10.67 10.68 10.69
WWW.GOODRETURNS.CO.NZ
-3.31 7.09 3.77 4.82 11.16 11.16 11.16 11.17
52.85 141.84 165.66 30.52 47.12 10.18 16.02 23.11 18.98
Name
Latest Transaction Exit Price 1.04 2.41
1 Yr 3 Yr 5 Yr Return Return Return % 3.37 --3.28 3.33 4.73
Size Morningstar Rating $M Overall 0.55 -3.87 5
AMP KiwiSaver International Fxd Intr AMP Prem PSS PIMCO Global Fixed Interest AMP Prem PSS SSgA Global Fixed 2.02 3.74 1.64 4.12 7.24 Int Index OneAnswer KiwiSaver-Intl Fxd Int 1.75 4.11 2.14 4.25 2.47 NZ Insurance Multisector - Aggressive AMP KiwiSaver LS Aggressive Fund 1.72 8.48 9.78 8.20 315.72 AMP NZRT AMP Aggressive 3.53 7.48 8.76 7.29 273.93 AMP PSS Select Growth 1.98 7.81 9.12 7.65 38.21 Booster KiwiSaver Asset Class Growth 9.33 4.51 8.61 -- 68.13 Booster KiwiSaver Geared Growth 2.40 11.72 12.93 11.88 35.47 Booster KiwiSaver High Growth 1.71 8.91 9.79 9.39 331.22 Booster KiwiSaver Socially Rsp Inv Gr 1.96 9.64 9.70 9.56 51.36 Fisher FuturePlan - Growth 3.29 7.68 8.17 7.77 75.42 Generate KiwiSaver Focused Growth Fund 1.78 9.62 11.02 11.47 584.87 Kiwi Wealth KiwiSaver Scheme Growth -5.21 9.37 8.54 1412.46 Mercer KiwiSaver High Growth -7.18 10.14 9.99 173.52 NZ Defence Force KiwiSaver High Growth -7.03 9.92 -- 19.57 NZ Insurance Multisector - Balanced AMP KiwiSaver AMP Global Multi-Asset 1.11 0.78 --- 14.50 AMP KiwiSaver AMP Responsible 1.19 6.77 --- 7.49 Invmt Bal AMP KiwiSaver ASB Balanced 1.21 6.83 --- 10.88 AMP KiwiSaver LS Balanced Fund 1.82 7.19 7.32 6.65 948.40 AMP KiwiSaver LS Moderate Balanced 1.78 6.68 6.39 6.09 675.30 Fund AMP KiwiSaver Mercer Balanced 1.97 6.46 7.00 7.41 45.33 AMP NZRT AMP Balanced Fund 3.22 6.00 6.27 5.71 881.14 AMP NZRT AMP Global Multi-Asset 1.10 1.18 --- 3.85 AMP NZRT AMP Moderate Balanced 2.34 5.60 5.36 5.14 299.25 AMP NZRT ASB Balanced Fund 2.27 5.87 6.79 7.40 86.35 AMP NZRT Mercer Balanced 2.66 5.34 5.97 6.43 156.22 AMP NZRT Nikko AM Balanced 2.91 4.26 6.32 7.79 170.57 AMP NZRT Responsible Investment Bal 1.20 7.32 --- 3.54 AMP PSS Lifesteps Consolidation 1.93 5.87 5.64 5.50 6.63 AMP PSS Lifesteps Progression 2.06 6.38 6.57 5.97 2.25 AMP PSS Select Balanced 1.98 6.44 6.63 6.05 49.08 ANZ Default KiwiSaver Scheme-Balanced 1.85 6.91 6.40 7.61 144.86 ANZ KiwiSaver-Balanced 1.94 6.92 6.43 7.60 2278.94 Aon KiwiSaver ANZ Balanced 26.72 6.04 6.52 7.44 31.20 Aon KiwiSaver Russell Lifepoints 2025 9.46 5.00 6.49 7.74 20.87 Aon KiwiSaver Russell Lifepoints 2035 9.60 5.88 8.10 8.99 20.08 Aon KiwiSaver Russell Lifepoints Bal 9.91 6.21 8.31 9.12 157.82 ASB KiwiSaver Scheme's Balanced 1.99 8.02 8.41 8.91 1689.20 BNZ KiwiSaver Balanced Fund 1.57 6.35 7.98 7.84 371.82 Booster KiwiSaver Balanced 1.88 7.60 7.33 7.54 471.88 Booster KiwiSaver Socially Rsp Inv Bal 1.44 7.91 7.12 -- 45.48 Fidelity Life Balanced 4.92 6.06 6.79 6.86 4.50 Fidelity Life Super-Super Balanced -7.27 7.10 -- 270.00 Fisher FuturePlan - Balanced 4.42 7.08 6.71 6.79 119.53 Fisher TWO KiwiSaver Scheme-Bal 5384.65 8.19 7.69 7.65 793.75 Kiwi Wealth KiwiSaver Scheme Balanced -5.24 7.11 7.05 1607.19 Mercer KiwiSaver Balanced -6.01 7.34 7.75 383.47 Milford KiwiSaver Balanced Fund 2.28 6.83 8.56 9.62 271.49 NZ Defence Force KiwiSaver Balanced -5.82 7.13 -- 50.00 OneAnswer KiwiSaver-Balanced 1.96 6.94 6.47 7.68 556.75 Westpac KiwiSaver-Balanced Fund 1.91 6.65 7.49 8.15 1495.40 Westpac Retirement Plan - Balanced Port 3.90 5.46 6.34 6.99 97.31 NZ Insurance Multisector - Conservative AMP KiwiSaver ANZ Conservative 1.10 4.93 --- 5.66 AMP KiwiSaver Default (Default) 1.72 4.91 4.68 5.11 1380.69 AMP PSS Select Income 1.85 4.18 2.64 3.74 1.10 ANZ Default KiwiSaver Scheme Cnsrv(Dflt) 1.80 5.54 4.34 5.67 1091.52 Aon KiwiSaver Russell Lifepoints 2015 9.52 4.25 5.02 6.56 4.78 Aon KiwiSaver Russell Lifepoints Cnsrv 9.96 4.26 5.02 6.52 72.43 ASB KiwiSaver Scheme's Cnsrv (Default) 1.85 5.94 5.11 5.83 3812.14 BNZ KiwiSaver Conservative (Default) 1.36 4.16 4.99 5.52 658.74 BNZ KiwiSaver First Home Buyer Fund 1.15 3.47 4.16 -- 124.11 Booster KiwiSaver Default Saver 1.28 5.33 4.69 -- 72.45 FANZ Lifestages KiwiSaver Income 1.09 ---- 79.90 Fisher Funds Conservative KiwiSaver Fund 1.68 6.64 5.24 5.75 738.20 Fisher FuturePlan - Capital Prot 1.24 1.50 1.50 1.50 16.96 Fisher TWO KiwiSaver Cash 1.82 5.62 4.93 5.70 648.17 Enhanced(Dflt) Kiwi Wealth KiwiSaver Scheme Cnsrv -5.26 4.69 5.33 726.92 Kiwi Wealth KiwiSaver Scheme Default -4.91 5.16 -- 207.21 Mercer KiwiSaver Conservative (Default) -4.91 4.85 5.71 1089.14 Milford KiwiSaver Conservative Fund 1.75 5.46 6.28 8.02 90.10
2 3 4 2 3 2 5 4 4 4 5 3 5 4 ---3 2 3 2 -1 3 2 3 -2 2 2 4 4 4 --5 5 4 3 4 3 4 3 4 3 5 5 3 4 4 3 -3 1 4 -5 4 4 3 3 -4 1 4 3 4 4 5
Latest Transaction Exit Price NZ Defence Force KiwiSaver Conservative -OneAnswer KiwiSaver-Conservative 1.76 Westpac KiwiSaver Default 1.27 NZ Insurance Multisector - Growth AMP KiwiSaver ANZ Balanced Plus 2.21 AMP KiwiSaver ANZ Growth 1.25 AMP KiwiSaver ASB Growth 1.27 AMP KiwiSaver LS Growth Fund 1.76 AMP KiwiSaver Nikko AM Balanced 1.99 AMP KiwiSaver Nikko AM Growth 1.25 AMP NZRT AMP Growth 2.47 AMP NZRT ANZ Balanced Plus 2.79 AMP NZRT ANZ Growth 1.25 AMP NZRT ASB Growth 1.25 AMP NZRT Nikko AM Growth 1.24 AMP PSS Lifesteps Growth 2.05 ANZ Default KiwiSaver Scheme1.89 Balanced Gr ANZ Default KiwiSaver Scheme-Growth 1.92 ANZ KiwiSaver-Balanced Growth 2.01 Aon KiwiSaver Milford 3.59 Aon KiwiSaver Nikko AM Balanced 19.98 Aon KiwiSaver Russell Lifepoints 2045 9.51 Aon KiwiSaver Russell Lifepoints Growth 10.01 ASB KiwiSaver Scheme's Growth 2.01 BNZ KiwiSaver Growth Fund 1.70 Booster KiwiSaver Balanced Growth 1.90 Fidelity Life Growth 4.90 Fidelity Life Super-Super Growth -Fisher Funds Growth KiwiSaver Fund 2.26 Fisher TWO KiwiSaver Scheme-Gr 1.93 Generate KiwiSaver Growth Fund 1.69 Mercer KiwiSaver Growth -Milford KiwiSaver Active Growth Fund 3.66 NZ Defence Force KiwiSaver Growth -OneAnswer KiwiSaver-Balanced Growth 2.04 OneAnswer KiwiSaver-Growth Fund 2.09 SIL 60s + Sup Balanced Fund 4.65 Westpac KiwiSaver-Growth Fund 1.99 Westpac Retirement Plan - Dynamic Port 4.49 NZ Insurance Multisector - Moderate AMP KiwiSaver AMP Income Generator 1.15 AMP KiwiSaver ASB Moderate 1.15 AMP KiwiSaver LS Conservative Fund 1.84 AMP KiwiSaver LS Moderate Fund 1.80 AMP KiwiSaver Nikko AM Conservative 1.14 AMP NZRT AMP Capital Assured Fund 2.66 AMP NZRT AMP Conservative 2.94 AMP NZRT AMP Income Generator 1.15 AMP NZRT AMP Moderate 2.29 AMP NZRT ASB Moderate 1.16 AMP NZRT Nikko AM Conservative 1.14 AMP PSS Lifesteps Maturity 1.79 AMP PSS Lifesteps Stability 1.92 AMP PSS Select Conservative 1.88 ANZ Default KiwiSaver Scheme-Cnsrv Bal 1.82 ANZ KiwiSaver-Conservative Balanced 1.85 Aon KiwiSaver Russell Lifepoints Mod 10.13 ASB KiwiSaver Scheme's Moderate 1.94 BNZ KiwiSaver Moderate Fund 1.47 Booster KiwiSaver Asset Class Cnsrv 3.78 Booster KiwiSaver Moderate 1.79 Fisher TWO KiwiSaver Scheme-Cnsrv 1.90 Generate KiwiSaver Conservative Fund 1.39 Mercer KiwiSaver Moderate -NZ Defence Force KiwiSaver Moderate -OneAnswer KiwiSaver-Conservative Bal 1.87 Westpac KiwiSaver - Moderate 1.33 Westpac KiwiSaver-Conservative Fund 1.76 NZ Insurance NZ Bonds AMP KiwiSaver NZ Fixed Interest 1.10 AMP Prem PSS ACI NZ Fixed Interest 2.21 Fidelity Life NZ Fixed Interest 4.23 Fidelity Life Super-Super Fixed Int -OneAnswer KiwiSaver-NZ Fixed Interest 1.79 SIL 60s + Sup NZ Fixed Interest 3.14 Westpac Retirement Plan - Accum Port 3.36 Name
1 Yr Return % 4.60 5.03 5.17
3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 4.44 -- 4.06 3 3.96 5.36 437.70 3 4.63 -- 207.81 3
7.54 8.00 7.78 8.11 5.30 4.81 7.07 6.49 8.50 8.07 5.30 6.94 7.72 8.40 7.74 5.74 6.04 6.68 6.87 9.19 7.61 9.07 7.00 8.71 9.79 8.06 10.49 6.49 7.33 6.27 7.77 8.45 7.87 7.69 6.57
7.36 --8.99 7.32 -7.96 6.34 ---8.03 7.72 8.87 7.71 9.49 7.53 9.40 9.53 10.22 9.78 8.97 8.77 8.66 10.36 8.88 9.73 8.93 10.09 8.67 7.75 8.93 7.81 8.78 7.69
8.34 --7.65 8.82 -6.77 7.33 ---6.95 8.74 9.72 8.72 9.82 9.01 9.98 10.03 10.39 8.98 8.78 8.40 8.34 9.33 8.44 10.78 -10.23 -8.76 9.77 8.50 9.45 8.35
257.58 14.27 10.03 726.86 65.94 13.85 228.71 287.00 7.97 7.37 11.07 0.25 157.34 139.14 1983.64 144.19 9.64 17.84 42.01 2358.41 434.14 291.24 2.83 123.17 1812.60 428.91 431.63 94.76 1209.69 19.59 489.12 398.20 93.36 1314.89 110.45
3 --2 2 -1 2 ---2 3 4 3 4 3 -5 5 4 3 2 2 5 3 5 4 5 3 3 4 3 4 2
8.25 6.14 5.59 6.13 5.76 3.28 4.53 8.89 5.05 6.72 6.21 4.66 5.17 4.71 5.99 6.00 5.39 7.15 5.42 4.06 6.38 6.34 8.08 5.10 4.91 6.01 5.96 5.38
--4.48 5.57 -3.75 3.45 -4.51 --3.48 4.73 3.65 5.14 5.16 6.69 6.56 6.68 4.41 5.31 5.35 5.31 5.67 5.45 5.18 5.88 4.88
--4.76 5.48 -3.99 3.78 -4.50 --3.90 4.72 3.99 6.48 6.48 7.85 7.33 6.87 -5.90 5.94 7.03 --6.48 -5.74
2.71 4.97 366.36 496.13 10.43 115.70 319.81 1.63 154.80 5.28 8.93 3.32 5.72 9.37 49.82 1087.69 23.30 1705.56 427.01 19.52 159.35 148.09 201.53 118.67 4.55 187.95 418.36 2510.90
--3 3 -2 1 -2 --2 3 2 4 4 5 5 4 2 3 4 4 4 4 4 4 3
6.11 6.26 3.92 4.04 6.04 5.93 2.16
-3.93 2.95 3.03 3.81 3.57 1.57
-- 2.61 5.39 12.07 3.64 0.18 3.69 1.20 5.32 7.87 4.91 6.35 2.41 16.14
-4 1 2 4 3 1
Name
Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price %
NZ OE Cash AMP AIT NZ Cash - UT35 1.14 AMP ARS-Cash 2.01 AMP Capital NZ Cash Fund 1.64 AMP Capital Term Advantage -AMP PUT Select Cash 1.36 ASB Cash Fund -BT Enhanced Cash Fund 2.16 Fisher Cashplus Fund 1.35 Nikko AM NZ Cash 1.03 NZ Funds Core Cash 1.37 NZ OE Equity Region Australasia AMP AIT Australasian Shrs-Multi 3.35 Mgr-UT07 AMP ARS-NZ & Australian (multi4.00 manager) AMP ARS-NZ & Australian (Value) 4.52 AMP NZRT Australasian Shares 1.57 BT PS Australasian Diversified Share 2.53 Castle Point Ranger Fund 1.84 Devon Alpha Fund 1.73 Devon Dividend Yield 1.93 Devon Trans-Tasman Fund 4.00 Forte Equity Trust 1.36 Harbour Australasian Equity 2.90 Harbour Australasian Equity Focus Fund 1.79 Harbour Australasian Equity Income 1.80 Milford Trans-Tasman Equity 2.79 Mint Australia New Zealand Act Eq (Ret) 3.22 Nikko AM Concentrated Equity 2.31 OneAnswer SAC Equity Selection 2.36 Pie Australasian Dividend 2.69 Pie Australasian Emerging Companies 3.43 Pie Australasian Growth Fund 5.29 Pie Growth 2 Fund 1.64 AMP Capital Australian Share Fund 2.79 Devon Australian 1.43 Fisher Funds Australian Growth Fund 3.89 Fisher Funds Premium Australian Fund 1.71 Milford Dynamic 1.80 OneAnswer SAC Australian Share 3.89 NZ OE Equity Region Emerging Markets AMP AIT Emerging Markets - UT65 1.54 NZ OE Equity Region NZ AMP Capital NZ Shares Fund 3.13 AMP Capital RIL NZ Shares 2.31 AMP Prem PUT ACI NZ Shares 3.10 AMP Prem PUT ACI NZ Shares Index 2.45 Fisher Funds NZ Growth Fund 9.68 Fisher Funds Premium New Zealand Fund 2.29 Fisher Trans Tasman Equity Trust 6.00 Forsyth Barr New Zealand Equities 3.16 Harbour NZ Equity Advanced Beta Fund 1.70 Nikko AM Core Equity 2.43 NZ Funds Dividend and Growth 1.96 OneAnswer SAC NZ Share 5.33 Russell Investments NZ Shares 1.85 Smartshares NZ Core Equity Trust 1.55 NZ OE Equity Region World AMP Capital Core Global Shares Fund 1.63 AMP Capital Emerging Markets Share 1.20 AMP Prem PUT FD Intl Share Fund 1 Value 1.51 AMP Prem PUT SSgA Global Shares Index 2.13 Elevation Capital Value Fund 1.45 Fisher Funds Property and Infrastructure 2.82 Nikko AM Global Equity Unhedged 2.11 OneAnswer SAC International Share 2.39 Pie Global Small Companies Fund 1.57 Russell Investments Global Shares 2.01 T.Rowe Price Global Equity Growth 1.74 NZ OE Equity Region World - Hedged AMP AIT Global Equities-Multi Mgr-UT28 1.31 AMP AIT Global Infrastructure - UT04 2.94 AMP ARS-International Shares (Growth) 1.67 AMP ARS-International Shares (Passive) 1.81
1.77 1.79 2.18 -1.47 0.48 2.23 2.16 -1.83
1.85 1.93 2.22 -1.58 0.62 2.26 2.15 -1.87
2.41 2.50 2.73 -2.07 1.50 2.69 2.46 -2.41
7.45 8.81 3495.06 -2.59 222.51 41.54 65.95 121.46 45.21
-----------
12.64 10.55 9.32 13.72
2
12.92 18.39 14.46 14.91 7.13 9.12 18.76 16.85 -13.24 10.55 5.90 14.63 13.08 16.30 -7.91 6.82 7.24 9.00 7.82 8.67 8.55 10.25 10.34 1.63 -2.83
11.03 8.70 12.11 11.74 17.72 6.22 8.00 9.39 7.49 13.29 12.44 7.58 13.99 14.04 -5.43 12.72 8.67 3.91 11.65 7.47 6.97 8.41 8.48 10.20 1.30
9.82 11.87 9.93 13.26 12.60 7.53 12.83 10.81 -13.08 -10.55 11.97 14.77 -6.66 12.27 14.49 9.91 -5.76 8.33 8.85 8.96 9.67 1.58
7.47 4.97 10.16 84.34 77.67 106.74 33.31 87.74 20.90 265.86 20.14 37.26 319.80 97.61 58.38 13.22 131.47 95.50 71.46 162.16 177.87 12.11 62.84 83.82 219.36 22.07
2 3 2 4 4 1 3 3 1 4 3 3 4 5 3 2 3 3 3 3 3 3 3 4 5 1
-4.66 8.47
5.71
2.24
--
14.95 17.11 14.40 18.53 19.45 20.20 16.49 17.48 15.39 -8.45 18.45 18.53 --
11.77 12.66 11.08 13.25 15.50 15.81 12.09 14.78 11.71 -9.28 12.86 13.14 --
14.19 14.76 13.59 13.82 13.81 14.10 12.13 15.80 --11.32 12.92 14.05 --
534.89 19.91 3.40 3.81 181.31 116.10 53.69 38.60 190.99 24.77 113.09 51.24 212.24 67.05
3 4 3 3 4 4 2 4 2 4 1 3 3 4
8.30 -3.71 7.85 10.76 -23.99 9.52 9.45 2.12 4.38 11.86
9.97 9.96 8.45 10.38 -14.97 10.20 11.71 10.39 10.15 15.11
11.82 7.96 8.84 11.19 -13.68 11.78 13.32 8.18 11.06 --
990.92 71.41 4.07 3.05 22.49 120.70 116.33 229.18 112.37 72.73 62.32
3 1 2 3 2 5 3 5 2 3 5
2.97 15.77 14.02 6.36
9.55 9.21 11.93 10.90
8.04 9.19 13.19 8.63
12.94 25.20 7.19 3.28
2 3 5 4
Latest Transaction Exit Price AMP ARS-International Shares (Value) 1.42 AMP Capital Core Hedged Global 1.62 Shares Fd AMP Capital Global Listed Infrastructure 1.85 AMP Capital Global Shares Fund 3.09 AMP Capital Resp Invest Leaders Gl Sh 1.77 AMP NZRT International Shares 1.62 AMP NZRT Passive International Shares 1.65 AMP Prem PUT SSgA Global Shares 2.54 IndexHdg ASB World Shares 1.75 BT PS International Diversified Share 1.96 Fisher Funds International Growth Fund 2.26 Fisher Funds Premium International Fund 2.36 Fisher Global Fund 5.83 Milford Global Equity 1.57 Nikko AM Global Equity Hedged 1.95 NZ Funds Equity Inflation 0.92 Pathfinder Global Water 2.05 Pathfinder World Equity Fund 1.81 Russell Investments Hedged Global 2.13 Shares NZ OE Equity Sector Global - Real Estate AMP AIT Global Property - UT54 3.63 AMP ARS-Listed International Property 4.42 AMP Capital Global Propty Securities Fd 1.68 NZ Funds Property Inflation 1.68 OneAnswer SAC International Property 1.53 NZ OE Equity Sector NZ - Real Estate AMP ARS-Listed NZ & Australian Property 3.97 AMP Australasian Property Index Fund 2.64 BT Property Fund 4.93 Mint Australia NZ Rl Estt Invm (Ret) 2.12 OneAnswer SAC Property Securities 3.77 NZ OE Global Bond AMP AIT Fixed Interest Income - UT36 1.24 AMP AIT Global Bonds-Multi Mgr-UT13 2.02 AMP ARS-International Fixed Interest 2.54 AMP Capital Global Short Duration 1.08 AMP Capital Hdgd Gbl Fixed Intrst Fund 2.43 AMP NZRT International Fixed Interest 1.20 AMP Prem PUT SSgA Global Fixed 1.87 Int Index ASB World Fixed Interest 1.10 BT PS International Diversified Bond 2.30 Fisher BondPlus Fund 2.26 Fisher Funds Income 1.04 Nikko AM Global Bond 1.19 NZ Funds Global Income 1.47 OneAnswer SAC International Fixed Intrst 1.25 Russell Investments Global Fixed Int 1.16 NZ OE Multisector - Aggressive AMP AIT Aggressive Portfolio - UT31 2.14 AMP AIT eInvest - Aggressive - MDF7 1.52 AMP AIT Growth Portfolio - UT03 2.04 AMP Capital Growth Fund 2.89 AMP PUT Select Growth 1.89 NZ OE Multisector - Balanced AMP AIT eInvest - Balanced - MDF5 1.39 AMP AIT Moderate Portfolio - UT01 1.97 AMP ARS-Balanced 2.24 AMP Capital Global Multi Asset Fund 1.27 AMP Capital Responsible Inv Leaders Bal 2.04 AMP PUT Select Balanced 1.90 ANZ Invmt Fds Balanced 1.88 ASB Balanced 1.75 Milford Balanced Fund 2.24 NZ Funds Core Growth 1.44 OneAnswer MAC Balanced 1.88 Westpac Active Balanced Trust 2.36 NZ OE Multisector - Conservative AMP PUT Select Income 1.72 ANZ Invmt Fds Conservative 1.58 ASB Conservative 1.68 Milford Conservative 1.14 OneAnswer MAC Conservative 1.58 Westpac Active Conservative Trust 1.96 NZ OE Multisector - Growth Name
1 Yr Return % -4.79 3.04 20.40 5.17 3.68 6.12 8.85 5.17 5.82 3.53 9.53 10.24 5.74 4.83 3.90 1.86 8.44 2.41 1.38
3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 9.89 9.18 4.62 3 10.51 8.27 595.89 4 8.03 7.25 325.91 1 10.75 9.84 137.96 4 9.37 7.69 68.45 3 11.15 9.52 10.46 3 11.76 10.27 6.56 4 9.88 8.28 5.25 4 11.33 10.97 509.58 4 10.73 9.92 125.27 3 13.96 10.22 53.23 4 14.12 10.62 136.23 4 9.82 7.06 94.32 2 8.19 7.53 455.11 2 10.12 9.11 50.71 3 1.95 4.31 82.51 1 8.13 7.73 18.32 2 7.05 8.63 22.14 2 10.76 8.85 71.53 3
17.98 15.79 13.78 12.67 14.49
6.24 5.64 3.55 4.51 4.92
9.92 1.41 8.78 5.21 7.29 217.59 6.40 86.39 8.51 315.14
3 3 3 2 3
20.12 20.79 19.32 20.85 20.58
7.95 8.83 9.57 8.48 9.27
12.11 10.80 14.21 12.72 13.36
4.07 158.00 47.30 63.44 142.56
2 3 5 3 3
2.24 2.91 3.45 2.37 3.50 3.98 3.69 2.83 3.34 3.24 4.63 -3.29 3.97 3.04
2.08 1.22 1.84 2.23 2.61 2.32 1.52 1.60 2.90 2.90 3.64 -2.47 2.01 3.49
2.91 3.02 3.67 2.93 4.08 3.64 3.96 2.92 3.68 4.38 4.42 -2.90 4.10 5.07
54.52 8.18 1.54 194.55 98.76 1.65 3.84 387.84 127.02 143.21 55.81 22.96 114.95 1.42 509.99
2 2 3 2 4 2 2 1 3 5 4 4 1 3 5
7.38 8.01 7.01 7.08 7.75
8.65 9.50 7.93 8.61 8.97
6.96 7.73 6.56 7.37 7.52
66.92 18.15 25.80 8.00 18.30
2 3 1 3 3
6.88 5.31 7.20 1.13 6.91 6.24 6.60 7.46 6.61 0.31 6.60 6.27
7.11 4.74 7.54 4.65 6.60 6.42 6.12 7.84 8.39 2.94 6.12 6.87
6.40 4.65 6.93 4.87 6.40 5.88 7.27 8.33 9.30 3.36 7.27 7.42
57.84 57.76 143.93 251.57 50.60 39.59 308.52 282.52 606.26 84.22 49.14 506.49
2 1 3 1 2 2 3 4 5 1 3 3
4.06 4.76 5.34 5.59 4.76 4.58
2.56 3.70 4.50 6.40 3.70 4.03
3.70 5.10 5.21 -5.10 4.79
2.17 46.24 139.55 245.44 13.11 346.42
1 2 3 5 3 3
Name AMP AIT Balanced Portfolio - UT 02 AMP AIT eInvest - Growth - MDF6 AMP ARS-High Growth ANZ Invmt Fds Balanced Growth ANZ Invmt Fds Growth ASB Growth Fisher Multi Sector Fund Milford Active Growth NZ Funds Global Equity Growth OneAnswer MAC Balanced Growth OneAnswer MAC Growth OneAnswer SAC Balanced Westpac Active Growth Trust NZ OE Multisector - Moderate AMP AIT eInvest - Conservative - MDF2 AMP AIT eInvest - Moderate - MDf3 AMP ARS-Conservative AMP Capital Conservative Fund NZ AMP Capital Income Generator Fund AMP PUT Select Conservative ANZ Invmt Fds Conservative Balanced ASB Conservative Plus ASB Moderate Harbour Income Milford Diversified Income Fund Mint Diversified Income (Retail) NZ Funds Global Multi-Asset Growth OneAnswer MAC Conservative Balanced Westpac Active Moderate Trust NZ OE NZ Bonds AMP AIT NZ Bond - UT36 AMP AIT NZ Fixed Interest - UT60 AMP ARS-NZ Fixed Interest AMP Capital NZ Fixed Interest Fund AMP Capital NZ Short Duration AMP NZRT NZ Fixed Interest BT Corporate Bond Fund BT PS NZ Diversified Bond Fisher New Zealand Fixed Inc Trust Forsyth Barr NZ Fixed Interest Forsyth Barr Premium Yield Harbour NZ Core Fixed Interest Harbour NZ Corporate Bond Nikko AM NZ Bond Nikko AM NZ Corporate Bond NZ Funds Core Income OneAnswer SAC NZ Fixed Interest Russell Investments NZ Fixed Interest Westpac Active Income Strategies Trust
Latest Transaction Exit Price 2.09 1.48 2.04 2.06 2.21 1.74 3.45 3.61 1.63 2.06 2.21 3.28 2.34
1 Yr Return % 6.15 7.70 8.00 7.44 8.12 8.66 6.95 6.83 0.26 7.44 8.12 7.46 7.39
3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 6.40 5.71 80.26 1 8.68 7.31 13.60 2 9.09 7.81 52.42 3 7.41 8.41 218.64 3 8.58 9.37 118.48 4 9.63 9.77 69.64 4 6.48 6.59 11.19 2 9.79 9.97 1029.08 5 7.18 7.51 71.03 1 7.41 8.41 40.20 3 8.58 9.37 29.88 4 7.29 8.25 53.36 3 8.15 8.67 110.68 3
1.26 1.32 2.37 2.51 1.13 1.84 1.73 1.69 1.72 1.00 1.73 1.06 0.58 1.73 1.57
5.23 5.96 5.63 4.90 8.34 4.61 5.71 6.43 6.61 8.32 9.29 6.51 -3.90 5.71 5.61
4.22 4.43 13.38 5.39 5.23 64.32 4.68 5.02 42.68 3.71 4.33 7.63 6.35 -- 149.45 3.50 3.83 14.34 4.86 6.17 192.81 5.27 6.05 786.50 6.00 6.75 457.86 4.98 -- 92.80 8.95 10.67 2087.37 4.62 -- 42.15 1.54 -6.46 27.38 4.86 6.17 16.55 5.38 6.11 990.10
2 3 3 2 4 2 3 3 4 3 5 2 1 3 3
1.27 1.86 2.70 1.73 1.28 1.32 1.71 1.44 1.38 1.79 1.84 1.13 1.09 1.05 1.19 1.66 1.79 1.24 1.24
3.89 5.88 6.18 6.55 3.73 6.70 4.29 6.03 7.82 5.16 5.22 5.29 5.15 --5.31 5.91 6.19 2.58
3.13 3.54 3.99 4.20 3.26 4.35 3.55 3.97 4.19 3.92 4.23 3.90 3.95 --4.07 3.69 4.13 2.56
2 2 4 4 2 5 2 3 3 3 4 3 3 4 5 2 3 3 1
4.61 4.97 5.46 5.63 4.18 5.72 4.52 5.22 5.26 5.15 5.37 5.08 4.89 --4.29 5.18 5.35 2.94
10.58 11.18 5.49 2330.62 627.10 10.03 117.24 37.55 55.90 18.03 105.24 163.68 378.53 52.98 123.68 124.17 11.65 62.83 9.16
Returns are calculated to 31/3/19 Returns are calculated before tax and after fees, except for the non-PIE categories, which are after tax and after fees. For more information about this table and the methodology behind the data, contact helpdesk.nz@morningstar.com or go to www.morningstar.com.au © 2016 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. To the extent that any of this information constitutes advice, it is general advice and has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 and/or Morningstar Research Limited (subsidiaries of Morningstar, Inc.) without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant Product Disclosure Statement (in respect of Australian products) or Investment Statement (in respect of New Zealand products) before making any decision to invest. Neither Morningstar, nor Morningstar’s subsidiaries, nor Morningstar’s employees can provide you with personalised financial advice. To obtain advice tailored to your particular circumstances, please contact a professional financial adviser. Please refer to our Financial Services Guide (FSG) for more information www.morningstar.com.au/fsg.asp
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