ASSET MAY 2016 by ASSET

MAY 2016

Jenning reflects on decades at the top Mike Moore How the small survive

Non-disclosure Are rejections fair?

David Ireland Code Update

LEAD STORY

UP FRONT

Signing 14 Off

04 EDITORIAL Model of High Fidelity 07 OPINION Controlling the judgement 08 NEW ZEALAND NEWS 09 AUSTRALIAN NEWS 10 PEOPLE New appointments

In an industry where chief executives come and go, Milton Jennings has been the exception as he ends a nearly 30 year career with Fidelity Life.

NOEL MAYE Why the Financial Planning Standards Board chief executive loves his international assignment.

REGULARS

06 {OPEN TO QUESTION} { INVESTMENT }

{ INSURANCE }

{ ASSET ADVISER }

06 What professional qualifications do you have?

28 What is fair in deciding what to reject? 34 A comparison of distribution and commission costs.

20 Finding an alternative for those seeking higher yields and lower volatility. 26 Process or people? Examining the changes in the lives of Kiwi investors. 30 Why many advisers with little funds under management are struggling to get by

18 Code review breaking down barriers to access advice. 22 The decision to move into financial advice is paying dividends for Mark Sheehan.

UP FRONT

{ FROM THE EDITOR }

MODEL OF HIGH FIDELITY "No matter how gritty the topic, he was always willing to answer my questions honestly and thoughtfully and never once fobbed me off"

IN THE TIME I'VE BEEN IN MY ROLE AT ASSET AND GOOD RETURNS, I've been able to meet a lot of really great people in this industry. A number of chief executives of insurance companies have been open and welcoming, willing to talk about their businesses and clearly passionate about their goal of providing better insurance coverage in this country. But none has been quite as willing to chat as Milton Jennings. I first met him when a public relations company set up a coffee meeting for us. It was before my Tarawera Publishing days, when I had first started to branch out into the personal finance round of a mainstream newspaper. We chatted about KiwiSaver, insurance, his love of getting staff running around the domain. As I left he said I should call any time I needed information or clarification. At the time I thought it was just another empty offer that would be almost impossible to take up, but over the years I have come to realise how sincere Jennings is about his willingness to help.

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I've called him on Saturday afternoons, weekday evenings, while he was on holiday overseas... probably every time you could imagine that you would not really want to be stuck on the phone talking to a journalist. I even had a middle-of-the-night text exchange with him while he was on the other side of the world for the Rugby World Cup. No matter how gritty the topic, he was always willing to answer my questions honestly and thoughtfully and never once fobbed me off to someone else or hid behind an over-zealous communications team. In his role at Fidelity he was clearly passionate about the insurance idustry, too. He has sometimes been the lone voice lamenting industry churn and was the industry leader on a new model of commission, something that others such as AIA are now starting to follow. While he is standing down from the chief executive position at Fidelity, it is good for the industry that he is not going far. If rumours prove true that he is in line for a place on the Financial Markets Authority's board, we would all be the better for it. Susan Edmunds Editor

HEAD OFFICE 1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: editor @assetmagazine.co.nz PUBLISHER Philip Macalister EDITOR Susan Edmunds SUBEDITOR Phil Campbell CONTRIBUTORS Russell Hutchinson, Mike Moore, Ben Brinkerhoff, Matthew Mimms, Tony Vidler DESIGN Jonathan Harding ADVERTISING SALES 07 349 1920 027 437 7527 SUBSCRIPTIONS Dianne Gordon P: 0800 345 675 E: subs@assetmagazine.co.nz ASSET is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and The NZ Mortgage Mag All contents of ASSET magazine are copyright Tarawera Publishing Ltd. Any reproduction without prior written permission is strictly prohibited. ISSN 1175-9585

OPEN TO QUESTION

KEITH KERR

ONNY FALEAFA

WHAT PROFESSIONAL QUALIFICATIONS DO YOU HAVE?

FINANCIAL SOLUTIONS NZ

Trade Cert Aeronautical Engineering (RNZAF), Financial Planning Diploma, RFA.

DO THEY HELP YOU IN YOUR BUSINESS? Discipline of being an ex serviceman helps in my pride of appearance, understanding numbers very well, good at technical knowledge and also at ease with people and public speaking and mentoring which as a director of mySolutions.

WHAT HAS PUT YOU OFF STUDYING FURTHER? As far as the AFA? No need to do it as focus on home loans and risk insurance. Having been in this wonderful industry for 27 years I suppose I have experience.

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NEST INSURANCE

Bachelor of Liberal Arts majoring in Economics (Dartmouth College). Level 5 National Certificate in financial advice.

DO THEY HELP YOU IN YOUR BUSINESS? The Level 5 National Certificate gave me a good understanding of best practice, legislation and a framework to build my business process on. I found it very helpful for my own professional development and the development of my business.

WHAT HAS PUT YOU OFF STUDYING FURTHER? I have not decided not to study further; in fact, I believe ongoing learning and development is essential in providing quality advice, and in continually evolving how I best meet my clients' needs. A particular focus for me is personal and leadership development. For the last five years, I have worked with Genratec Coach every week. I have had amazing results in both my business and personally; it has been the most valuable learning and development experience I have had.

GRANT WOOD

FUTURE VISION FINANCIAL ADVISERS

WHAT PROFESSIONAL QUALIFICATIONS DO YOU HAVE? I am a CFP, AFA obviously. I have a Bachelor of Business Studies from Waikato University and a Diploma of Business Studies with a financial planning endorsement from Massey University. So bottom line is I pretty have done everything I need to do on the study front.

DO THEY HELP YOU IN YOUR BUSINESS? From a consumer’s perspective, they can see I’ve done everything I need to do to be able to be giving the advice that I am. There’s no hidden agenda. I’ve done everything I need to do and I certainly tell the clients that, too.

DO THEY HELP YOU IN YOUR BUSINESS? Other than the continuing professional development stuff that we always have to do, outside of that I don’t have any further study ambitions because I believe I have done everything I need to do.

OPINION

CONTROL THE BASIS ON WHICH YOUR CLIENTS JUDGE YOU Consilium partner Ben Brinkerhoff says focus on your client's long-term goals at review time, not on short term performance.

t’s time for annual reviews. You are looking over the list of clients you are going to meet with. Some names have been on that list for 20 years or more. You are thankful for loyal clients. Where would you be without them? Other clients have come and gone. Some you lost for reasons you didn’t fully understand. Others experienced a bad return or two and bolted. How much bigger would your business be had you kept those clients? 10% bigger, 20%...? You reflect on what are you going to talk about at the upcoming reviews. You look up recent portfolio returns and print out a few performance reports at different intervals. Looking at a client you began working with last year you see some mixed results. ➤ The overall portfolio was up $25,000. ➤ Last month the portfolio was down 0.25% and down 2.00% for the quarter. ➤ But it was up 4% for the year…. that’s encouraging. ➤ Compared with benchmarks the portfolio was down 0.10%. You consider how to best present this information. Do you just focus on the positive numbers and ignore the negative ones? Maybe the client won’t ask too many questions. But something gnaws at you. As this is a new client relationship, you don’t know the basis on which this client will judge you. You hope it’s on the factors that have gone up rather than those that have gone down. But what gnaws at you is that you know you have no real control over what the markets or fund managers delivered over the last month or quarter. So you are likely to be judged on something that, for the most part, you outsourced. This concerns you, as it should. But will it ever be any different? CLIENTS WILL JUDGE You need to establish the basis on which you are judged by your clients. I call it establishing the “reference point”. This is the inflection point either side of which your clients will judge your advice is succeeding or failing. The term “reference point” was coined by Nobel Laureate Daniel Kahneman in his seminal behavioural psychology paper “Prospect Theory”. In that paper, Kahneman demonstrated that human beings feel the sting of losses at two to

the portfolio. Why shouldn’t they, if that’s the main agenda item at review time? If you make it the focus of the meeting then by default your clients will think it’s important. And absent any other information, this will form the basis on how they judge you.

{BEN BRINKERHOFF} three times the potency as the joy of gains. As the reference point provides the basis for your clients to determine whether a gain or loss has occurred, it’s imperative that you control the reference point for each of your clients. This is where many investment advisers often sabotage themselves. They do so because in annual meetings they typically focus on the recent returns of the portfolio or underlying funds, instead of the progress being made towards client goals. With short-term performance often highly variable, advisers can be tempted to obfuscate by focusing much more on the positive returns than on any negatives. However, this invariably means they end up changing the focus slightly for each meeting. Sometimes the focus is on the last quarter returns. Sometimes it’s the last year. Sometimes it’s one fund, sometimes it’s another. SHORT TERM PERFORMANCE If this sounds familiar, then be warned. The inevitable result is that your clients assume the relevant reference point to gauge the success of your advice is the short-term performance of

That has to be a sobering thought because no matter how good an adviser you are, you know that you can’t really control short term performance and it’s usually not that important in the context of a long term strategy anyway. So what should be the reference point for your meetings? A financial adviser’s most compelling value proposition is to significantly increase the probability that their clients achieve their long term objectives. Therefore, review meetings should focus on the following: ➊ Has as anything changed relative to the client’s long-term objectives on which their current strategic plan is based? ➋ Is the client delivering on their part of the plan (i.e. are they contributing the $15,000 p.a. they previously committed to, or have they saved less because of some unexpected short term spending priorities)? After clarifying this along with any new assumptions for the future, the adviser is in a position to answer the one question that clients most want to know, which is “am I on track?” And if not, what should they be doing about it, if anything, at this point in time. SO CHANGE THE REFERENCE POINT Make the focus of the meeting about how the client is progressing towards their long term investment objectives, not on short term performance which often has very little impact on long term outcomes. The added bonus is, this is a subject your client is usually most interested in! Try it and discover that your clients are happier, they will judge you on areas of advice that you have much more control over, and you will enjoy these meetings even more than you do already. Ben Brinkerhoff is partner growth at Consilium.

UP FRONT

{ NEWS FROM NEW ZEALAND }

FSC, Workplace Savings work together A former FMA manager will take over running the Financial Services Council (FSC) and Workplace Savings. Owen Gill has been appointed executive of Workplace Savings following the departure of Bruce Kerr. Gill will also fill the chief executive role at the FSC following the termination of Peter Neilsen's contract. While the organisations will continue to operate separately, the joint appointment signals support from the board of the FSC and the Council of Workplace Savings to work together to strengthen industry advocacy in New Zealand.

SIL and MFL stop taking new members

Advisers say it is not surprising SIL Mutual and MFL Mutual superannuation schemes have decided to stop accepting new members, SIL has $651 million in its funds while MFL has $518 million. Over the past two years, fewer than 100 new members have joined the schemes, reflecting the growing popularity of KiwiSaver schemes as a result of government contributions.

Former RFA pledges to stop offering advice

A former registered financial adviser has signed an enforceable undertaking with the Financial Markets Authority, promising not to offer any financial advice for the next five years. Stephen Duff came to the authority's attention in March 2011 when, trading as Financial Vision, he was registered

WWW.GOODRETURNS.CO.NZ

on the Financial Service Providers Register to provide wholesale or generic financial advice services. The FMA was concerned that he was operating as an authorised financial adviser without authorisation, and his conduct was in breach of the Financial Advisers Act. Duff accepted that he was not allowed to continue and in 2014 sold his client base to advice firm Newton Ross. Last year, Financial Vision was put into liquidation and Duff deregistered from the FSPR. He has agreed not to provide advice, deal with client investments, receive client money or serve as a director of any company involved in the provision of financial services or investments.

That had driven the decision to stop accepting new members. “This will mean less administration cost and we are therefore able to reduce our management fee, delivering even greater value to existing members,” Lockyer said. Adviser Robert Oddy said the move was not a big surprise. "I would have thought they would have difficulty getting new members now anyway,” Oddy said. “People seem to have hung in there but it might be more by apathy than desire." Former IFA president Nigel Tate agreed. "These funds go way back to Armstrong Jones,” Tate said. “They are rationalising a lot of the product lines at OnePath and this doesn't surprise me. Over time, I expect we will see them amalgamated into other funds, if they can get an alignment."

Time for new way to value equities? A low interest rate environment requires a new approach to equities valuation, Nikko’s head of equities says. New Zealand’s equity market has a price-to-earnings (P/E) ratio of 18.5, compared with a five-year average of 16.2. But Stuart Williams, head of equities at Nikko Asset Management, said while that seemed expensive, it did not mean the stocks were overvalued. He said when the OCR was 5% or 6%, that was a different investing landscape.

UP FRONT

{ NEWS FROM AUSTRALIA }

Not just advice

Advisers are being encouraged to embrace their role as counsellor and coach, Australia’s Association of Financial Advisers president says. At a media lunch last week, Deborah Kent said while the rise of roboadvice would have a positive impact on the industry through lowering costs and improving accessibility of advice for young people, it would not be a replacement for financial advisers. “Emotional intelligence is so primary in what we do,” Kent was quoted as saying.

“When you come to an adviser, you are going to strip yourself bare because we are going to ask you some very probing questions and connecting with that person is all about emotional intelligence.” “I can go and find a solution alone, but does that online solution cater to my feelings, particularly in terms of how I feel about risk, tax [and] strategy? Is this actually going to take me on the road I want to go? That’s where the advisers come in.”

Independents paid less Non-aligned woman advisers are being paid less than their tied counterparts, a survey shows. Money Management's latest salary survey found 45% of female non-aligned respondents had an annual income of less than A$69,999, whereas only 19% of their aligned counterparts said the same. But 33% of both aligned and nonaligned respondents said they earned between A$110,000 and A$129,999. Almost 40% of non-aligned female planners said a salary increase would be an incentive to retain them, compared with 32% of aligned planners.

Buy interest in online insurance A life insurer says its research shows half of Australians would buy life insurance online rather than from financial advisers. Life insurer Noble Oak found 55% of those surveyed would buy complex life insurance policies over the internet, even though online products currently represent just 5% of total sales. "Life insurance seems to be a laggard compared with other financial services products, but it's inevitable buying behaviour will quickly change," Noble Oak chief executive Anthony Brown said. "Life insurance will be bought online far more often within the next five years. The number of people purchasing general insurance products online increased more than tenfold from about 2008 to 2013," he said. "There is no reason why this trend won't be replicated with life insurance."

Tackle drop in trail Financial advice businesses need to take appropriate action to offset losses from a decreasing trail income, a financial services consulting firm has told media.. Elixir Consulting managing director Sue Viskovic said: “We’ll see that happening more and more over the next few months, as advisers review their financials for the year and look at what revenue they generated this year compared to the previous year in that trail investment income.” Advisers must either replace those fees with new clients or consider increasing the price of their advice, Viskovic said.

ASSET UPDATA FRONT ADVISER

a new appointment email details { PEOPLE } Ifandyoua have picture to editor@goodreturns.co.nz

Kevin Smee

NEW ADVISER GROUP LAUNCHED New group mySolutions has been launched and says it wants to fill a market gap for insurance advisers. Led by Kevin and Nicola Smee, it will offer training and mentoring to advices and help them move into the business sector to serve the SME market. The group has three sales directors – Antony Erickson, Glen Hatcher and Keith Kerr. As a new national group mySolutions has already welcomed a number of leading advisers to the membership, to which bi-weekly training and ongoing support is available. All members also have access to a unique web-based, best-practice system that includes an end-to-end paperless client engagement process to streamline advice and sales for clients, advisers and industry providers.

Peter Veerhart

CHANGES AT AMP Global investment and fund manager Gareth Morgan Investments (GMI) has appointed Peter Verhaart to the newly created key role of head of implemented investment. Verhaart joins Wellington-based GMI from AMP Capital, where he led the New Zealand Multi-Asset Group for almost five years, heading the group’s strategic and dynamic asset allocation, and multimanager investment solutions for New Zealand investors. Prior to his role with AMP, Verhaart was general manager of AXA Global Investors and head of investment consulting with Mercer. GMI chief investment officer Simon O’Grady said Verhaart was a key addition to GMI’s investment management team. “Peter’s a highly respected member of the investment community, and GMI and our clients are fortunate to have a leader of his calibre and experience onboard.”

We would welcome the opportunity to help you sell part or all of your client base. We have many more buyers than sellers, all keen to provide those clients with a high level of service. CALL US NOW

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Verhaart, who starts in his new role on May 2, said he was excited to join the thriving Kiwi-owned fund manager. “I'm looking forward to getting to know GMI's clients and helping them to achieve their investment goals through utilising the investment expertise of the GMI team.” AMP Capital’s head of investment strategy has also resigned. A spokeswoman said Keith Poore had left his role after four years. AMP said the changes were made to better leverage the insights from its global multi-asset business and simplify the team structure in New Zealand. "Over the coming months, Keith will work closely with Debbie Alliston, head of multi-asset portfolio management, and the Australia-based team to ensure there is no disruption to the management of AMP Capital’s diversified portfolios as we search for an experienced investment professional to join the team. Our focus remains on delivering the best outcomes we can for our New Zealand clients." Poore started his career as an analyst with Reuters in London before moving to New Zealand to take up senior investment strategy positions at BNZ, Grosvenor, Axa and the New Zealand Superannuation Fund.

HARBOUR EXPANDS INVESTMENT OPERATIONS TEAM Investment management firm Harbour Asset Management has appointed Declan McKeefry as a new operations analyst. “This appointment reflects the growth in Harbour’s business, and our continued

Maree Porter

021 874 231

maree@mikemoore.co.nz

he started the role. He said he would look at advisory practices in Europe to determine what was best practice in other parts of the world. He is arranging meetings with advisers, fund managers and business owners. “I’m keen to check out smart beta, which is an approach Synergy endorses,” Bowkett said.

MORNINGSTAR RESEARCHER DEPARTS

Declan McKeefry

focus on having the resources and systems in place to deliver global best practice funds management services for our clients,” Harbour director and portfolio manager, Craig Stent, said. McKeefry will provide investment operations and administration support for Harbour’s equity and fixed income teams and will join Harbour from Implemented Investment Solutions (IIS) where he had been client services manager since 2013, Stent said.

Auckland-based Morningstar research analyst Elliot Smith has left to join Shaw and Partners as an associate market analyst in Sydney. Morningstar's New Zealand presence was reduced in the middle of last year. Only data specialist Greg Bunkall and Smith were guaranteed roles here. Most Australasian Morningstar research is now done from Sydney. Sydney-based Kathryn Young has been named director of manager research ratings Asia-Pacific.

Michelle O'Connell

Aaron Bowkett

SYNERGY BDM TO PICK UP INTERNATIONAL LESSONS Aaron Bowkett is taking a sabbatical from his role at Synergy, the new class DIMS offer from FANZ and Consilium, to study other businesses around the world. Bowkett was appointed to the business development manager role in September last year. He is a former investment development manager at Sovereign. Bowkett confirmed he was leaving on a three-month sabbatical to Ireland, which Synergy had known he was planning before

SHARE APPOINTS GROWTH MANAGER Adviser group Share has appointed Michelle O’Connell as its new business growth manager. She previously spent 10 years at Sovereign, starting as a technical development manager and moving on to become a senior business development manager. She spent the last 14 months as northern region area manager for Lifetime Group. O’Connell is well known for helping adviser businesses grow and develop. She said: “It is great to be on board as the business growth manager. I look forward to supporting our Share advisers, exploring new opportunities for the group and growing the brand throughout New Zealand.”

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LEAD PROFILE STORY

DEVELOPING WORLD’S NEXT PROFESSION Financial Planning Standards Board chief executive Noel Maye tells Susan Edmunds why he loves his international assignment.

oel Maye might have a home in Boulder, Colorado, but he does not get a lot of time there to enjoy it. The chief executive of the Financial Planning Standards Board (FPSB) spends six months of every year travelling the world, meeting the international members of the organisation. He is away from the office, and his home, at least two weeks of every month. “I’ve been doing it now for so long that it is my life,” he says. “I’ve got very used to it. To some extent because we have communities in each territory I go to; it’s not like I travel around the world and sit in a hotel room on my own. I go around the world and meet people we’ve worked with for five, 10, 15 years.” The FPSB is a not-for-profit association that manages, develops and operates programmes for financial planners. It administers the Certified Financial Planner (CFP) certification.

JOB GOOD FIT It has partner organisations in 26 countries and more than 160,000 CFP professionals registered with it. Its partner in New Zealand is the Institute of Financial Advisers. Maye says his job is a good fit with his desire to have a career helping people and his love of travel. Maye grew up on a farm in Ireland. He remembers tourists marveling at how amazingly scenic his hometown was but says he was always plotting his escape. He went on to study electronic engineering at university in Dublin before heading to New York to try to work for a couple of months to pay off his student loans. “I ended up working in an insurance company that specialised in, of all things, brownstones – they would be the historic residences of New York,” Maye said. “After about six months or so I had made

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"I said I could

come for a couple of years. Long story short that was about 20 years ago." -Noel Maye

enough money to pay off my student loans. One day, it was snowy and wintry in New York and I was walking by a travel agent and there was a sign in the window that said ‘flights to South America for cheap’. I went in and said, ‘What can you do to take me to South America for three months?’”

FINANCIAL SERVICES PR When he returned, he decided he wanted to learn Spanish properly, so headed to Madrid where he was employed teaching English. After a couple of years teaching and learning, he decided the time had come to get a “grown-up job” again. He joined a New York public relations firm that specialised in financial services. Among the client base was a firm seen as more of a charity case, a small nonprofit organisation based out of Colorado, focused on developing financial planning as a professional practice. “While I enjoyed working with all the clients, the client that really spoke to me and spoke to me being really passionate about communicating value was this organisation that eventually became FPSB in Denver,” Maye says. Eventually, Maye was asked to shift to Denver to set up the communications

function of the FPSB. “I said I could come for a couple of years,” he says. “Long story short that was about 20 years ago.” Maye’s role gradually expanded, first with the legal department, then the public policy office and the international department. When the US organisation was looking to spin off an international division, with an international board and international staff, Maye was asked if he would be part of the process. “I worked on that project for a couple of years, when we launched FPSB the international network asked if I would be CEO and that was 11 years ago. What I do now is a culmination of a lot of my natural interests. I love to travel, I am really interested in other cultures and I enjoy dealing with people in other languages. I’ve always wanted to do something that I cared about and could speak about and be passionate about. A lot of that has come together for me being the CEO of the FPSB. The majority of my time is spent promoting the value of financial planning.” While the people and communities he deals with are diverse, Maye says a lot of the issues he sees for financial advisers are the same around the world. “On the consumer side, you are seeing governments and employers push responsibility on to the individual; you are seeing increased complexity of products and complexity of choices; you’re seeing longevity and the issues of how do you deal with healthcare, ageing parents, children in school and your own retirement all at the same time? “That environment is definitely creating an interest in financial planning and people wanting to find someone who will work in their interests and be ethical and competent and qualified.” Advisers face a changing landscape, too.

LEAD Y RPROFILE OTS STORY DAEL

SUPPORTING FINANCIAL VALUES “On the practitioner side, you are really seeing what was in the past a distribution model with focus on products you’re increasingly seeing through regulatory effort or consumer demand, financial services providers switch from being transactional to relational, from product selling into advice delivery. Those themes are consistent with driving support for the value of financial planning and certification.” He said global differences depended one the state of countries’ economies and the willingness of consumers to pay for advice. “Some territories are more comfortable having independent practitioners, others are more comfortable going to a large firm for advice. We have sufficient variation in how the practice models are developing, how consumers are accessing advice and how even regulators are shaping the environment. But for the most part the demographic shift, the marketplace complexity, the growing need… that’s pretty consistent theme we are

seeing around the world.” Some big changes in consumer perception have already happened in the 20 years Maye has been with the FPSB. He says when he first started in the role, most media organisations did not even have a personal finance reporter. “Now it’s hard to imagine not having a finance column in the newspaper or a magazine and TV personalities are making it an important topic for consumers, there’s been an evolution over the past 20 years or so that I’m very pleased to see.” The board’s vision for the future to ensure that consumers around the world understand what financial planning is, know what the value of going through the process is, are able to identify someone competent to do it for them. FPSB’s own research has shown that one of the biggest barriers to consumers getting professional advice is a lack of trust. Maye wants to see the organisation in 40 countries and with 250,000 CFP professionals by 2025.

FINANCIAL PLANNING CAREER “We’re making that a focus area,” Maye says. “The bigger challenge is how do we make sure financial planning is an attractive career option to that young person in university who looks out and says, ‘I want to be a lawyer, a doctor, an accountant’. We want that same person to look and say, ‘I want to be a financial planner and get CFP.” Maye says he hopes to still be involved with the FPSB for many more years to come – albeit with a bit more time at home eventually. “I am based in Denver but I live in a town called Boulder which is 28 miles north of Denver. It’s probably more famous for Mork and Mindy than anything else. For me it’s a nice respite – I could be in Tokyo on Monday and Shanghai on Wednesday. It’s nice to be hiking in the Boulder foothills watching out for bears on Saturday.” He says his career with FPSB has allowed him to recreate and redefine his job every few years. On the face of it, it might look like he has been in one role for a long time but he says it has constantly changed. “In school I wanted to be out in the world, I wanted to be doing something worthwhile. I’m not a fan of people who say ‘I don’t like my job’. I feel like ‘let’s help you see if you can get one you do like’. It’s one life we have and I think we should be enriched by what we do. “What we do is big, we are basically saying we want to build the world’s next profession and we want to do it all over the world. It’s not a job you say ‘I’ll go and do that on Monday morning’. It’s a commitment and a journey and I love the journey I am on. I love seeing how so many other people around the world want to be on this journey, too.”

LEAD STORY

Jennings reflects on

marathon effort

He’s been an avid proponent of financial advisers and a memorable host at international conferences. Now Fidelity Life boss Milton Jennings is giving up the hot seat in favour of a governance role.

n an industry where chief executives

come and go, Milton Jennings has been the exception at Fidelity Life. He has been in the top job for 14 years and with the company for almost three decades. Now, handing over the reins as the company enters a new phase of growth, Jennings is being celebrated as one-of-akind in an insurance industry that changed significantly under his watch. EARLY CAREER Jennings says he almost did not start work with the insurer at all. After graduating university, he took a job as a junior auditor with Coopers and Lybrand, now PricewaterhouseCoopers. After five years there, and a couple of years auditing for reinsurer Lloyd’s of London, he applied for the position of Fidelity Life’s company secretary. But the job was offered to someone else. “I was the second pick,” Jennings said. “The first guy thought the company was

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too small but by the time they got to me, I had gone off the idea. I said I was not interested and I was going to continue with Coopers and Lybrand. “They said ‘do you want to know what we were going to pay?’. When they told me, I said ‘I’ll have to come back you’. My mortgage was at about 21.5% and with a young family, money mattered.” He took the job in 1986 and stayed in it until 1994 when he was made head of sales. “That was a bit of a shock. They knew I got on well with advisers and said ‘get out there and get as much business as you can’. So I got into the sales role and that helped me when the CEO role came up. “I had that experience with advisers and the advisers helped me get the job, they were supportive of my appointment.” That was 14 years ago and during his time in the role, Jennings has overseen substantial change. “The profit at that stage was $2 million and we’ve got that to $25 million. The share price has gone from $18 to $150.

The dividend has risen from 20c to $3.15. There’s been some big changes. The acquisition of Tower was a big turning point.” Fidelity Life bought Tower’s life insurance business for $145 million in 2013. “The company added another 50% to what it was before,” Jennings said. “That was quite a big change. It’s been a big challenge over the past couple of years to bed that in. As the acquisition has gone well it has stepped Fidelity Life up to another level.”

LEAD STORY

Fidelity Life also purchased Lumley Life in 2003 and Farmers Mutual Life in 2007. “It’s been really challenging but I’ve enjoyed the acquisitions over the years,” Jennings said. “Because the company has grown so well over the last 20 years it’s been exciting to be part of that growth. It’s certainly not been boring.” NEVER STOP LEARNING Jennings says he has always tried to focus on learning and growing in his role,

including taking a month-long course at a Paris university. He has tried to encourage his staff to do the same, whether that meant stretching themselves to do more in their official roles or coaching them to tackle physical challenges such as running around the domain. Under Jennings’ guidance, and the company’s sponsorship of the Corporate Challenge, some staff members who previously could not run 5km have gone on to finish marathons. Jennings is a keen

sportsman and has patrolled the sidelines as a senior rugby referee. Jennings said he had always relished the fact that Fidelity was a New Zealand-owned insurer competing in a market that was dominated by Australian and American companies. “I’m a bit of a passionate New Zealander,” he said. “I like to see New Zealand succeed. That’s been a driving factor, to get the company to beat the Australians.” Colleagues and friends comment on his openness, inclusivity and desire to create a

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family environment at Fidelity. John Reddiford worked with him for seven years and said that was the thing that stood out the most about the experience. “He’s very strong on building up that family relationship for Fidelity Life not only as a group but also with individuals. He’s very strong on that and on loyalty. Fidelity has the most stable workforce of anyone. While the others tend to come and go with their CEOs, Fidelity has only had two in the last 20 years.” He said staff always knew that if something happened at the weekend and they needed support, they were expected to call Jennings. Advisers also appreciated the openness, he said. “He’s one of the few CEOs an adviser could ring and be put through to and talk to. I have a big practice and I could talk

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to the national stales managers but not the CEOs of other insurers. He’s unique in that.” Ed Eadie, who has taken over from Jennings in an acting chief executive capacity, said he hoped to be able to continue that approach. “I hope while I’m in the acting role advisers don’t perceive any change.” ADVISER NETWORKS Jennings said working with advisers had been a highlight of his career so far. Fidelity only distributes its products via third parties. “There’s some colourful characters in the industry which makes life fun,” he said. The small percentage who had not acquitted themselves well sometimes reflected on the industry as a whole, he said, but the majority did a good job for

their clients. Jennings said there were only a small number of things he would have liked to have done better in his time as chief executive. “When Partners Life came along we could have been a bit more aggressive. They’ve done well on market share over the last five years and we should have done more to counter that. But overall I’m fairly proud of what we’ve achieved. “I’m an accountant by background so it’s all about profitability. We’ve achieved good, consistent growth over a long period, and profitable growth. That’s what I’m proud of.” The company could have fought for a bigger share of new business, he said, but wanted the industry to move to a more spread commission model and away from high upfronts.

LEAD STORY

"Milton is through and

through an adviserfocussed executive and the whole Fidelity strategy has been about getting close to independent advisers – and he has been successful. I think advisers warm to him because he is just upfront and honest – no frills, he just says it as he sees it and advisers like that." -Fred Dodds

Jennings was praised for being forwardthinking in his moves to change commission structures and run the company with a fiscally conservative touch. Fidelity now offers some of the lowest upfront commissions to advisers but higher trails, encouraging them to keep their clients on their books and not transfer them to new policies. “That has led to persistency improving over the years while others have seen it deteriorate,” he said. “We could have got more new business if we had focused on the upfront commissions but we have gone to the quality end by taking this stance. Regulators are now looking at commission but if the industry had followed the Fidelity Life model it would not have an issue.” It benefited advisers, too, he said. When

the earthquakes stuck Christchurch and many advisers had their businesses disrupted, those with strong renewal books were grateful for them. Jennings has been vocal in his criticism of churn and said it was something the industry needed to tackle. But he said he did not begrudge advisers being paid significant upfront commissions. “It’s hard getting out there, getting new business. I think they deserve the high commission they get for writing new business. I just don’t think they deserve it a second time around for shifting the business. “They have to make a huge effort to get a new client on board and they face a huge amount of rejection so they deserve that commission. But when they are taking it for a second, third or fourth time, we need to eliminate that. It’s costing consumers and companies.” Fred Dodds, chief executive of the Institute of Financial Advisers, said advisers valued Jennings’ honesty. “Milton is through and through an adviserfocussed executive and the whole Fidelity strategy has been about getting close to independent advisers – and he has been successful. I think advisers warm to him because he is just upfront and honest – no frills, he just says it as he sees it and advisers like that.” He said Jennings had also shown his strengths as a communicator at the many

international conferences Fidelity had run. “He has a love affair with offshore conferences where he is probably seen as the best host around. The culture at Fidelity is certainly one of family. He has transported that feel into Fidelity’s own GMC – General Managers Club for the top brokers who support Fidelity.” Jennings predicts the future is bright for the country’s advice force. “The industry needs to get together to try to grow it and to try to get new people and make it attractive for new recruits to come in. “With regulation and the Financial Advisers Act, the quality of advisers has risen and there’s a real opportunity for advisers to come in. We’ve seen a lot of good young mortgage brokers coming in and now they are starting to switch to selling risk. “There’s a real opportunity for financial advisers to be full financial planners. As many come through with university degrees we’ll see more producing a financial plan as well as offering risk advice. There’s a problem of financial literacy so we need advisers out there, it’s critically important.” Insurers and the Government could both play a part in promoting the role of independent advisers, he said. “With KiwiSaver balances running into hundreds of thousands of dollars people will need advice in the decumulation phase. Accumulation is reasonably simple but decumulation is critically important.” Jennings finishes as chief executive at the end of March and will shift to a board advisory role. He says there are already projects lined up for his attention including strategic alliances to work on. Jennings is also on the Grosvenor board and said it was refreshing to be on the other side of the table. “It’s a lot easier sitting on the board than trying to do it as the CEO. It will be a bit more relaxing. I’d like to pick up a few more directorships, I think I can contribute on boards and it is a role I enjoy.” Jennings says he will likely also be playing a bit more golf and focusing on exercise. “I’ve always been keen on keeping fit.” He said he was ready to hand over the role to one of a number of fresh young managers coming through the ranks of the company. “We’ve got some good young managers at Fidelity Life and it was time for them to have a go. I want to keep it growing as an organisation so it’s time for me to step aside. It’s time for some fresh blood and ideas to come through and take Fidelity Life to the next level.” Stability of shareholders and directors had been one of the things that helped in his time as chief executive and Jennings said he was keen to offer that to his successor, too. “I’ve devoted a lot of my life to the company and am passionate about it. I want to keep that involvement.” Jennings is believed to be in the running for a board position at the Financial Markets Authority.

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REGULATION

E C I V D A L A I C N A N I F G N I S S ACCE S R E I R R A B E H T G N I V O REM

hen the Code Committee

becgan its current consultation process for proposed changes to the Code of Professional Conduct for authorised financial advisers back in October 2015, the focus was on maintenance changes to ensure the Code remained fit for purpose. The impetus for change was the

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pending phasing out of the National Certificate in Financial Services (Financial Advice) (Level 5), which had been adopted as the default minimum standard of competence, knowledge and skills for an AFA when the Code first came into force on December 1, 2010. As a part of our initial round of consultation, we noted concerns over the accessibility of advice. New Zealand

is not alone in grappling with this issue. None of the overseas regimes we have considered has been truly successful in finding the regulatory sweet spot in this space. How best to facilitate access to advice without unduly exposing consumers to the risk of suboptimal practices? For AFAs, the amount of paperwork many feel is required to evidence the

REGULATION

CE "For AFAs,

The Financial Advisers Act has been criticised for dis-incentivising the provision of some types of financial advice. suitability of advice has been identified as a particular problem. We asked whether the current transactional advice mechanism in Code Standard 8 was an appropriate solution for enhancing access to financial advice, and whether changes to that Code Standard were warranted. Given the review of the Financial Advisers Act currently in train, the

the amount of paperwork many feel is required to evidence the suitability of advice has been identified as a particular problem." -David Ireland

starting point for our consultation process was that the Code Standards should remain as currently worded. However, we wanted to test the waters to see whether the transactional advice relief mechanism introduced to the Code on May 1, 2014, had been effective: informal feedback received was that it was not working to improve access to advice as had been hoped. CONSULTATION FEEDBACK Feedback from our initial round of consultation was pretty conclusive. The transactional advice suitability relief

mechanism currently provided in the Code was not operating as intended. Part of the reason has been the impact of the Financial Markets Authority’s Guidance Note: Limited Personalised Advice, issued in 2014. While the committee has encouraged FMA to revise the wording of this Guidance Note, the damage has been done. In the absence of a change in the law to which the Guidance Note relates, AFAs will understandably take a conservative approach, and treat the Guidance Note in its current form as at least indicative of FMA’s thinking in this area. If financial advice is viewed as a continuum, the concern is that the current regulatory settings push AFAs to the extreme ends of the continuum, incentivised either to provide no personalised advice or to only provide comprehensive personalised advice, with minimal scope for operating in the middle. This is not a good outcome for consumers. The first round of consultation certainly encouraged us to consider adjusting the advice suitability relief mechanisms to make them more effective. However, it was the Options Paper released by MBIE during the course of our consultation that forced our hand. Amid a range of observations recorded within the Options Paper, MBIE noted certain types of advice were not being provided. ‘Advice-gaps’ were being driven by the regulatory regime “which places high monitoring and compliance requirements on some advisers and products, thereby incentivising the provision of other types of advice”. This was identified by MBIE as one of the key barriers to achieving the objectives of the regime. With the final outcome of MBIE’s review of the Financial Advisers Act not becoming known until the second half of this year, and those outcomes not likely to find their way into the statute books any time soon, the current Code review was seen as an opportunity to break down the identified barriers to the accessibility of advice. The fact that a doctor might be able to stitch up a major wound in the future should not deter you from attempting to stem the flow of blood meantime! David Ireland, Code Committee chairman

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PRACTICE ASSET INVESTMENT DATA MANAGEMENT ADVISER

GLOBAL CREDIT – THE MISSING ASSET CLASS For those seeking higher yields and lower volatility another option is available, writes Matthew Mimms

{ MATTHEW MIMMS }

ncome-focussed investors in New Zealand are facing times of challenge. Bonds issued a few years ago at high interest rates are now maturing. A quick look at a comparison of term deposit rates shows that you’re unlikely to get much approaching 3.5% gross from a six-month term deposit. A recent syndication for an April 2033 NZ Government stock set a

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coupon of 3.5%. Whilst this level of income may seem low by historic standards, New Zealand investors in domestic cash and fixed income assets should consider themselves lucky. With inflation (as represented by the Consumer Price Index or CPI) currently sitting at 0.1%, at least we are getting a positive real rate of return (above CPI/inflation).

INFLATION BENIGN Globally, inflation is largely benign and interest rates are very low (for example, the “official cash rate” equivalent in the UK is 0.5%, in the US 0.5%, in the EU 0.05%, and in Switzerland -0.75%; that’s right, you have to pay them to look after your money). International comparison may however

prove cold comfort for many investors used to more attractive income levels. One possible option for those seeking income is to invest in high-yielding equities. Historically, both New Zealand and Australia have offered attractive dividend yields. For example, the current cash dividend yield on the NZX 50 is 4.78%, noticeably above the current five-year government bond yield of 3.35% (many individual stocks offer investors even higher yields). But this chase for yield does come with higher risk; equities, even higher-yielding ones, are still equities. When the sharemarket falls, higher yielding stocks will also almost certainly fall. Unbeknown to many local investors, there is also another asset type that offers attractive

PRACTICE ASSET INVESTMENT DATA MANAGEMENT ADVISER

yields, typically above that offered by cash or government bonds, with a lower level of volatility (risk) than equities while bringing diversification benefits that can reduce overall portfolio risk:

GLOBAL CREDIT What is global credit.? There are many types of global credit and fixed income instruments, including: ▶ Investment-grade corporate bonds. ▶ Convertible corporate bonds. ▶ Secured corporate loans. ▶ Asset-backed debt securities. ▶ Non-investment-grade corporate (high yield) bonds. ▶ Bank capital securities. ▶ Emerging market credit. These each have their own characteristics in terms of yield, credit risk and interest rate risk. The majority of global credit sectors are not directly accessible to retail investors. Global credit markets are large and deep. For example, the US corporate bond market alone is worth US$8 trillion (compare that with the market capitalisation of the NZX of $107 billion). The size of the market, the number and size of issuers and investors and the wide variety of credit securities and products can help to support liquidity, even in difficult times. What benefits and characteristics does global credit bring to portfolios? Corporate bonds, loans and high-yield securities tend to pay investors regular coupons, with a higher yield than cash or fixed interest. A diversified portfolio of such couponpaying instruments allows for the smoothing out of all those cash-flows, which can be paid out as regular, high-yielding income. For New Zealand investors, credit securities, when hedged back to the New Zealand dollar, offer higher income than cash and most traditional fixed income assets. For example, as at December 31, 2015, US Investment Grade Corporate Bonds had a NZD hedged yield to maturity of 5.23%, and US High Yield Bonds, 10.41%.

CAPITAL RESILIENCE Credit investors may benefit from having priority of payment above equity investors for payment of coupons and repayment of principal. Senior credit investors rank ahead of hybrid and subordinated debt investors. A credit investor's ranking in the company's capital structure is a key determinant of their recovery of investment if a company gets into trouble, and their certainty of receiving ongoing distributions. In addition to seniority, some credit investments also provide investors with the benefit of security over specific assets of the borrower, providing further protection to the investor. This normally takes the form of a mortgage over property and other realisable assets. Global credit is a large and deep market and significantly larger than global sharemarkets. It has many different investor types, including asset managers, banks, insurance companies, pension funds and sovereign wealth funds.

Changes in credit risk can impact at both an individual security, and at a sector and overall market level. – Matthew Mimms

This diversity of investors means credit investments are traded between buyers and sellers even in difficult times. Global credit has been a more resilient asset class than equities, recovering far faster than equities after the GFC. Global credit is regarded as intermediate risk with an investment horizon of three to five years.

DIVERSIFICATION Global credit allows New Zealand investors to diversify away from the local sharemarket and achieve a broader spread of exposures across issuers and economic/geographic areas. Industry diversification is particularly important, because corporate failures may occur in clusters – the technology crash in the early 2000s, or financial institutions during the GFC, for example. Industry diversification is difficult to achieve in the New Zealand and Australian market. Our markets have a heavy concentration to financials and miners (about 60% of ASX 200 market capitalisation is in those two sectors) and utilities (about 15.8% of the NZX50). Far greater diversification is available by investing in global asset classes. Credit sectors also tend to have a relatively low correlation (which is good for portfolio diversification) to traditional asset classes. For example, for the 10 year period ending June 30 2015, Syndicated Loans (a sub-sector of credit) had a correlation of 0.31 to unhedged global equities, 0.54 to Australian equities, and -0.29 to global government bonds (i.e. negatively correlated)11.

NO FREE LUNCH Like all investments, there are of course risks to consider when investing in global credit. The key one is credit risk, where a company fails to repay coupons or principal in full and on time, or where a company experiences a credit downgrade which in turn can have implications for their yield and the capital value of their bonds. Many credit sectors will comprise on average lower credit rated securities than traditional government bonds. Credit worthiness will vary across sectors, ranging from AAA to BBB rating categories for

example in investment grade credit to BB and below for high yield bonds. Changes in credit risk can impact at both an individual security, and at a sector and overall market level. For example, when credit risk increases (due for example to a slowdown in economic activity or tight liquidity conditions), this will typically lead to a fall in the value of credit securities (as seen during the Global Financial Crisis). Credit risk can be better managed and mitigated through careful investment analysis and security selection, thorough review of creditor protections in any security (i.e. seniority, security), a focus on rated, liquid investments, and significant diversification.

INSTITUTIONAL GRADE ASSETS For retail investors, it is very difficult to effectively access global credit investments directly. Local Australian and New Zealand credit markets are relatively small in size, with lending (and capital markets issuance) dominated by banks. In addition, global credit securities are typically only sold to wholesale investors and/or have large minimum investment sizes ($500,000-plus). The small number of individual credit securities made available directly to the retail market in Australia and New Zealand are often of “non-institutional quality”, being subordinated, unrated and without a liquid, traded market. Finally, credit investing requires considerably more diversity than equity portfolios. Diversity is more important in credit portfolios than in equity portfolios but less recognised. A credit portfolio with 20 to 50 securities is not diversified enough to reap the full benefits of diversification. The diversity required to create a robust credit portfolio is simply not possible to replicate with a small portfolio.

MANAGED PORTFOLIOS This is why global credit has historically been a more institutional market. Even the larger institutional investors, such as superannuation funds, will typically invest in global credit via managed portfolios, not through selecting a small number of individual bonds. In conclusion, global credit is a large, and globally diversified, asset class that has historically generated higher levels of income than cash and traditional fixed income assets but with a lower level of volatility than equities. It provides global diversification benefits to New Zealand investors. Credit is an intermediate risk asset class (over the longer term, more risky than cash and government bonds, but less risky than equities). The institutional nature and unique characteristics of the asset class means that for most retail investors, access is easier and best achieved via a professional active fund manager with expertise in the sector. Matthew Mimms of The Investment Store with contribution from Richard Quin of Bentham Asset Management. Matthew Mimms is managing director and The Investment Store, a New Zealandbased funds marketing business.

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ADVISER LEAD STORY PROFILE

ADVICE BUSINESS OFFERS PERFECT FIT After a couple of yearsâ€™ hard graft, the decision to move into financial advice is paying off for Mark Sheehan.

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ADVISER LEAD YROTS STORY PROFILE DAEL

inancial adviser Mark Sheehan could not imagine arising in the morning and heading off to any other kind of job. Sheehan, who runs a Nelsonbased branch of Plus4, previously known as Endeavour Financial Planning, has been working as an adviser since 2009. On returning to New Zealand after an OE, thinking he should do something with the degree in finance he had picked up from university, he first started dabbling with financial advice. Fred Dodds, now the president of the Institute of Financial Advisers (IFA), hired him to work in the Tower Financial Advisory team, working on business development with a compliance focus. “The finance companies were just starting to hit the walls and the disclosure regime was being rolled out and my job there was to assist advisers to get ready for the regime that was inevitably coming,” Sheehan remembers.

OPPORTUNE MOVE After a year in the job, he decided to try his hand on the other side, as an adviser. An opportunity came up in Nelson and he moved from Wellington to take it. He has been there ever since. Sheehan’s wife, Nicki van Asch, has family in Marlborough and he admits he thought the two centres were closer than they really are. But now Nelson is offering the family a lifestyle that Sheehan says most other areas could not match. He has a five-minute commute to work, can pop home for lunch if he wants to and affordable houses mean what Sheehan earns is enough for the family to live on. Sheehan offers insurance, investment and KiwiSaver advice to his clients. Over the years he has bought five other books of business to gradually increase his client base. But he said it was not easy to get started as an advice business. “I found it really hard, to be perfectly honest. It’s a provincial town, I didn’t really know many people and the job itself is difficult to get established. But I just kept going I guess and one day it just seemed to be all right. “One of the big advantages I had was that through my previous job with Tower I knew 50 advisers so if anything came up I could ring one of them.”

CATERING FOR NEED That was one of the industry’s big issues to tackle if it was to supply enough advisers to cater for a growing need for advice, he said. Sheehan said almost everyone had to suffer through least a couple of lean years before they started earning money. It had helped that he did not yet have children and a mortgage when he first started. “The initial two or three years is really tough. I don’t know what the answer is but once you get through it, talk to anyone, they

"There are a

lot of clients I deal with where you’re working for free really. Some people you just want to help out but if it was in purely commercial terms there would be a lot of people not getting advice" -Mark Sheehan

love it. The only answer I have is that you take on heaps of debt so you can’t leave. That was part of it. What else was I going to do? I was almost in a situation where I couldn’t leave so I carried on. It’s darkest before dawn then one day you wake up and it’s okay.” It took two years before he hired a full-time employee to help with client management and paperwork. Sheehan is an AFA and certified financial planner (CFP) and has had a stint as chair of the local branch of the IFA. His desire to achieve higher qualification levels than strictly necessary was driven by a need to prove himself as a younger person starting in the industry.

OVER 30S INVESTORS “When I started I was 30 and trying to bring on investment funds. The vast majority of folks with money to invest are a bit older than 30. If you achieve the pinnacle mark you get a bit more credibility,” he said. “It’s a credible way to prove you are better than competent, rather than 40 years’ experience which I simply didn’t have. I was AN AFA straight away and then CFP. I try to stay abreast of things as best I can. Plus there’s the responsibility. You’re looking after people’s life savings or their insurances and I was wary that you don’t know what you don’t know.” With an eye on the future, Sheehan could see the potential in building up a solid book of KiwiSaver clients. “A bit of a point of difference for me is that I do a broad range of financial advice. When I started I tended to deal with younger people and their inquiries tended to be around

KiwiSaver and mortgages as opposed to lump sum investment. “I look at that as future-proofing the business. In 20 years it’s likely there will be a big focus on KiwiSaver. I figure if I keep ticking along with that it’s a long-term strategy. I don’t know what it’s going to look like in 20 years so I keep that iron in the fire just in case. You imagine that’s where a lot of the lump sum investment is going to come from eventually.” Insurance fits into the business as a source of cash-flow and other investment advice provides ongoing work. Were he a 50-year-old adviser, Sheehan said he would not have bothered with KiwiSaver.

NOT A CHARITY “There are a lot of clients I deal with where you’re working for free really. Some people you just want to help out but if it was in purely commercial terms there would be a lot of people not getting advice because it doesn’t stack up from commercial terms but we’re not a charity either. “As a boutique operator it would be very difficult to have high volumes of clients. I think about guys in town here, these older gents and ladies who give investment advice. Would they rather spend their time looking after someone with a $1 million portfolio or a $20,000 KiwiSaver. The time is relatively the same and the process is relatively the same but one pays you and the other doesn’t.” A small-town environment means Sheehan focuses on being trustworthy and building an image as an honest operator. His goal is to remain a boutique operator and not become too big. “There are certain clients who would rather deal with me than a large company,” Sheehan says. But he said life was getting tougher for smaller operators as regulatory expectations increased. With four children including one new baby, Sheehan does not have much spare time, although he plays a lot of sport and is involved with the Tasman United football league. “You’ve got to have something away from work so you are not just constantly 24-hours a day thinking about the job.” A career in financial advice offered good work-life balance and Sheehan the industry should appeal to more young people. “You help people out and everyone enjoys doing that really, it’s very rewarding. If you work hard you get paid pretty well. You’ve got the opportunity to build your own business. It’s fantastic really. “Once you get going there’s fantastic work life balance. I’ve had other jobs in corporates and small companies and there’s a reason that I’ll be doing this the rest of my life and that’s a big part of it. I’d recommend it to anyone.”

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PAA NEWS

Together towards tomorrow Knowledge, insight and experience – three crucial elements that turn business goals into reality. The National Advisers Conference 2016 has a huge line-up of leading thinkers and speakers – on business, on advice, and on life. Here’s a quick snapshot of just five speakers you can hear from on July 28 and 29 this year. Find out more at nationaladvisersconference.co.nz.

the New Zealander of the Year Awards in 2014.

Julia Hartley Moore Personal relationships that endure Julia Hartley Moore is not only New Zealand and Australia’s most recognised private investigator, but also an author, radio host, media commentator and inspirational speaker. Through her work as a private investigator and her life experiences, Julia has gained immense knowledge on the subject of human nature and relationships.

Karen Schaeffer Clients for life Karen Schaeffer is the managing member and co-founder of Schaeffer Financial LLC, a financial consulting firm in suburban Washington, DC. With over 30 years' experience, She has developed a diverse client base including professional women, Foreign Service officers, foreign nationals and Federal government employees.

Dr Oliver Hartwich Together in a new world Dr Oliver Hartwich is the executive director of The New Zealand Initiative, an independent public policy think tank

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supported by chief executives of major New Zealand businesses. Before joining the Initiative, he was a research fellow at the Centre for Independent Studies (Sydney), the chief economist at Policy Exchange (London), and an adviser in the UK House of Lords.

Mai Chen Super diversity for tomorrow Mai Chen is the managing partner of Chen Palmer New Zealand Public and Employment Law Specialists, Australasia’s first specialist public law firm, which she co-founded in 1994. Mai Chen is an adjunct professor at the University of Auckland School of Law; a director on the board of BNZ; and was a top 10 finalist in

Steven Bradbury Be the last one standing Speed-skater Steven Bradbury collected the most unlikely, unthinkable gold medal in the history of the Olympics. Australia’s first Winter Olympic Gold medal. Bradbury tells an inspirational story of triumph over adversity, of how he underwent years of obsessive training, and of how he armed himself with the information and tools he needed to achieve this amazing success.

Visit nationaladvisersconference.co.nz to find out more about our speakers, sessions and what we have lined up for the National Advisers Conference 2016.

PRACTICE ASSET DATA MANAGEMENT ADVISER

DIG DEEPER ON ANNUAL REVIEWS Is process the problem or the people. Tony Vidler discusses changes in the lives of Kiwi investors.

{ TONY VIDLER }

ou know how you go through the annual review process with clients each year and ask “has anything changed?”, and then 7 out of 10 say “no, not really”? Somebody is lying. Or the process doesn’t

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work. It is definitely one or the other. Statistics NZ have compiled the most comprehensive research on what is really happening in Kiwi lives with their 2014 New Zealand General Social Survey; they found: Seven in 10 New Zealand adults experienced at least one change that had a major impact on their lives in the last 12 months.   The study investigated how New Zealand adults deal with change in their lives and, in particular, how they use social networks to help deal with these changes. Social network refers to the wider social fabric of people’s lives, too; it isn’t a social media thing. Their community, families, and the professionals they turn to for emotional, financial and practical support, is the social network referred to.

with us, because there is a massive difference between what the national data tells us about how many lives change significantly each year and what our annual review process with clients reveals. But maybe the problem is our process. Perhaps it doesn’t do the job it is supposed to do. Perhaps our process is the problem, not the people. If 70% of Kiwi adults on average have experienced significant changes in health, finances, relationships, employment or living arrangements in the last year, and your annual review process is indicating that less than 20% have experienced any significant change in their world during that same time, you may well be a statistical exception. Or your process is utterly ineffective.

NOT TOTALLY HONEST?

I am willing to bet that the standard annual review process the financial advice industry has employed is utterly ineffective. It is hard to believe that every adviser I talk to is a statistical

Either Statistics NZ have suddenly become really poor at compiling and analysing data, or our clients are not always being totally honest

PRACTICE ASSET DATA MANAGEMENT ADVISER

and evaluating agreed financial strategies and solutions, in accordance with those agreed with the client”.

ANNUAL REVIEWS

anomaly, yet virtually all have an annual review process which suggests that only perhaps 12%-25% of their clients have experienced a significant change in the last year. Or lower. So what has happened and, more importantly, what can we do about it? It seems that the bulk of the industry has moved to a uniform approach to handling the annual review requirement of best practice standards which is essentially based on the perceived needs of the regulators, and is deemed the safest path for advisers. That is, clients get sent a thorough checklist and we pass the burden to determine ongoing suitability of product or advice to the client to determine. In essence the industry sends a checklist and says “get in touch if any of this stuff happened and we’ll give some more advice”.

CHECKLIST APPROACH Not surprisingly, very few clients appear motivated to give the checklist more than a few seconds attention, and even fewer engage thoughtfully with the review process. This checklist approach is thoroughly boring, bland and does little to engage clients’ minds, nor does it appear relevant to the majority of them as it arrives well after most significant changes have occurred in clients’ lives. If Statistics NZ is correct, the clients have already received the support and made the changes required by turning to their own social networks before our dull checklist arrives in the post. So the adviser becomes pretty much the last to know of any significant changes in clients’ lives, if we get to know of them at all, and our process creates a sense on the client’s part that we are actually out of touch with their world. It is time for us to step back, have a good look at what we are trying to achieve, and start again when engaging clients in

It seems that the bulk of the industry has moved to a uniform approach to handling the annual review requirement of best practice standards which is essentially based on the perceived needs of the regulators. ongoing reviews. To recap: there is nothing I can find in the law or the Code of Professional Conduct that says, “The way to be compliant is to send a checklist”. Our obligation is “to make reasonable enquiries to ensure (the adviser) has an up-to-date understanding of the client’s financial situation, financial needs, financial goals, and risk profile, having regard to the nature of the personalised service being provided”. This is the benchmark requirement for the “best practice” end of the advice spectrum. Even if we shift back from the “best practice” end to the middle of the current professional practice continuum, being the requirements of NCFS (5), we find that the objective applying to advisers is that they have “mechanisms and timeframes for reporting

So here is the key point: as an industry we’re shooting ourselves in the foot with this stupid checklist approach to annual reviews. Nobody that matters told us we had to do it that way. The people who pay the bills and who we are supposed to be listening to and helping aren’t engaging with the process in the main. It is too little and it is too late for most clients, and rather than being part of a highly personalised service it becomes seen for what it is: a robotic and impersonal safety procedure designed to help the adviser’s business, not the client. Knowing what I know now I’d do things differently today. The review process would be incremental, and largely done over the phone or via video conferencing apps, every four months (so three times per year), although a face-to-face once a year at least would be an ideal component. The key is that we must be having a personal conversation that guides the client through what has been happening in their world (quickly) over a relatively short period of time (last three-four months), and has a clear outcome for the client in the form of ongoing suitability. They are going to hear: “You’re fine and what you have is all good. Gee, we might need to look at that part of the portfolio/plan/ program again…”

MEANINGFUL PROCESS Either way it provides continual re-assurance regarding suitability and relevance for the client, and actually puts the adviser into a meaningful review process that achieves multiple objectives: ➜ The adviser is present without being a nuisance, and has an opportunity to become embedded as part of the social network of the client (someone they DO turn to when big changes happen). ➜ The focus is upon making sure the client has what is right for them in the here and now ➜ We are all on top of the changes in life that can derail plans. ➜ It is compliant, and determining suitability is at the forefront. Above all, it puts the client back in the centre of the relationship and the process is now there to help the client, not some third party. Wasn’t that the objective of having good process and professional practice to begin with? Tony Vidler is an adviser to financial advisers, helping them to grow their businesses via his coaching firm, Strictly Business.

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PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

Claims declined for non-disclosure Are insurers being fair in how they decide what they will reject?

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PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

{ RUSSELL HUTCHINSON }

nsurers value their right to decline claims for non-disclosure because it simplifies underwriting at the time a policy is set up. Some consumer advocates argue that it is unfair and should be much more limited. What’s going on? Some consumer advocates argue hard against the rules around non-disclosure because they think insurers are unfair in how they are applied. Very often this idea springs from a lack of understanding of the underwriting process. If a claim was made for, say, income protection arising from a new heart condition, and it was discovered that serious mental health issues had been non-disclosed, they complain that these two conditions are unrelated, and the insurer should wear the claim. Insurers rightly point out that they may never have had the risk had they been able to properly assess all the information: they may have offered terms so unattractive that the applicant declined to take the cover. Even had terms been acceptable the insurer has missed out on the premium. There are many imponderables.

MEDICAL HISTORY CONUNDRUM Another charge made frequently is that insurers look back in medical history and can always find something the client failed to disclose, however immaterial, and therefore decline the claim. This is simply not the case. In aggregate, of course, insurers pay a lot of claims, so this cannot be true. But specifically insurers cannot whimsically nominate an immaterial condition and claim that they would have offered terms rather than just issue the policy. Several mechanisms exist to prevent this. For life insurance there are provisions in law which limit insurers’ ability to claim non-disclosure to the first three years. But even within that period they would have to demonstrate that the matter would have attracted adverse terms. If a claimant goes to a disputes resolution body then they will sometimes involve an independent underwriter to confirm any substandard terms and be bound by the opinion if it considers there was no additional risk.

REVISION OF TERMS However, it is usual to decline for material non-

A couple of insurers have contemplated a world without the ability to decline a claim for nondisclosure. It is worth wondering what that would look like. disclosure if it is apparent the non-disclosed matter would have attracted adverse terms whether the reason for claim is in any way related. It is indeed necessary to decline to invoke the company’s right to do so and then to offer revised terms if they are going to do so. If the revised terms are not accepted, usually within a defined period of time, then the whole contract can be forfeit and premiums refunded. Premiums are refunded because cancelling from inception implies the contract never existed. I believe most insurers will endeavour to pay a benefit and be prepared to adapt the benefit to what would have been purchased for the premium paid after adjustment for the revised risk. They are certainly mindful of being able to have to defend their position if the claimant approaches a dispute resolution body. Recently one writer on the subject identified clauses in some policy wordings which allow the company to deduct costs from the premium refund in the event of avoiding the contract from inception. If the company has paid benefits it is possible to offset them from the refund but never in my experience have I seen commissions recovered from refund amounts. The cancellation and reinstatement of a contract with altered terms appears harsh to clients especially when the non-disclosure is innocent but the process dictates that legalese be used. An underwriter I know explains that they could sometimes soften the impact by verbally explaining the need for the language. Where a policy is cancelled for nondisclosure during the responsibility period/ first two years insurers will generally clawback commissions. Sometimes circumstances mean that the advisers end up having a discussion about the claw-back. But after the responsibility period it is our experience that insurers have always worn the cost of commission. Although we can see merit in clawing it back from the adviser in some cases: one insurer relates how a case of nondisclosure arose from a replacement business case written by an adviser. The non-disclosed disorder was declared to the previous insurer, but not to the new insurer in an application

form completed by the adviser but signed by the client. Such cases usually end up with negotiated solutions through the dispute resolution process. A couple of insurers have contemplated a world without the ability to decline a claim for non-disclosure. It is worth wondering what that would look like. Clients could not cheerfully omit, forget, misunderstand, or outright lie to insurers without threat of penalty. Then insurers would have to get better data to inform new business underwriting. Firstly, it would probably require a lot more evidence at the time of underwriting. Every case might require access to the notes held by the GP and the history of medical tests and prescriptions held by the Ministry of Health. Both sources of information belong to the client and can be accessed by them if requested. However, it is hard to get the information out of both of these stores of data – not impossible, but hard. I know two people that have obtained all their GP records and health data.

CHEAPER COVER Secondly, tests may be requested a lot more often. Compared with other countries New Zealand and Australia ask for very few tests in the underwriting process. As an example, take the United States: after two years they cannot deny a claim based on non-disclosure. They require many more tests compared with New Zealand and decline applications for cover more frequently – and they are permitted to decline them, not just defer as we tend to because of our Human Rights law. Conversely, their cover is cheaper. In short, it would be a lot more expensive and onerous to apply for new cover. How exactly that would impact the level of sales and premiums is complicated and difficult to forecast. Extra costs would have to be recovered from clients. It is possible that this might be offset in some way by a reduction in switching (because it becomes harder) but it might just depress levels of new business overall. There would be some positive effect from reduced costs at claim time, but these would take years to emerge. There are unknown possible reactions from clients as the underwriting process becomes somewhat more traumatic for them. The role of Government agencies in helping to make information available would be crucial, and yet their attitude towards the data in their custody does not suggest it would be easy to get them to change. The adjustment would be very difficult. If insurers are to maintain the current approach they need to explain better how the system generates fair outcomes, otherwise the debate will be carried by those keen to paint the claims process as too one-sided.

Russell Hutchinson is director of Chatswood Consulting and director of Quality Product Research.

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PRACTICE ASSET DATA MANAGEMENT ADVISER

STRUGGLE FOR SMALL BUSINESSES Many advisers with relatively little funds under management are struggling to get by, writes Mike Moore.

{ MIKE MOORE }

re you an investment adviser with less than $10 million in funds under management? These ideas may suit you. At one time you could be an effective adviser with relatively small funds under management, but regrettably that time has passed. The impact of regulation and the

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cost of compliance has really eroded margins to the extent that you may well be operating on negligible profit and not as a growing and profitable business. In addition the workload has gone up but in many cases the income has gone down. Over the last five years we have spoken to many advisers in this position, many of whom

we have helped resolve the situation through either acquiring other practices to 'bulk up' or merging or selling down for a practical exit from the business.

QUALITY YEARS Having said that, a lot of advisers are still in an unhappy space with no new business or

PRACTICE ASSET DATA MANAGEMENT ADVISER

The impact of regulation and the cost of compliance has really eroded margins to the extent that you may well be operating on negligible profit and not as a growing and profitable business.

incremental activity for some time but at the same time they do not really want to get out now; they still have many quality advisory years ahead of them. You may be interested to know that a New Zealand organisation is looking to partner with such people to provide them with an alternative to the current arrangement. By

providing a pathway for eventual retirement and also providing back office procedures, their idea is to give the adviser who is planning their exit another alternative opportunity. Roughly their idea is to give such advisers a ‘home’ where the provision of back office support and bulk-buying enables an improvement in margins and also provides a pathway to eventual exit. They asked if I thought there were many such people out there? I had to answer while I think there are, I really do not know. Therefore I am asking you the question as a bit of a reality check. In planning ahead we often have to take a pause and ask ourselves some critical questions. These could be: 1) Do I have an exit strategy that is going to give me a decent rate of return for my lifetime’s work? 2) How do I find a partner that will provide the type of services that I can be proud of for my existing clients? 3) Can I stay on longer if I can improve the margins of my practice? 4) Do I want to be involved with New Zealanders, with a local business or would I sooner work with an overseasbased organisation? 5) Am I actively pursuing new business activities? For example have I introduced five or more clients to my practice in the past 12 months? If not, why not? Is it the case that I have lost confidence, energy and enthusiasm and I am now sitting on an ever diminishing value in my practice? These questions are going to assist you to make up your mind about your short to medium term future. If you would like to hear more about this idea, give us a call. We are keen to help all advisers to get the best possible result for themselves and for their clients. It is fascinating to see how much activity

there is in the market. For example we have today promoted to potential buyers three quite different scenarios: 1) A retiring adviser, medium size, almost all risk. 2) A very small book from an adviser remaining in the business, largely medical. 3) The third one is a really decent book, 1000 odd clients and well over $600,000 in purchase price. In this case the adviser is again streamlining and just retaining a handful of clients and relationships in early retirement. Over the years we have seen a change in the mix of sellers, but they are all part of the four 'D’s' scenario which you'll no doubt remember: Death, Divorce, Disability or Despair.

PRESERVING PROFESSIONAL LIFE It is probably unfair to call someone who merely wants to downsize their business as being in despair; rather, they are taking the opportunity of preserving the longevity of their professional life by only retaining key clients, and selling down the rest. At the start of the year you laid a plan for your practice. Expansion, maintenance or streamlining. We have been busy since the beginning of the year and should you be making a decision about the practice you own we look forward to hearing from you How are your plans going so far? If you are on the expansionary side, we have seen some excellent ideas come from recent clients who have resolved to not only expand their practice but also refine it. We all need new clients, just a trickle that keeps you aspirational and also replaces the inevitable loss of clients through death or change of circumstances. Throughout my advisory career we were told that the best possible option for new clients was referral. But the minority of advisers practiced what they preached. It sometimes gets too hard to bite the bullet and pick up the phone so some smart people have a habit. Firstly at the beginning of the year they set aside some opportunities to work with key clients and gain referrals.

CHOOSING RIGHT PEOPLE Often these are socially based, like a show and a dinner, a jointly shared experience with family or even organising an interesting speaker for an informal luncheon. That is entered in the diary and suddenly the pressure is on to choose the right people to come along. It actually focuses your mind on which clients you would like to replicate. May I suggest that today may be a good time to dust off the diary, set a tentative date and concept and get enough names so that you can be sure of a full house? We are right in the process of making sure the financial year next year is going to boom. I hope you have as good a year as we plan to. Mike Moore is the principal of Mike Moore Marketing Limited. Visit www.mikemoore.co.nz

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ASSET ADVISER

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 %

New Zealand Insurance Fund Cash AMP KiwiSaver Cash Fund 1.4371 2.58 2.85 2.82 AMP Prem PSS OnePath NZ Cash 1.5337 2.65 2.93 2.94 AMP PSS Select Cash 1.449 2.45 2.73 2.68 ANZ Default KiwiSaver Scheme-Cash 1.3672 2.86 3.16 3.11 ANZ KiwiSaver-Cash 1.2741 2.94 3.21 3.11 Aon KiwiSaver ANZ Cash 14.7763 2.49 2.65 2.64 Aon KiwiSaver Nikko AM Cash 13.7519 2.84 3.11 3.20 ASB KiwiSaver Scheme's NZ Cash 1.3879 3.05 3.23 2.95 Asteron Rtrmnt Savings Plan Deposit 10.6898 3.35 3.44 3.34 Asteron Superplan 2000 Capital Fund 2.2429 3.01 3.33 3.35 Asteron Superplan Capital Fund 2.6517 2.46 2.78 2.81 Fisher TWO KiwiSaver Scheme-Presv 2754.29863 2.91 3.16 3.17 Grosvenor KiwiSaver Enhanced 1.4541 2.73 3.09 3.20 Income Fund Mercer KiwiSaver Cash -3.00 3.22 3.17 OneAnswer KiwiSaver-Cash Fund 1.3246 2.80 3.09 2.99 SIL 60s + Sup Cash Fund 2.1174 2.46 2.57 2.50 SIL Cash Plus 2.1174 2.46 2.57 2.50 Westpac KiwiSaver-Cash Fund 1.3339 3.01 3.16 2.98 Fidelity Life Cash Portfolio 3.226 1.47 1.69 1.63 Westpac KiwiSaver-Cash Fund 1.3276 3.25 3.19 3.02 New Zealand Insurance Fund Cash Non-PIE Fidelity Life Cash Portfolio 3.226 1.47 1.69 1.63 New Zealand Insurance Fund Equity Region Asia Pacific SIL 60s + Sup Pacific Basin Share 1.899 -6.56 3.08 2.00 SIL P/R Pacific Basin Fund 1.899 -6.56 3.08 2.00 New Zealand Insurance Fund Equity Region Australasia AMP Prem PSS OnePath NZ Shares 2.1033 7.92 11.25 12.30 Aon KiwiSaver Milford 2.8029 9.42 12.56 14.49 Asteron Superplan 2000 Trans Tasman 4.1161 18.82 15.64 14.45 Fund Asteron Superplan Trans Tasman Fund 5.183 17.90 14.84 13.69 Grosvenor KiwiSaver Socially Rsp Inv Gr 1.4859 6.23 6.49 5.79 Grosvenor KiwiSaver Trans-Tasman Share 1.2626 6.64 3.18 -0.04 Milford Active Growth KiwiSaver 2.81902 10.21 12.94 14.80 OneAnswer KiwiSaver-Australasian Share 1.6332 15.88 14.38 14.65 New Zealand Insurance Fund Equity Region Emerging Markets Fisher FreedomPlan - Emerg Mkts 2.3709 -3.20 3.95 -2.71 Fisher FuturePlan - Emerg Mkts 2.3709 -3.20 3.95 -2.71 New Zealand Insurance Fund Equity Region Europe Asteron Superplan 2000 European Fund 2.2764 0.81 11.53 8.36 Asteron Superplan European Fund 2.6559 0.08 10.71 7.57 New Zealand Insurance Fund Equity Region North America Asteron Superplan 2000 Nth Amrn Fd 2.3213 3.52 14.78 10.58 Asteron Superplan North American Fund 3.2847 3.07 14.18 9.93 New Zealand Insurance Fund Equity Region NZ Asteron Rtrmnt Savings Plan NZ Equity 3.911 19.31 15.87 14.51 SIL 60s + Sup NZ Share Fund 5.0929 15.57 13.61 14.62 New Zealand Insurance Fund Equity Region NZ Non-PIE Fidelity Life NZ Shares Portfolio 5.7034 10.87 9.64 7.19 New Zealand Insurance Fund Equity Region World AMP Prem PSS FD Intl Share Fund 1 Value 1.107 0.45 11.73 6.28 AMP Prem PSS FD Intl Share Fund 1.2024 2.86 12.78 8.13 3 Growth Asteron Rtrmnt Savings Plan Intl Eqty 2.5793 5.16 13.38 9.10 Asteron Superplan 2000 Aggressive Fund 1.9663 9.52 10.83 7.29 Asteron Superplan 2000 Global Fund 2.0728 4.25 12.77 8.56 Asteron Superplan Aggressive Fund 1.8427 8.92 10.19 6.59 Asteron Superplan Global Fund 2.4317 3.72 12.04 7.81 Fisher FreedomPlan - Intl Coms 2.48762 -6.43 6.04 4.56 Fisher FuturePlan - Intl Coms 2.48762 -6.43 6.04 4.56 Fisher TWO KiwiSaver Scheme-Eq 3668.08937 3.75 9.22 7.41 Grosvenor KiwiSaver International Share 1.5473 0.31 11.11 7.26 OneAnswer KiwiSaver-Intl Share 1.5301 6.65 14.72 10.20 OneAnswer KiwiSaver-Sustainable Int Shr 1.4948 0.77 10.74 6.56 SIL 60s + Sup International Share Fund 2.9147 6.14 14.09 9.61 SIL International Share 2.9147 6.14 14.09 9.61 New Zealand Insurance Fund Equity Region World Non-PIE Fidelity Life Aggressive 3.1858 6.22 9.71 5.10

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76.76 4.22 1.36 3.40 264.36 3.74 1.65 361.60 3.34 3.41 22.95 26.62

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18.57

15.34 27.57 0.76 1.13 273.61 4.94 269.04

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4.94

0.17 2.86

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4.45 104.39

3 4

6.93

29.22 18.16 4.99 465.15 23.26

3 1 1 4 4

1.39 17.62

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1.75 14.35

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1.73 14.72

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1.68 1.75

2 3

3.11

5.47

5.37

3.79 0.77 3.31 5.52 31.25 2.92 24.43 65.10 7.31 34.95 4.50 0.72 12.26

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

6.02

Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price % Fidelity Life International 2.0985 -5.41 8.03 3.73 3.36 1 New Zealand Insurance Fund Equity Sector Global - Real Estate OneAnswer KiwiSaver-Intl Property 1.3678 4.24 9.03 10.41 8.82 2 New Zealand Insurance Fund Equity Sector NZ - Real Estate MFL Property Fund 3.8933 11.98 11.85 14.71 538.38 2 OneAnswer KiwiSaver-Australasian Prpty 1.7561 15.91 13.88 16.50 14.92 4 New Zealand Insurance Fund Global Bond AMP Prem PSS Blackrock Global Fixed Int 1.9285 4.90 5.35 6.26 2.28 3 AMP Prem PSS PIMCO Global Fixed 2.2039 2.97 4.77 7.52 2.43 4 Interest AMP Prem PSS SSgA Global Fixed 1.932 5.78 5.78 6.69 9.07 4 Int Index Asteron Rtrmnt Savings Plan Intl Fx Int 3.3481 5.79 5.67 6.28 1.19 3 Asteron Superplan 2000 Global Bond Fund 2.9574 4.80 5.02 5.75 1.15 3 Asteron Superplan Global Bond Fund 2.8002 4.90 5.05 5.78 1.88 3 OneAnswer KiwiSaver-Intl Fxd Int 1.656 4.37 5.03 6.01 3.02 3 New Zealand Insurance Fund Miscellaneous Westpac KiwiSaver-Capital Protect Plan 1 2.0517 6.16 12.81 10.21 11.72 -Westpac KiwiSaver-Capital Protect Plan 2 1.8419 6.15 12.82 10.22 9.92 -New Zealand Insurance Fund Miscellaneous Non-PIE Fidelity Life Options Portfolio 4.5901 10.42 6.69 4.40 14.24 -New Zealand Insurance Fund Mortgages Non-PIE Fidelity Life Mortgage 3.9597 4.25 3.78 3.26 2.04 -New Zealand Insurance Fund Multisector - Aggressive AMP KiwiSaver LS Aggressive Fund 1.2844 -1.28 7.18 7.11 225.85 3 AMP PSS DynamicMkts Growth 1.6109 -1.58 6.46 6.39 3.87 3 AMP PSS Select Growth 1.5194 -1.61 6.60 6.47 32.20 3 Aon KiwiSaver Russell Lifepoints 2045 7.4029 5.77 11.27 10.10 11.76 5 Fisher FreedomPlan - Growth 2.55204 4.03 7.67 6.72 7.71 3 Fisher Funds Growth KiwiSaver Fund 1.7158 6.88 10.56 7.76 1075.35 4 Fisher FuturePlan - Growth 2.55204 4.03 7.67 6.72 69.50 3 Forsyth Barr KiwiSaver Growth Portfolio 1.4571 10.33 9.32 8.09 13.59 4 Grosvenor KiwiSaver Geared Growth Fund 1.6796 2.60 9.76 6.88 5.74 3 Grosvenor KiwiSaver High Growth Fund 1.2985 3.28 8.85 6.33 140.73 3 Mercer KiwiSaver High Growth -4.13 11.02 9.30 97.28 4 New Zealand Insurance Fund Multisector - Aggressive Non-PIE AMP PRP Dynamic 1.8543 -1.60 6.35 5.49 107.33 2 New Zealand Insurance Fund Multisector - Balanced AMP KiwiSaver Fisher TWO Balanced 1.6045 6.07 8.01 7.71 27.79 3 AMP KiwiSaver LS Balanced Fund 1.4593 0.41 6.03 6.59 699.20 3 AMP KiwiSaver LS Moderate Balanced 1.467 1.11 5.65 6.08 464.77 2 Fund AMP PSS DynamicMkts Balanced 1.6913 -0.06 5.29 5.80 3.17 3 AMP PSS Lifesteps Consolidation 1.6467 0.95 5.07 5.43 7.42 2 AMP PSS Lifesteps Progression 1.7061 -0.23 5.29 5.85 2.89 3 AMP PSS Select Balanced 1.6391 -0.06 5.37 5.88 47.77 3 ANZ Default KiwiSaver Scheme-Balanced 1.5662 4.72 8.36 8.56 71.87 4 ANZ KiwiSaver-Balanced 1.6338 4.81 8.58 8.94 1337.63 4 Aon KiwiSaver ANZ Balanced 22.3426 4.59 8.04 8.84 23.37 4 Aon KiwiSaver Russell Lifepoints 2025 8.0369 5.48 8.81 8.90 14.86 4 Aon KiwiSaver Russell Lifepoints Bal 7.9806 5.94 9.99 9.51 68.11 4 ASB KiwiSaver Scheme's Balanced 1.5604 5.60 8.81 8.10 782.46 4 Asteron Rtrmnt Savings Plan Mgd Neutral 3.1278 8.90 10.35 9.40 16.64 5 Asteron Superplan 2000 Balanced Fund 2.4603 8.07 9.78 8.87 10.46 4 Asteron Superplan Balanced Fund 3.1128 7.32 9.01 8.02 67.32 3 Fisher FreedomPlan - Balanced Fund 3.59391 4.30 6.41 6.61 11.16 4 Fisher FuturePlan - Balanced 3.59391 4.30 6.41 6.61 121.98 4 Fisher TWO KiwiSaver Scheme-Bal 4341.45273 5.21 7.53 7.54 516.77 3 Grosvenor KiwiSaver Balanced Fund 1.542 3.80 6.60 6.10 315.20 2 Mercer KiwiSaver Balanced -4.27 8.83 8.08 245.10 4 Milford KiwiSaver Balanced 1.82816 6.54 11.05 11.74 91.40 5 OneAnswer KiwiSaver-Balanced 1.6553 4.91 8.69 9.02 400.15 4 Westpac KiwiSaver-Balanced Fund 1.5592 5.32 8.68 8.04 951.02 3 Westpac Retirement Plan - Balanced Port 3.2883 4.21 7.50 6.89 100.44 2 New Zealand Insurance Fund Multisector - Balanced Non-PIE Fidelity Life Balanced 4.0623 3.12 6.34 5.36 197.52 4 Fidelity Life Ethical Portfolio 3.0454 10.85 9.76 7.55 0.98 5 New Zealand Insurance Fund Multisector - Conservative AMP KiwiSaver Default (Default) 1.5055 3.17 5.28 5.04 1219.74 2 AMP PSS Select Income 1.732 4.29 3.09 4.40 2.10 2 ANZ Default KiwiSaver Scheme Cnsrv(Dflt) 1.6015 4.91 6.14 6.80 951.16 4 Name

Latest 1 Yr 3 Yr 5 Yr Size Morningstar Transaction Return Return Rating Return $M Overall Exit Price % ANZ KiwiSaver-Conservative 1.5747 4.45 6.02 6.61 545.48 4 Aon KiwiSaver Russell Lifepoints Cnsrv 8.8147 4.92 6.88 8.11 76.50 5 ASB KiwiSaver Scheme's Cnsrv (Default) 1.5885 5.16 5.77 5.88 3048.37 3 Fisher Funds Conservative KiwiSaver Fund 1.4588 5.14 6.33 6.51 410.54 3 Fisher FuturePlan - Capital Prot 1.19157 1.50 1.50 1.66 23.56 1 Fisher TWO KiwiSaver Cash 1.5854 5.25 5.70 6.18 644.99 3 Enhanced(Dflt) Mercer KiwiSaver Conservative (Default) -4.88 6.70 6.80 988.59 4 OneAnswer KiwiSaver-Conservative 1.5899 4.49 6.03 6.65 374.24 4 New Zealand Insurance Fund Multisector - Conservative Non-PIE Fidelity Life Conservative 4.3224 5.62 5.49 5.10 94.28 -New Zealand Insurance Fund Multisector - Growth AMP KiwiSaver ANZ Balanced Plus 1.7775 4.95 9.58 9.73 177.82 4 AMP KiwiSaver LS Growth Fund 1.3394 -0.86 6.73 6.83 523.11 2 AMP KiwiSaver Nikko AM Balanced 1.5912 8.30 10.36 8.85 30.34 3 AMP PSS Lifesteps Growth 1.6223 -1.15 6.16 6.22 0.75 2 ANZ Default KiwiSaver Scheme1.5453 4.82 9.57 9.45 79.97 3 Balanced Gr ANZ Default KiwiSaver Scheme-Growth 1.5198 4.82 10.74 10.30 65.30 4 ANZ KiwiSaver-Balanced Growth 1.6401 4.89 9.84 9.96 1105.63 4 ANZ KiwiSaver-Growth 1.6309 4.83 10.97 10.90 1804.32 5 Aon KiwiSaver Nikko AM Balanced 16.2098 7.65 9.96 8.62 6.19 3 Aon KiwiSaver Russell Lifepoints 2035 7.7597 5.84 10.22 9.62 12.61 3 Aon KiwiSaver Russell Lifepoints Growth 7.7822 6.04 11.08 10.12 25.09 4 ASB KiwiSaver Scheme's Growth 1.5043 5.60 10.31 8.93 815.21 3 Asteron Rtrmnt Savings Plan Mgd Growth 3.1694 11.05 12.38 10.49 30.92 4 Asteron Superplan 2000 Dynamic Fund 2.4435 9.86 11.53 9.70 2.69 4 Asteron Superplan Dynamic Fund 2.7698 9.30 10.90 9.04 21.52 3 Fisher TWO KiwiSaver Scheme-Gr 1.5019 4.88 8.68 8.40 200.70 2 Forsyth Barr KiwiSaver Balanced Port 1.5014 8.61 7.83 7.14 15.03 2 Grosvenor KiwiSaver Balanced Growth 1.4798 3.89 7.70 6.32 160.94 2 OneAnswer KiwiSaver-Balanced Growth 1.6625 4.84 9.92 10.05 356.80 4 OneAnswer KiwiSaver-Growth Fund 1.651 4.96 11.09 10.99 262.93 5 SIL 60s + Sup Balanced Fund 3.7624 4.46 9.01 9.22 18.02 4 SIL Balanced Plus 3.7624 4.46 9.01 9.22 80.30 4 Westpac KiwiSaver-Growth Fund 1.5758 6.01 10.32 9.37 630.81 3 Westpac Retirement Plan - Dynamic Port 3.6573 4.95 9.20 8.29 104.37 3 New Zealand Insurance Fund Multisector - Growth Non-PIE Fidelity Life Growth 3.7989 1.71 7.55 5.59 70.54 3 New Zealand Insurance Fund Multisector - Moderate AMP KiwiSaver LS Conservative Fund 1.6064 2.22 4.56 5.32 276.54 3 AMP KiwiSaver LS Moderate Fund 1.518 1.42 5.16 5.73 328.16 3 AMP PSS DynamicMkts Conservative 1.7074 1.59 3.69 4.48 0.97 3 AMP PSS Lifesteps Maturity 1.6298 1.67 3.76 4.53 3.20 3 AMP PSS Lifesteps Stability 1.6831 0.84 4.34 4.95 5.76 3 AMP PSS Select Conservative 1.6977 1.60 3.75 4.52 10.49 3 ANZ Default KiwiSaver Scheme-Cnsrv Bal 1.5866 4.63 7.17 7.67 25.51 4 ANZ KiwiSaver-Conservative Balanced 1.6126 4.67 7.33 7.85 638.64 4 Aon KiwiSaver Russell Lifepoints 2015 8.4222 5.08 7.28 8.15 5.03 4 Aon KiwiSaver Russell Lifepoints Mod 8.5132 5.59 8.48 8.86 16.48 5 ASB KiwiSaver Scheme's Moderate 1.5967 5.78 7.17 7.06 1018.60 4 Asteron Rtrmnt Savings Plan Mgd Conserv 2.9757 6.86 7.54 7.71 2.61 5 Asteron Superplan 2000 Conservative Fund 2.4029 6.03 6.96 7.22 3.10 4 Asteron Superplan Conservative Fund 2.6327 5.01 6.06 6.33 5.73 3 Fisher TWO KiwiSaver Scheme-Cnsrv 1.63953 5.02 5.91 6.46 113.82 3 Grosvenor KiwiSaver Conservative Fund 1.5568 4.54 4.80 5.71 113.57 3 OneAnswer KiwiSaver-Conservative Bal 1.6278 4.60 7.30 7.87 134.02 4 Westpac KiwiSaver-Conservative Fund 1.5456 4.77 5.80 6.31 1896.27 3 New Zealand Insurance Fund NZ Bonds AMP Prem PSS OnePath NZ Fixed Interest 1.8464 6.33 3.68 5.56 2.34 3 Asteron Rtrmnt Savings Plan NZ Fixed Int 3.1865 6.61 4.71 6.39 1.49 4 Asteron Superplan 2000 NZ Bond Fund 2.7331 5.86 4.31 5.97 1.28 3 Asteron Superplan NZ Bond Fund 3.4912 5.89 4.32 6.01 6.74 3 OneAnswer KiwiSaver-NZ Fixed Interest 1.6286 6.84 4.14 5.82 6.70 3 SIL 60s + Sup NZ Fixed Interest 2.8779 6.17 3.50 5.25 2.41 2 SIL NZ Fixed Interest 2.8779 6.17 3.50 5.25 6.32 2 Westpac Retirement Plan - Accum Port 3.2202 2.23 2.41 3.11 18.72 1 New Zealand Insurance Fund NZ Bonds Non-PIE Fidelity Life NZ Fixed Interest 3.9114 3.89 3.23 3.61 0.58 3 New Zealand OE Cash Asteron Rtrmnt Savings Plan NZ Property 4.8628 ---- 1.23 -Name

ASSET ADVISER

For more information call 0800 888 361

Name

Latest Transaction Exit Price 4.59642 4.59642 4.8332

1 Yr Return % 9.60 9.60 12.75

Fisher FreedomPlan - Property Fund Fisher FuturePlan - Property Fidelity Life Property Portfolio New Zealand OE Cash AMP Capital Cash Advantage Fund 1.39494 2.64 AMP Capital NZ Cash Fund 1.62572 3.14 AMP Prem PUT OnePath NZ Cash 1.359 2.55 AMP PUT Select Cash 1.3041 2.34 ASB Cash Fund -2.10 Fisher Cashplus Fund 1.2711 2.66 New Zealand OE Cash Non-PIE AMP UT NZ Cash 1.7824 0.98 New Zealand OE Equity Region Asia Pacific Non-PIE AMP UT Asian Shares 1.6405 -8.74 New Zealand OE Equity Region Australasia AMP Prem PUT OnePath NZ Shares 2.1353 7.82 Devon Alpha Fund 1.5926 4.98 Devon Trans-Tasman Fund 3.5259 11.10 Harbour Australasian Equity 2.0226 18.81 Milford Active Growth 2.80394 9.93 Milford Trans-Tasman 2.02979 9.98 Mint Australia NZ Active Equity 2.319 17.56 Nikko AM Australasian Small Companies 1.852 16.93 Nikko AM Concentrated Equity 1.8035 18.18 OneAnswer SAC Equity Selection 2.1416 7.56 Pie Australasian Growth Fund 4.4683 9.41 New Zealand OE Equity Region Australia AMP Capital Australian Share Fund 2.24668 -4.26 Devon Australian 1.3059 8.12 Fisher Funds Australian Growth Fund 3.1695 10.40 Fisher Funds Premium Australian Fund 1.3867 10.22 OneAnswer SAC Australian Share 3.7657 0.01 New Zealand OE Equity Region Australia Non-PIE AMP UT Australian Shares 2.3101 -6.66 New Zealand OE Equity Region NZ AMP Capital NZ Shares Fund 2.64613 19.12 AMP Capital Strategic NZShares Fund 2.32018 18.25 Fisher Funds NZ Growth Fund 6.6221 14.93 Fisher Funds Premium New Zealand Fund 1.553 14.86 Fisher Trans Tasman Equity Trust 4.492 15.45 Nikko AM Core Equity 1.7954 19.64 OneAnswer SAC NZ Share 3.9753 16.01 New Zealand OE Equity Region NZ Non-PIE AMP UT NZ Shares 3.3049 15.72 New Zealand OE Equity Region World AMP Capital Core Global Shares Fund 1.21587 7.92 AMP Capital Core Hedged Global 1.16467 -5.34 Shares Fd AMP Capital Emerging Markets Share 0.87154 -10.72 AMP Capital Global Shares Fund 2.22145 -1.25 AMP Capital Resp Invest Leaders Gl Sh 1.30383 -6.84 AMP Prem PUT FD Intl Share Fund 1 Value 1.1579 0.44 AMP Prem PUT FD Intl Share Fund 1.237 2.87 3 Growth AMP Prem PUT SSgA Global Shares Index 1.564 4.06 AMP Prem PUT SSgA Global Shares 1.8847 -3.68 IndexHdg ASB EasyFund World Shares Fund 1.2938 0.69 Elevation Capital Value Fund 1.4811 8.44 Fisher Funds International Growth Fund 1.5238 2.83 Fisher Funds Premium International Fund 1.5858 3.61 Fisher Global Fund 4.3394 -5.84 OneAnswer SAC International Share 1.7479 7.05 New Zealand OE Equity Sector Global - Real Estate AMP Capital Global Propty Securities Fd 1.57472 2.63 ASB EasyFund Global Property Fund 1.319 10.55 New Zealand OE Equity Sector NZ - Real Estate AMP Capital Listed Property Secs Fd 2.40348 17.04

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 9.09 7.41 0.91 -9.09 7.41 7.51 -9.71 9.54 0.44 -3.18 3.35 2.87 2.67 2.86 2.71

3.30 3.32 2.88 2.61 2.97 2.60

178.80 4140.20 3.28 3.75 376.00 24.65

-------

1.49

1.59

1.68

7.94

4.39

1.23

11.26 15.03 13.54 13.73 12.80 9.51 17.18 11.09 16.61 10.64 17.35

12.34 11.78 10.92 13.24 14.67 12.68 17.17 9.39 12.96 11.66 19.29

2.12 99.26 124.50 130.00 715.66 238.66 59.62 1.22 18.05 17.98 75.08

3 3 3 3 4 3 4 2 3 2 5

1.21 9.13 5.72 5.85 1.23

1.04 6.31 4.15 4.40 2.04

77.51 45.60 60.88 52.76 35.01

1 4 3 3 2

-0.10 0.08

1.25

16.25 16.94 12.94 13.15 11.58 16.35 13.99

423.09 84.40 130.18 65.52 51.24 22.73 106.16

3 4 3 3 2 3 2

13.02 12.07 3.09

15.17 9.20 722.32

9.83

9.91 456.84

2.42 11.18 8.96 11.77

-0.51 8.85 7.14 6.13

69.92 144.03 54.32 2.29

1 4 2 2

12.68 8.00

2.02

13.30 8.51

15.19 14.85 15.07 15.24 12.90 15.14 14.87

5.03

11.04 11.07 6.18

11.94 10.86 9.63 10.35 6.65 16.51

158.19 24.20 27.75 54.69 84.43 147.24

3 3 2 2 2 5

9.15 11.40 148.64 10.19 10.12 94.84

3 3

13.85 16.20 21.55

8.34 6.79 3.96 4.43 6.01 12.03

Latest 1 Yr Transaction Return Exit Price % AMP Capital NZ Property Fund 2.20889 17.99 Mint Australia NZ Real Estate Investment 1.7542 16.07 OneAnswer SAC Property Securities 3.088 15.87 New Zealand OE Global Bond AMP Capital Hdgd Gbl Fixed Intrst Fund 2.27736 3.66 AMP Prem PUT Blackrock Global Fixed Int 1.7895 4.68 AMP Prem PUT PIMCO Global Fixed 2.2062 2.86 Interest AMP Prem PUT SSgA Global Fixed 1.7881 5.21 Int Index ASB EasyFund World Fixed Interest Trust 1.105 -Fisher BondPlus Fund 2.0892 3.29 New Zealand OE Miscellaneous Fisher Funds Property and Infrastructure 1.9588 9.30 KTAM NZ Australian Long Short Equity 1.33972 -Nikko AM Income 1.2646 9.22 Pathfinder Commodity Plus Fund 0.9403 0.62 New Zealand OE Mortgages Westpac Home Loan Trust 1 -Westpac Mortgage Investment Fund 1 -New Zealand OE Multisector - Aggressive AMP Capital Growth Fund 2.2408 -2.50 AMP PUT DynamicMkts Growth 1.6417 -1.56 AMP PUT Select Growth 1.4546 -1.69 New Zealand OE Multisector - Aggressive Non-PIE AMP UT Dynamic 1.9512 -2.91 New Zealand OE Multisector - Balanced AMP PUT DynamicMkts Balanced 1.6733 -0.16 AMP PUT Select Balanced 1.5792 -0.07 ANZ Invmt Fds Balanced 1.6014 4.48 ASB EasyFund Balanced 1.4227 5.04 Milford Balanced 1.79888 6.07 Westpac Active Balanced Trust 1.9671 4.46 New Zealand OE Multisector - Balanced Non-PIE AMP UT Balanced 2.0996 -1.13 AMP UT Balanced - Other 1.8135 -1.10 New Zealand OE Multisector - Conservative AMP PUT Select Income 1.6116 4.13 ANZ Invmt Fds Conservative 1.4319 4.21 ASB EasyFund Defensive 1.4869 4.55 New Zealand OE Multisector - Growth ANZ Invmt Fds Balanced Growth 1.6971 4.68 ANZ Invmt Fds Growth 1.7647 4.60 ASB EasyFund Growth 1.3532 5.01 Fisher Multi Sector Fund 2.8835 4.16 OneAnswer SAC Balanced 2.7092 4.64 Westpac Active Growth Trust 1.8874 5.06 New Zealand OE Multisector - Growth Non-PIE AMP PMF - Active Growth 2.0705 -0.76 AMP UT Legg Mason Balanced 1.6089 0.66 New Zealand OE Multisector - Moderate AMP Capital Conservative Fund NZ 2.26491 2.56 AMP PUT DynamicMkts Conservative 1.657 1.49 AMP PUT Select Conservative 1.6684 1.31 ANZ Invmt Fds Conservative Balanced 1.5191 4.31 ASB EasyFund Conservative 1.4671 5.11 ASB EasyFund Moderate 1.4646 5.22 Milford Diversified Income 1.55598 10.46 Westpac Active Conservative Trust 1.7564 3.74 New Zealand OE Multisector - Moderate Non-PIE AMP PMF - Balanced 2.3976 0.20 AMP UT Conservative 2.0449 0.53 New Zealand OE NZ Bonds AMP Capital NZ Fixed Interest Fund 1.69026 6.33 AMP Capital NZ Short Duration 1.25538 5.07 AMP Prem PUT OnePath NZ Fixed Interest 1.7239 6.11 Harbour NZ Corporate Bond 1.0675 5.79 Name

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 12.14 10.50 120.56 -12.28 14.97 50.48 2 13.66 16.26 136.65 3 5.05 5.12

5.54 129.92 6.04 1.43

2 3

4.86

7.51

2.84

5.65

6.61

4.87

-4.66

-- 54.14 7.40 127.19

1 3

12.66 10.06 57.17 --- 19.42 6.53 6.67 9.32 -0.58 -5.63 68.91

-----

---

86.79 119.43

---

6.33 6.53 6.51

6.61 7.44 6.34 3.63 6.37 13.46

3 3 3

6.14

6.00

8.50

5.25 5.27 8.23 8.20 10.53 8.27

5.73 5.77 8.60 7.49 11.38 7.51

4.96 36.20 164.65 124.21 324.20 165.26

3 3 4 3 5 3

4.93 4.82

5.44 13.70 5.37 0.63

3 2

3.09 5.75 5.13

4.38 3.23 6.35 41.60 5.24 120.23

1 3 2

9.56 10.63 9.63 6.52 9.11 9.84

9.74 10.55 8.25 7.19 9.52 8.75

124.18 55.45 26.62 11.11 51.41 66.87

4 5 2 3 4 3

4.29 4.07

3.78 15.92 3.12 1.54

2 1

4.32 3.58 3.64 6.96 5.80 6.58 12.04 5.02

5.11 4.38 4.42 7.50 5.83 6.46 13.43 5.39

8.93 2.11 16.76 138.74 502.31 204.25 1325.06 178.03

3 2 2 4 3 3 5 3

3.43 3.23

3.49 31.86 4.06 0.88

2 3

4.41 4.56 3.59 4.79

6.24 1726.91 4.45 239.45 5.48 1.94 5.41 260.26

4 2 3 3

Name

Latest Transaction Exit Price 1.1605 1.6333

1 Yr Return % 6.27 6.76

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 5.41 6.50 270.66 5 3.87 5.43 10.51 2

Nikko AM NZ Corporate Bond OneAnswer SAC NZ Fixed Interest New Zealand OE NZ Bonds Non-PIE AMP UT NZ Fixed Interest 1.8934 3.13 2.12 3.72 New Zealand OE Unlisted and Direct Property - NZ Non-PIE AMP UT NZ Property 1.7552 14.02 9.99 8.93

0.58

1.85

Returns are calculated to 30/04/16 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

033

DATA

THE COSTS OF INSURANCE SALES Research, commissioned by Sovereign examines the make up of the life insurance industry in New Zealand. The following figures show NZIER, which wrote the report noted that policy acquisition and maintenance costs consume a substantial part of premium revenue for all insurance companies. However, the costs vary widely across companies and do not appear to be subject to economies of scale. For many companies less than half of policy acquisition and maintenance costs are commission payments suggesting that strategies to lower distribution costs need to consider the efficiency of both the commission and company distribution channels. It said that the difference between company levels of commission payments as a share of premiums and also the balance between commissions to acquire and commissions to maintain policies suggests opportunities to change commission structures.

034

WWW.GOODRETURNS.CO.NZ

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