ASSET SEPTEMBER 2017

SEPTEMBER 2017

Your guide to law change

Health insurance opportunities

Asvisers upskill or get out

LEAD STORY

UP FRONT

Your guide to the new rules The Financial Services Legislation Amendment Bill is coming – here’s what you need to know to transition to the new regime.

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04 EDITORIAL A bright future

08 NEWS 10 PEOPLE The latest appointments

11 GOOD RETURNS TV Dr Phillip Randall explains why you should date your clients

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Carl Richards Sketch Guy confronts advisers’ fears.

REGULARS

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{OPEN TO QUESTION} 06 Has regulation been positive for the industry?

{ INVESTMENT } 26 Tech’s impact on investors

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{ INSURANCE }

{ ASSET ADVISER }

18 Health insurance opportunities 30 Model statement of advice

24 Upskill or get out 28 Plan for change

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UP FRONT

{ FROM THE EDITOR }

ADVICE FORECAST:

BRIGHT

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here’s no shortage of people willing to tell you how tough life is for the typical independent financial adviser. With the new law looming, there’s growing sentiment that some advisers may just up sticks and leave the industry alltogether.

It was refreshing, then, to get a chance to talk to Carl Richards. If you want a glass-halffull perspective, it would be hard to find a more optimistic proponent of the industry.

Many advisers will remember him from the IFA/PAA conference, if they hadn’t crossed paths with him elsewhere. He’s an American former adviser who went on to build a much bigger following out of making complicated financial concepts super simple for the average consumer to understand.

He now has a weekly sketch column in

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the New York Times – simply line drawings designed to cut through the noise that sometimes comes with financial services.

But while some advisers might worry that something that becomes too simple could be co-opted by roboadvice or verticallyintegrated product providers, Richards takes the opposite view.

He reckons that, if financial advisers can set about making their clients’ lives simple, there is a huge opportunity for the profession to grow. That those who can give people one less thing to worry about will find clients flocking to their doors.

He also wants advisers to switch their mindsets – instead of being worried about the prospect of roboadvice and other fintech competition, he says, they should focus on what they do that machines could never succeed in – and farm out the rest to the algorithms.

One financial adviser, Rachel Strevens, is at the forefront of roboadvice in this country and, as you’ll see in this issue, she shares some of his views.

She’s spent the last year developing the Ilumony platform. At the moment it’s operating as class advice, but she’s hoping to make it personalised once the law allows.

She says it isn’t direct competition for human financial advisers, though – and it won’t be long before other advisers see the benefits of technology in their practises.

While advice firms navigate their way through the new licensing regime, it will be important that we keep giving a platform to those with a positive view of the future.

That should allow advisers to identify new opportunities that could lie ahead, and map out a path to success in the new regime, however that eventually looks.

Susan Edmunds Editor

HEAD OFFICE 1448A Hinemoa Street, Rotorua PO Box 2011, Rotorua P: 07 349 1920 F: 07 349 1926 E: editor@tarawera.co.nz PUBLISHER Philip Macalister EDITOR Susan Edmunds CONTRIBUTORS Russell Hutchinson, Barry Read, Shane Solly DESIGN Jonathan Harding ADVERTISING SALES Kelly Thorpe kelly@tarawera.co.nz phone 07-3491920 SUBSCRIPTIONS Dianne Gordon P: 0800 345 675 E: dianne@tarawera.co.nz ASSET is published by Tarawera Publishing Ltd (TPL). TPL also publishes online money management magazine Good Returns www.goodreturns.co.nz and TMM – The Mortgage Mag 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

Has regulation so far been positive for the industry?

JON-PAUL HALE

WILLOWGROVE INSURANCE I think it has lifted the standard of advice.

It has gone a long way to improve the ourcome for a lot clients.

REAGAN BAX

NZ ADVICE GROUP Yes, clients and potential clients can have more trust in advisers knowing we are in a regulated industry. It has helped our advice process and has been a great starting point for new advisers coming into the industry.

ONNY FALEAFA NIDO GROUP

That's a bit of a broad question so to answer it I'll go broad too. I think if you view regulation from the point of view that it is there to support behaviours and conduct that are in the best interests of Kiwis, and that in doing so more Kiwis will access the benefits of advice, then yes regulation has been good for the industry. While I think the application of regulation can sometimes get in the way of the intended outcome, the intention should be supported.

WHAT DO YOU EXPECT TO BE THE BIGGEST IMPACT OF THE COMING CHANGES? The concern I've got is that the regulations will potentially create a situation that makes it very hard for a small independent operator to exist. The cost and compliance burden gets in the way of them paying the bills.

It's easier to sell insurance to people who've already bought into the concept. It's harder to get clients who haven't got insurance to take it up. It's not just about advice but the education of the public about the role insurance plays in their everyday lives. Most people are not aware that insurance enables a large part of society to operate.

It will be great if we can get all advisers up to a minimum standard to give advice and to make sure every adviser is getting CPD credits each year. That will mean a lot of advisers will have to do additional education but it will be worth it for everyone including our clients in the years to come.

Well, what I would like to see is the beginnings of advice being viewed as a 'profession'. A profession that will attract new talent for a healthy future; a profession that has consistent and clear standards for Kiwis to understand and trust; a profession that has undeniable value for Kiwis when making important financial decisions that have such a meaningful impact on their lives.

WHAT ONE THING WOULD YOU LIKE TO SEE THE REGULATOR TACKLE? I want to see a focus on replacement business - it's already heading in that direction but that's the big one. The regulator takes a view that life is life and trauma is trauma ... they don't have that finer understanding that this [policy] will respond better to the things that are covered. It's the quality of advice.

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We can all help the regulator by doing the right thing by the client and making sure we are servicing our clients each year. If we stay on top of our regulatory requirements it should make the job of the regulator much easier to spot a potential problem.

Many Kiwis don't know the difference between getting a financial product direct from the provider or through an adviser.

There's been a lot of discussion about the proposed designations and how these may help provide more transparency for Kiwis, but we - the regulator and the industry - have a lot of work to do in this space.

UP FRONT

{ NEWS FROM NEW ZEALAND }

Funds not true to label: Researcher When is a 'balanced' fund not a balanced fund? When it takes the risk of a growth fund, one researcher says.

AUT professor of finance Bart Frijns wrote a research paper in which he said the way KiwiSaver funds' risk levels were described could be misleading.

"When you look at the risk profile of a 'balanced' fund, there was a very large dispersion in the risk profile that those funds have. Some balanced funds turned out to be more risky than growth funds," he said.

"This different level of risk exposure by funds indicates that in the long-run investors in such funds could end up with significant differences in the values of their final portfolio endowment.”

He said it required more transparency from KiwiSaver providers.

Consilium offers philanthropic FMA: No regrets about solution $1.7m bill Rob Everett

New Zealanders will soon have the option of asking their financial advisers to help them manage money they want to donate to charity.

Consilium has entered a partnership with The Gift Trust.

It will mean that money destined for charity can be grown, tax-free, and donated over time.

“Traditionally, a budding philanthropist would either give directly to a charity or set up a grant making foundation. Today, donors in other countries are flocking in large numbers to an alternative giving vehicle – Donor Advised Funds (DAF), a giving account held by a not- for-profit.

This new partnership will offer this in New Zealand for the first time,” Consilium said.

A DAF is like a savings account for donations – the equivalent of a “personal foundation”, but without the administrative hassle. A donor places a donation into their giving account and can take an immediate tax credit deduction. The donor can then choose which charities they would like to make grants to, and when.

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Financial Markets Authority chief executive Rob Everett says $1.7 million for its case against fund manager Mark Warminger was money well spent.

The regulator has revealed that most of that money went to law firm Meredith Connell and barrister Justin Smith QC. Warminger was found to have manipulated the market in relation to trading in two stocks.

He had to pay a $400,000 penalty.

Despite the expense, Everett said taking the case was the right thing to do.

“The integrity of New Zealand’s financial markets is a core part of the FMA’s mandate and we are satisfied our regulatory objectives were achieved in this case. Global research tells us it is not enough to have laws around market manipulation or insider trading, but that they have to be successfully enforced.

The court found that the conduct in this case “was likely to materially damage the integrity or reputation of New Zealand’s securities markets.”

UP FRONT

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

NEWPARK STACKS ITS BOARD

Murray Weatherston Newpark Group has appointed four business leaders to its board, to help design and implement the group’s future strategy.

Adviser Murray Weatherston is one of the new members appointed to the Newpark board. Weatherston has been the chairman of SiFA and one of the predecessor organisations of the IFA. Burton Shipley is the husband of former Prime Minister Jenny Shipley. He has 15 years’ experience in financial services that includes stints at Sovereign, ASB and Westpac.

Bruce Cotterill has extensive experience across a range of industries including real estate, media, financial services, technology and retail. He is an ex chief executive of Colliers, Kerry Packer’s ACP Magazines, sportswear company Canterbury International and in 2008 he stepped in as CEO of the Yellow Pages Group to lead the company through a period of dramatic change.

Bob Harvey served six terms as mayor of Waitakere, and has extensive experience in the advertising industry and politics.

The other directors are managing director Darren Gannon and Scott Wilson.

Gannon says the new board and management team will now focus its time and energy to re-inventing Newpark into the leading advisory support business in New Zealand for good financial advisers.

PIE FUNDS REVEALS MANAGER CHANGE Pie Funds is making changes to the management of its funds.

Founder and chief investment and

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chief executive officer Mike Taylor said Victoria Harris, who moved to the fund manager from Milford, would become co-portfolio manager of the global fund, with him, from October 1.

Taylor will move off the Growth and Growth UK and Europe funds in the next six months.

Chris Bainbridge and Chris Wright, who already manage the funds with Taylor, will take over.

Taylor said he was not retiring.

“At 37 years of age – a spring chicken still to many – there remains an exciting future at Pie and one that I am keen to spearhead. My role as CIO is very important because it gives me oversight of ALL investment decisions.

Given my experience and knowledge, I believe this is the best role for me at Pie. Finally, it puts me in a good position to manage our new product.”

PERPETUAL GUARDIAN APPOINTS FROM SOVEREIGN

RESIGNATION AT HEATHCOTE

One of Heathcote Investment Partners’ key people is moving on, taking a role representing Australian funds in this country.

Key account executive David Batty has resigned. He was not yet willing to reveal his next move but is believed to be taking a role with Pinnacle.

The Australian multi-boutique firm had been looking to hire a New Zealand representative for some time.

It has A$26 billion under management and had signalled it could see business opportunities in retail and wholesale markets in New Zealand.

Batty moved to New Zealand in 2002 and has been at Heathcote since 2012.

The firm said he had been instrumental in contributing to its success.

“As a well-known industry identity and good friend to many, David will be missed within our business. All of David’s duties will be continued by Clayton and the team, who hope to name a replacement for David’s position over the coming months.”

Batty started his career as a financial adviser and has worked for both banks and fund managers through his career.

HOBSON WEALTH EXPANDS

Private wealth advisory firm Hobson Wealth Partners has made a trio of senior appointments across the business.

Nigel Scott has joined as board director and head of advice and distribution David Tetro has been appointed to the role of business development manager.

Edward Glennie has stepped into the role of investment strategist.

Angela Vale Perpetual Guardian has a new head of business development.

It has hired Angela Vale, who will be responsible for the design and delivery of Perpetual Guardian's strategic approach to business growth and brand positioning.

She has more than 15 years’ experience leading and building teams in the customer experience and change management spaces.

Vale most recently worked as head of strategic implementation and prior to that head of customer retention and growth at Sovereign, where she led the design and execution of its customer retention strategy and supported its service blueprint for an existing customer base of approximately 650,000.

DEVON GRABS HIGH-PROFILE CIO

Devon Funds Management has appointed a new chief investment officer who has for many years been with one of its competitors.

Mark Brown has taken on the role of CIO at Devon after spending many years as head of Australasian equities at ANZ. Devon chairman Paul Glass said he was one of New Zealand’s most experienced investment managers, having enjoyed a long and successful career at ANZ. "Mark will have specific responsibility for Devon’s New Zealand-only equity funds, and will assist portfolio manager Chris Gaskin with management of the Devon Australasian portfolios when he joins Devon in January 2018."

ASSET GRTV DATA ADVISER

WHY YOU SHOULD DATE YOUR CLIENTS

D

r. Phillip M. Randall came out from America for last month's National Adviser’s Conference.

Good Returns TV sat down with him to discuss his observations on the industry.

DO YOU THINK THAT FINANCIAL ADVISERS ARE NOW REALISING THAT THE VALUE THEY HAVE IS ACTUALLY THE RELATIONSHIP WITH THEIR CLIENTS, IN COMPARISON TO 20 YEARS AGO, WHEN THEY WERE VERY MUCH FOCUSED ON THE SKILLS? That is clearly the case. Twenty years ago, I was advocating a model of wholeperson planning based on criticality of the relationship. I would say that now, practically every adviser would have heard that a hundred times. The clarion, or call of action, that I think is important in this particular conference is the question, “So, what are you going to do about it?”

WHAT ARE THEY GOING TO DO? The hope is that they’re going to see the necessity of creating a relationship, and doing so through the act of nourishing the relationship. It’s understanding that relationships should really be built based on the understanding of the following aspect: “The more you know about me, the more responsible for me you become.” As a result, if you understand that psychology, you will then say, “Well, what I need to do in order to build a relationship is to share with the client as much about me as possible and then to learn from the client as much about him or her as possible.”

IT’S PROBABLY QUITE CHALLENGING FOR SOME OF THE ADVISERS TO OPEN UP ABOUT WHO THEY ARE? Indeed! If for the most part you’ve been

very transactional, and opaque in your transaction, then you’re not going to be able to build a relationship. When I talk about relationships, I try to translate it for everyday people; you’re dating, for example. If you’re dating and you’re trying to build a relationship, the relationship that you’re trying to get to is one of intimacy. That means you need to be able to know the person well enough to meet their unexpressed needs. Right?

Because everybody is going to try and meet the needs that they say they have.

The differentiation in the marketplace will be such, that those who can create a relationship that’s intimate enough that “I know what you need before you say it.”

DO YOU THINK MANY FINANCIAL PLANNERS WOULD BE DOING THAT? At this particular time, I don’t think that many are doing that. But there are niches.

Those niches have been able to show that they have been able to grow their business through this investment; investment and an interest in the individual, in terms of what it is they’re trying to achieve. A fundamental understanding is how your client spends the most of their time. Well, work is how most of us spend a major portion of our time.

Work dictates much of everything. It gets us up in the morning and brings us home at night. It tells us when to eat and tells us when to sleep.

THERE’S NO QUICK AND EASY WAY TO BUILD THAT EMPATHY AND TRUST, IS THERE? IS IT A LONG-TERM PROJECT? Yes. I wouldn’t suggest that you approach it as a “quick and easy”. I do expect that it would be a long-term engagement that you’re working towards. But it starts out with asking the individual about

them and sharing with the individual about you.

SO, IT’S NOT JUST ABOUT DOING A RISK PROFILE QUESTIONNAIRE? In the business, we call it a structured interview, meaning that you have already predetermined the questions, you ask the question and you listen. The key to this is that nature gave us two ears and one mouth, so listen twice as much. That’s the idea.

DOES IT LIMIT HOW MANY CLIENTS AN ADVISER CAN HAVE? It used to be a case of having to make a lot of sales. What is emerging in your culture here is this idea of fee-base, so they have time.

The interaction and engagement is based on the fee, so they have time to develop that relationship. The model that I use in order to even create this discussion is old private banking. Private banking was where you actually had a banker - although it wasn’t involved in banking as we know it today, but it was called a private banker. That person had a relationship with you and generations, in given families. And what did they do?

Not only did they manage your money, as it were, but they also managed your relationship with your physician, managed your relationship with your children and their education, etc. They were always there supporting you.

ARE WE GOING FULL-CIRCLE BACK TO THE OLD WAY OF DOING THINGS? I hope. That is my appeal.

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

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PROFILE

Advisers have got to stop throwing their clients in holes, Carl Richards says.

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f United States financial advice guru Carl Richards had his way, the New Zealand industry would stop trying to make things complex for clients and admit a lot of it is actually really simple.

Richards has been in New Zealand just over a year, working on marketing with investment adviser support firm Consilium.

He also writes a regular column, Sketch Guy, for the New York Times, which includes a sketch to illustrate a financial concept. He is the author of two books, The Behavior Gap and The One-Page Financial Plan.

He says he became Sketch Guy by accident.

“I was a financial adviser, giving advice to clients. I found myself in a common dilemma, trying to explain something to a client that I thought was really important for them to understand to help them make a decision.”

He says, even though the clients were intelligent, successful people, and he was making his best effort to make the concept plain, they were sitting “with blank stares on their faces”.

“I remember, just out of an act of desperation, saying ‘like this’ and I stood up and drew on the whiteboard. If I remember right, it was money moving from one account to another … I remember them being like ‘oh right I get it’.”

With no background in art or sketching, he started doing more and more sketches and putting them up on his website. “Not long after that I got an email from the New York Times, saying ‘would you do this for us?’”

For the past eight years, he has been producing 250 words and an image each week. “That led to the first book which led to the second book, and that led to speaking engagements and I eventually sold my financial advice business because it had taken over my life and I enjoy it so much.”

That’s not bad for someone who came into the financial advice industry thanks to a mistake.

Richards and his wife, who had finished a finance degree, were going through the paper looking for jobs while he was at college.

He decided to apply for a job that he thought was as a security guard. “I found out the ad didn’t say security but ‘securities’. I didn’t know the difference but I somehow got the job.”

Within a month of working at Fidelity Investments, Netscape went public and

Richards was hooked. “I stayed because it became so obvious to me it was not about the money, it was about behaviour. “ Richards ended up in New Zealand through his relationship with Consilium’s head of partner firm services, Ben Brinkerhoff.

The pair initially traded a couple of emails – in one, around the time of the Christchurch earthquakes, Brinkerhoff asked to use some images.

“I made that connection and said ‘you do what you need, take them, don’t worry about that right now’ and we struck up a relationship.”

Roboadvice is not a big threat to most advisers Five years later, Richards and his family were pondering moving overseas for a year or so, from their home base in Park City, Utah. “My wife had always wanted to live overseas,” he says. “We were going to go to France because I have a daughter who speaks French but we mentioned it to a friend, who said ‘you should go to New Zealand’.”

Richards says he knew little about New Zealand, except that growing up he’d thought it was “the coolest country in the world” because he was interested in mountain climbing, skiing and kayaking. “We started looking into it and three or four weeks later, we had tickets to New Zealand.”

Richards told Brinkerhoff what he was planning and took up the role with Consilium.

Richards says he has been impressed by what Consilium does. “Something most people don’t know is they do a lot of really good training and coaching behind the scenes and I’m helping with that as well.”

He says advisers in New Zealand share many of the same concerns as those overseas.

“Financial advisers here and everywhere are worried about the ground shifting beneath their feet. Regulatory issues. But really they should be excited.”

New developments would force advisers to be clear about what their value was, which would not be in transactions or products, or

© 2017 Behavior Gap. | Need to get in touch? Email us at hello@behaviorgap.com

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commission, he said. “Any of that stuff, that’s going to go away. The value is in helping real human beings make decisions, helping people align the use of their money with what they say is important to them.

Roboadvice is not a big threat to most advisers, he says.

“You can cut your fingers off just as fast with roboadvice as you can with a real adviser.

It’s just a faster, cheaper way to behave poorly.

What people are finding is they still don’t understand what these things mean or how to apply them – the real adviser will get as much if not more opportunity as a result of the fintech start-ups.”

But they cannot be complacent or expect to continue to operate in the way they have always done, he says. Regulation and the market will demand more transparency around investments. “You can’t get away with some of the stuff you used to be able to get away with, one quick google search and anyone will know how much you’re charging.”

Richards’ plan was to stay for a year but that ticked over in early September. He says his son is so happy at Nelson College and the family will stick it out to allow him to finish there.

He’s not sure what he will be doing in five years – “Probably exactly what I am doing now, I don’t know where. Still here or back in Utah – I want to have that opportunity to find really good people doing really good work and in any small way I can help them have a bigger megaphone.”

He says a big message advisers need to hear is to make things simple for their clients.

“A big problem in financial advice and a key message I make in every presentation is that people want it simple. I know you think you should make it complex – dig a hole, throw the client in the hole and look down and say ‘I’m the only one with a rope’. But no one likes to be treated that way. There’s a fear of it being too simple but it goes back to that understanding of what is the value of advice. It’s not to make it more complex but to simplify it. Real human beings don’t walk around saying ‘I hope I can find someone to make this more complex for me’, they say ‘please make it simple’.”

PROFILE

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LEAD

Your guide to the new rules T Changes are coming – but what does it all really mean? By Susan Edmunds

here would be people working in the financial services sector who are not aware that major change is coming.

The new bill that is due to overhaul the regulation of financial advice in New Zealand is set to become law by the middle of next year.

The Financial Services Legislation Amendment Bill was introduced to Parliament last month and is working its way through the process. It will move everyone offering financial advice into the Financial Markets Conduct Act regime.

But many financial advisers are still trying to work out what it will mean for them.

We’ve assembled a simple guide to the new rules.

START HERE…

First, you’ll need to decide on your new identity.

The new rules focus on entity licensing, rather than licensing of individuals.

Under the new regime, all financial advice will have to be tracked back to a financial advice provider.

That could be a one-man-band operation with just one financial adviser, or it could be the type of organisation that is currently a qualifying financial entity.

Those providers will then offer advice via one of three methods: Roboadvice: Offered online. The new bill clears the way for this, although not for a couple of years. The Financial Markets Authority is looking at ways to make it possible to begin offering roboadvice sooner, with a class exemption.

Financial advisers: You will now be counted as offering financial advice if you make a recommendation or give an opinion about someone acquiring or disposing of (or deciding not to acquire or dispose of)

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LEAD

a financial advice product, or if you write an investment plan. The new designation encompasses AFAs and RFAs together – none of the advisers will be licensed or authorised in their own right.

Nominated representatives: This is the new regime’s equivalent of a QFE adviser.

They don’t need to be registered in their own right, but must operate under the umbrella of a financial advice provider licence. There were many concerns raised during the consultation process about the lack of transparency and accountability for these people and they do not appear to have been addressed. They will have no civil liability and will not be subject to the disciplinary action that will apply to financial advisers. It will be up to the financial advice providers to keep their representatives in line.

If you decide that your firm should become a provider, you’ll need to determine whether you want to have your staff – if you work with other advisers - working as advisers, or to take more liability for them and have them working as nominated representatives.

Depending on the future you see for your business, you may opt instead to join forces with another, bigger, entity that will take a license. You could then operate as a financial adviser or nominated representative for that entity.

Industry sources said that could potentially damage the value of a business for future buyers but it may decrease the compliance costs involved substantially.

Financial advisers can work for more than one financial advice provider but nominated representatives can only deal with one.

OBLIGATIONS

All financial advice providers, financial advisers and nominated representatives must give priority to the interests of their clients, disclose information set by regulation, do their utmost to ensure their retail clients understand the scope and nature of the advice given, and meet standards of competence, knowledge, skill, ethical behaviour and client care.

What about dealer groups and other adviser bodies?

It has been suggested that some of the bigger adviser groups may

The new regime will significantly alter the way financial advice is regulated in New Zealand Jacqui Dean

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opt to become providers to allow their members the option of becoming nominated representatives, with fewer compliance obligations.

But it will be important for those bigger organisations to determine how much liability they are comfortable taking for the people then working for them. Some industry commentators have suggested that, when the first round of regulation was introduced,

some advisers whose business systems did not hold up to scrutiny fled for the safety of a QFE – dealer groups and other adviser bodies may not be interested in sheltering those advisers under the new regime.

The new regime puts civil liability on financial advice providers for their representatives and incentivises providers to have stringent recruitment processed and strong ongoing compliance monitoring systems. They will also be required to limit the advice that can be given by their representatives.

“This is not to say nominated representatives will be ‘let off the hook’ completely. If a nominated representative is knowingly involved in a contravention the representative could still be liable,” Commerce Minister Jacqui Dean said in a cabinet paper as the bill was introduced.

"The new regime will significantly alter the way financial advice is regulated in New Zealand and contribute to the Government’s Business Growth Agenda goal to build a more productive and competitive economy," Dean said.

“Commentary to date suggests that the more you are reliant on nominated representatives to deliver financial advice on your behalf, the more extensive your policies, procedures, and controls will need to be.

FMA will look to see these demonstrated during the licensing process. It’s also possible that licence conditions might limit the type of financial advice nominated representatives can provide,” said financial services law experts at Kensington Swan.

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"The full extent of those consequences will not be known until FMA has developed its licensing guide. However, what seems clear for now is that developing a nominated representative-reliant model is making yourself a potentially uncomfortable bed to lie upon, even without taking into account the increased risk of exposure to penalties that arises when using nominated representatives.”

That’s representatives what liability do providers have for advisers?

Financial advice providers are not liable for pecuniary penalties when a financial adviser has contravened their legal duties and the provider took reasonable steps to ensure the adviser met their obligations.

While financial advisers are not directly civilly liable, they are subject to disciplinary action through the financial adviser disciplinary committee. This will now be an option for all advisers, instead of the current system which only applies to authorised financial advisers.

Financial advisers could also still be subject to civil liability if they are knowingly involved in a contravention.

What about wholesale?

Fewer clients will be able to be called “wholesale” investors under the new regime, which may mean more compliance requirements for some firms.

The definition has been tightened in line with the Financial Markets Conduct Act definition.

Instead of the qualifying factor being assets or turnover of $1 million, which covered many people who owned houses in a trust, they will now need to have assets or turnover of $5m.

The FMC Act definition of wholesale investor also captures government agencies, people who have expertise in or have purchased a high-value of investment products, and “investment businesses” such as banks, insurers and entities that provide financial advice.

This means, if you’re currently operating outside the regime

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because your only clients are those with assets of more than $1m, you’ll need to decide how you want to fit into the new rules.

Feedback from the industry in relation to wholesale clients led to one change – it had originally been suggested that if a provider was required to be licensed because it provided services to retail clients, those obligations would apply to all its services, including to wholesale clients.

That has since been removed.

The working group will operate transparently.

That does not mean publishing everything, but it does mean being open.

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Angus Dale-Jones CODE DEVELOPMENT

A clear focus of the new bill is to ensure that everyone giving financial advice has to meet conduct and competence requirements.

Work is under way to deliver the new code of conduct, which will cover the whole industry and detail what those requirements should be.

A working group has been appointed to develop it, and will then become the code committee to administer it under the new regime. Consultation on the

key concepts is expected next month and in November, and a preliminary draft is due in March or April.

Chairman Angus Dale-Jones said the scope of the code had widened from an occupational code for AFAs to a service code capturing advice given by all individual advisers. The new code would be able to differentiate different types of advice.

The code must satisfy new requirements, too, to improve the availability and quality of advice – which it said were potentially contrary objectives – and conduct considerations would become more directly relevant.

The document said that decisions would be made with appropriate consultation, including with the FMA, those who were representatives of the advice industry and those who were representatives of consumers.

Consultation would likely include formal documents requesting submissions, roadshows, focus groups and online requests for views.

Consultation would be needed on how minimum standards should apply to the increased range of advisers, businesses and digital services; and to the different types of advice.

Dale-Jones said it would need to consider the extent to which the standards of the existing code were relevant and the need for additional standards.

It would also need a methodology to determine where advice types or products justified changes to the minimum standards.

The group would have to ask whether any universal baseline competence standard was required, what transitional requirements would be appropriate and how ongoing training could be used to broaden skills as adviser roles evolved.

“The working group will operate transparently. That does not mean publishing everything, but it does mean being open, in a timely fashion, about policy deliberations and progress. Similarly, the working group encourages those involved in consultation to be publicly transparent too, especially on policy thinking.”

LEAD

October/November

Consultation on key code of conduct concepts

TIMELINE March/April

Preliminary draft code of conduct issued Mid 2018

Financial Services Legislation Amendment Bill passed, not yet in force.

August 2018

Code of Conduct approved November 2018

Transitional licensing begins for existing industry participants

May 2019

New regime comes into effect May 2021

All financial advice providers giving advice to retail clients must have a full licence

THEY LISTENED TO SUBMISSIONS…

Some of the changes made to the Financial Services Legislation Amendment Bill before it was presented to Parliament, in light of submission feedback: Financial advice representative role: Changed to “nominated representative”, which MBIE said more clearly distinguished between financial advisers and nominated representatives.

Client-first duty, which some submitters

said was too broad and some said should be wider, and principles-based: The duty has been left as limited to conflict management but has been amended to apply if there is conflict between the interests of the client and the interests of the person giving advice or any associated person, not “any other person”.

Duty to agree the nature and scope of advice, which some said was not always possible: Those giving advice are now required to take reasonable steps to ensure their clients understand the nature and scope.

Concerns about the terms “broker” and “broking service”: The term has been changed to “client-money or property service”.

The prohibition on a broker putting their own money in a client account: Deposits are now allowed in limited circumstances.

Consumer credit, which submitters said was already captured by the Credit Contracts and Consumer Finance Act: There is now a limited exclusion for lenders in relation to consumer credit and credit-related insurance products.

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OPPORTUNITIES IN HEALTH INSURANCE

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ASSET REGULATION 2ND DATA ADVISER LEAD

New Zealand’s health insurance market is changing fast, as consumers turn to online offers and medical technology boosts the power – and price – of treatments.

B

ut advisers are being told that there is a big opportunity for them in the market, if they know how to craft it.

The latest statistics from the Health Funds Association showed that the number of people with health insurance rose for the ninth quarter in a row in June, to 1.37 million, one of the strongest years for the sector since 2001. Those statistics do not include data from nib or Partners Life.

“This has been mainly on the back of strong employment growth and growing interest from employers in providing health insurance options for their staff as part of their commitment to health and safety,” said chief executive Roger Styles.

He said employer-subsidised health insurance was a key area of growth. But it was not the only one.

There was growth in the 25-to-39-year-old age group, he said, but the number of people over 65 who had cover had also increased by 14,000 over the year.

“A growing number of those aged over 65 are retaining health insurance for peace of mind and prompt access to treatment if and when they need it. With more of the population reaching this age group, we now have around 159,000 New Zealanders over the age of 65 covered.”

Styles said claims paid in the June 2017 quarter totalled $297m, up 2.4% on the June 2016 quarter. For the year to June 30, 2017, claims paid totalled $1.152 billion, up $76m or 7.1% on the June 2016 year But David Savidan, head of marketing and product at AIA, said there was still room for improvement.

“It’s good to see more Kiwis insuring their health, but we still have a large number of our population - around 71% - not insured, which is still lower than many developed nations.

The New Zealand health insurance market has traditionally been dominated by one or two large insurers, but in the last two to three years, other insurers such ourselves have been making good gains,” he said.

“We are seeing that consumers are responding really well to policies that focus on what they really need from a health product… What’s positive is that

the competitiveness in the sector is driving more innovation.”

Advisers can play a key role, insurers said.

Len Elikhis, chief officer of product and marketing at Sovereign, said the health insurance market offered insurance advisers an opportunity to acquire a younger customer base. He said a third of Sovereign’s health insurance customers were children on their parents’ policies.

“Apart from protecting the family, which is important, it helps as an intergenerational play for the adviser practice,” he said.

Health insurance was also a good way to reinforce the value of insurance more broadly, he said, because the claims rate was higher.

Unlike life cover, where people might pay premiums for decades and never see a claim, health insurance would pay out more frequently.

“It’s also a product that is more easily described, you’re talking about medical developments and health as opposed to death and disability.”

,,

More cover doesn’t necessarily mean better Len Elikhis

Kerry Boielle, head of distribution at Southern Cross, said advisers were a key part of how her organisation was growing its business. “It’s how we service a lot of group accounts.”

Many New Zealand employers had substantial medical cover schemes for their staff, she said. “From last year to this year, the number of groups through the adviser channel has doubled.”

She said advisers could work with a business to help it determine the best way to structure an employee benefits package.

Changes to health and safety legislation had made employers consider what they should be doing, she said. “It has made employer stop and think – what do we need to be doing? It plays into the advice piece.

They want that independent advice – what should they do, what’s out there, what does a good employer look like. I see that role [for advisers] getting bigger and bigger.”

There was less growth in adviser numbers for individual clients, she said, because most opted to go online.

“A big chunk of New Zealand society wants to deal with advisers – they might have more complex needs, want that expert advice piece. Others have had that in the past and just want to go straight through. They know what they need and want to push a button and have it done. I do see advisers continuing to play in the employer space a bigger and bigger role.”

Elikhis said advisers had the best opportunity if they could “get in early” with clients before they developed pre-existing

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conditions that would exclude them from cover. “They can make sure cover is in place and the continuity of that cover for all conditions as they get older. The advice piece is important – more cover doesn’t necessarily mean better, it’s important to understand what the customers’ expectations are and needs are.”

He said relying exclusively on product benefits and price combinations was problematic because premiums tended to increase over time. “It’s a much longerterm conversation.”

Savidan agreed advisers had a role to play in client education.

“As a country I think everyone agrees that we have an under-insurance problem in healthcare and insurers and advisers need to work together to change the public’s view on health insurance,” he said.

“Yes, we have a great public healthcare system. But this is coming under increasing pressure as wait-lists for both acute and elective surgeries grow at a fast rate, and new generation medicines and treatments place a real strain on the ability of Pharmac to provide solutions for everyday New Zealanders.”

At Accuro, Geoff Annals said he expected advisers to continue to have an important place in the market.

It has recently released an online service providing instant underwritten healthcare cover. That had been designed with the idea that advisers would be able to sit with their clients and go through that, he said.

“I don’t think any of this is removing the need for person-to-person contact.”

Advisers whose model was built on personal relationships, helping clients through their whole lives and understand their needs and ongoing engagement would find the need for their services remained as strong as ever. “I’d like to think for those advisers, business is likely to get better.”

Nib chief executive Rob Hennin said advisers would continue to play an important role in the industry, into the future.

They were an important part of insurers’ value proposition, he said, helping to address the information asymmetry between clinical providers and consumers.

Direct sales are now more than 50 per cent of the firm’s business but Hennin said he was “really happy” with the growth it had experienced in the adviser channel, too.

“Advisers are only one channel in the marketplace but they are a very, very important channel.”

The prospects were bright for advisers who had strong personal relationships with their clients and offered solutions rather than products. “They have the ability to have the conversation at the right time in a client’s life about their lifestage and what they need. That’s a unique opportunity and something they should do more and more of going forward.”

Tim Fairbrother, an adviser at Rival Wealth in Masterton, said health insurance was something that brought “We think long-term that people should

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It’s also a product that is more easily described, you’re talking about medical developments and health as opposed to death and disability.

Len Elikhis

,,

have it,” he said.

Advisers often had to explain to their clients how health insurance would fit in alongside other cover such as income protection, he said. It often made sense for clients to get health insurance as soon as they could so that they would be covered for conditions that developed as they aged, he said.

As they paid down debt, they could drop other types of insurance and retain their health cover, even if it became pricier.

When cost was a problem, some clients opted to only insurer their main earner, or the person who seemed to have more health problems, he said.

Russell Hutchinson, from Chatswood Consulting and QuoteMonster, said twothirds of advisers offered their clients quotes for health insurance. “A lot are quoting health but it is expensive, it can add a lot to the cost of the insurance package.”

He said it made sense for advisers to dabble in it. A third of the population had health insurance and another third were interested in having it, but didn’t because of the price or because they didn’t know which product to choose. “A lot of people are interested in health insurance.”

Sovereign had had significant growth in its health insurance book over recent years, Elikhis said, with premiums up about 15% year-on-year for the past three. Claims inflation had urn at a rate of 6.5% he said.

“Premium change usually follows an increase in the rate of claims.”

Elikhis said the changing treatments available and trends in healthcare helped to boost the value of health insurance. “Some treatments we are paying for now are more effective than they were in the past,” he said.

“Conditions that might have been untreatable are now significantly more treatable.”

Cancer treatments were progressing quickly, he said, and many conditions had become significantly more treatable.

Payments from health insurers had helped to develop more depth in the treatments on offer in New Zealand, he said. “A policy might be twice the price of 10 years ago but the volume of stuff that is covered is much higher.

That’s the challenge. People expect to be able to access the new and latest treatment but that needs to be funded either by premiums or higher taxes.”

“I think it’s important to recognise the relationship between the product design and the premium.”

As consumer awareness built of what was available and the opportunities provided by health insurance that would raise public awareness of its value, he said.

He said medical cost inflation was likely to be an ongoing challenge for the industry.

Different insurers had different ways of dealing with it, he said. Southern Cross and nib operate an approved-provider model but Sovereign does not.

“Different companies have different perspectives. Our approach is to try to provide customers with choice in product and services,” he said.

That meant more flexibility.

The insurer had spent time with advisers talking to them about the value proposition of health insurance as a product category rather than about its products in particular, and had run education events. A recent one included a medical specialist talking about radiotherapy and the changing treatment trends.

New Zealand health insurance premium income was $354m in the June quarter, up $4m from March and up 5.8% on an annual basis compared to the year before.

There was $297m in claims in the quarter, up 2.4% on the previous June quarter.

Boeille agreed cost was an issue as insurers had to juggle the increasing cost of claims with a desire to keep premiums manageable.

“There is a perception in the market that when you look at the CPI, it’s very low.

But healthcare is one industry where new technology doesn’t pull the cost down. It often pushes it up. That affordability piece can be a bit of a challenge.”

SOVEREIGN HEALTH INSURANCE STATS:

➤ Each year 130 Kiwi kids are covered for the cost of their grommets by Sovereign. ➤ 25% of all claims payments were for cancer. ➤ In FY16 (June 2016-June 2017), 14,500 Kiwis had their healthcare costs covered by Sovereign. ➤ Nearly every day, one Sovereign customer claims more than $20,000. ➤ Most common claims: ➤ Males – At any age is musculo-skeletal issues ➤ Women – Under 35 years is for gynaecological issues and over 35 is cancer.

Source: Sovereign

ASSET REGULATION 2ND DATA ADVISER LEAD

Savidan pointed to his firm’s REAL health cover, cover for non-Pharmac policies, cancer treatment benefit and fertility treatment benefit.

“At AIA we try to follow a very customer centric model when developing products.

We see future growth in the health space being built around product innovation, reduced complexity both in product features and policy wordings, and development of products that evolve with the changing needs of consumers as they move on to new milestones.”

Boeille said there was likely to be significant growth for insurers in innovations that supported customers’ general well-being. “A lot of conversations with corporate clients are very focused on holistic approaches to health, rather than just ‘providing a subsidised health insurance policy for my staff’. They’re interested in helping them get healthy and stay health – that might be mental health, physical health or spiritual.”

Southern Cross is one insurer that now offers “everyday” cover that is designed to be claimed on more often for more minor healthcare needs.

Health Funds data shows that about 3.5% of those who have health insurance have a policy designed to cover day-to-day healthcare expenses. Elective surgical and specialist policies still make up 68.3% of all lives covered.

She said customers’ push for digital interaction was also challenging, as the insurer had to balance their desire for quick, online solutions with the need to ensure

they fully understood their cover. “We don’t want to digitise too much and take away any understanding from consumers about what they are and aren’t covered for.”

Advisers were invaluable to Southern Cross when it came to serving parts of the market in which it did not have its own physical presence, she said. A report on the net impacts of health insurance in this country, by Wellington consultancy firm TDB Advisory, found that health insurance created productivity benefits of about $100m a year, and had a net positive fiscal impact for the country of $400m annually.

Annals said insurance sometimes had a poor reputation, which should be tackled.

“Some of that is not deserved and some of it is. The served bit is to do with the complexity and there can be poor advice given or poor options taken. Not all products are great. But anything that makes the environment more encouraging of good practice [is welcome]. There’s a lot of regulation in the advisory world and I think that’s good for the industry. The only ones hurt by that are the cowboys.”

Rates of insurance cover were not growing as fast as they should he said.

“We have to do things better to make it so that New Zealanders can understand the value proposition that is there and see that it is one they want.”

Source: HFANZ

BY THE NUMBERS 1.368M $1.395 BILLION $1.152 BILLION

NEW ZEALANDERS HAVE HEALTH INSURANCE PAID IN PREMIUMS OVER THE YEAR TO JUNE

PAID BY INSURERS IN THE SAME YEAR

CHANGE IN LIVES COVERED BY AGE: JUNE 2017 YEAR AGE

JUN-16

JUN-17

CHANGE

PERCENTAGE

0 to 4

69361

60943

-8418

-12.10%

5 to 9

84272

83705

-567

-0.70%

10 to 14

83180

85071

1891

2.30%

15 to 19

85080

84354

-726

-0.90%

20 to 24

76929

77367

438

0.60%

25 to 29

74703

78761

4058

5.40%

30 to 34

88111

90450

2339

2.70%

35 to 39

94971

97846

2875

3%

40 to 44

112477

108299

-4178

-3.70%

45 to 49

117490

119993

2503

2.10%

50 to 54

119398

117900

-1498

-1.30%

55 to 59

108166

112581

4415

4.10%

60 to 64

88525

92092

3567

4%

65 to 69

64302

67576

3274

5.10%

70 to 74

37585

41185

3600

9.60%

75 to 79

21831

25846

4015

18.40%

80 to 84

12531

13462

931

7.40%

85 to 89

6552

7646

1094

16.70%

90-plus

2273

3191

918

40.40%

Totals

1347738

1368269

20,531

1.50%

Source: HFANZ

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ADVISER ASSET REGULATION DATA ADVISER PROFILE

A NEW BREED OF ADVISER Rachel Strevens is taking financial advice to the masses, online.

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ADVISER ASSET REGULATION DATA ADVISER PROFILE

A

n authorised financial adviser who has started a new online advice platform says she cannot imagine ever going back to the traditional face-to-face style of advice for clients.

Rachel Strevens started in the financial advice industry about 10 years ago with Goldman Sachs JB Were, as an adviser’s assistant. She then moved to Craigs Investment Partners, where she qualified as an AFA and an NZX adviser.

She was working for Craigs when KiwiSaver launched, and saw how the market responded. “I was involved in the early stage and saw the benefits but realised people were not taking much notice or paying too much attention to it.”

It quickly became obvious that many New Zealanders considered retirement savings “uncool”, she said, and struggled to care about saving for something that was so far in the future, for many of them. New Zealanders had predominantly invested in residential property and, for many, the idea of KiwiSaver and its underlying investments was a new one.

In 2011, she moved back to Auckland, where she took a role as a financial specialist with ANZ before moving on to become an investment adviser at Macquarie Private Wealth.

It was there that she saw how hard it was for people who did want help with their KiwiSaver investments to get it. There was a lack of advice available to clients with smaller amounts to invest.

“Banks would provide advice only about their own KiwiSaver products. None of the advisers I was working with were talking about KiwiSaver or dealing with KiwiSaver at all,” she said. “I could see a real need for it. People didn’t know what to do with their KiwiSaver and didn’t have the relevant knowledge.”

Strevens started to look at what was happening internationally and realised there was a growing trend for roboadvice to guide people who wanted advice but were still in the accumulation phase. “There was nothing like that happening here.”

That led to the development of Ilumony, which claims to be New Zealand’s smartest technology-based financial adviser. It now has $7 million of KiwiSaver investments under management.

It monitors publicly available KiwiSaver funds information to deliver financial advice to users online, no matter the size of their bank account or investment portfolio.

Strevens said KiwiSaver had been a natural starting point but Ilumony was branching out to other non-KiwiSaver investments and other products. The fintech startup also provides advice and access to a range of globally diversified investments.

At the moment it works predominantly with employer groups, providing KiwiSaver advice to staff but it will soon open to the wider public.

“The feedback from both employers and staff members has been fantastic, and people are really loving the help and advice we are giving them with very high rates of

Rachel Strevens (AFA) Founder & CEO B.Bus & NZX Dip S

Rachel Strevens (AFA) Founder & CEO B.Bus & NZX Dip S

NUMBER OF CLIENT INVESTORS 110 TOTAL FUM/FUA $7MILLION ILUMONY FORMED IN 2016 registration from employees,” she said.

“A lot of people we are helping with KiwiSaver also want to look at investing outside of KiwiSaver, and we have a great range of cost and tax efficient portfolios available online. We are seeing a lot of interest from people who have never invested before, and who would not be your typically investors — it’s great to be helping a new wave of investors come through and make smarter financial decisions.”

She said there was a growing opportunity to help smaller-scale investors get started.

“Helping them to take the next step, know what’s next, helping them to grow and plan.”

None of the advisers I was working with were talking about KiwiSaver or dealing with KiwiSaver at all Strevens said she had seen, in her presentations to employer groups, more people had started to realise that decisions they made now could affect their long-term outcomes and give them a better standard of living in 20 or 40 years’ time, when they retired.

At the moment, Ilumony operates as class advice. Investors who want more help can be referred to Strevens for personalised advice. When the rules make it possible, Ilumony hopes to be able to offer personalised roboadvice online.

Strevens is waiting to see the details of the proposed Financial Markets Authority exemption to allow roboadvice to determine how that will happen.

“It will depend on the look and feel of their exemption.”

Regulation has been a challenge through the development of the platform, she said.

New Zealand’s regulators have not taken the “sandbox” approach used overseas to foster new fintech developments. She said while the FMA had indicated it was willing to do things to help the development of new technologies, there was less progress being made here than in other jurisdictions.

She said a big challenge in developing the platform had been that she did not have technological expertise. She turned to cofounder Abhy Singla to fill in the gaps.

“He was interested in fintech, anyway,” she said. He had been involved in development roles for new technology offerings rolled out around the world and had experience in building platforms in different settings.

Their first challenge was to break down the advice process and figure out how to put it into an online setting.

They started working together last year and did a lot of testing before the platform launched in a beta phase. Strevens said both considered it important that the platform was easy to user and understand and that it kept things “nice and clean”.

Ilumony receives a commission from KiwiSaver providers and charges annual management fees for non-KiwiSaver portfolios, but Strevens said that was significantly less than traditional providers because it was an online platform. She said the amount of commission paid by KiwiSaver providers meant it would not be worthwhile if each client was dealt with on an individual basis but because it was online, there were economies of scale.

At the moment, clients who want personalised advice also pay more.

Strevens hopes to have 2% of the KiwiSaver market within a couple of years.

She said she would never go back to traditional financial advice. Other financial advisers should also soon see the benefits of emerging technologies in their practices, she said. “It’s just whether they are willing to see they can benefit from this help.”

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PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

Upskill or get out It’s time to create space for the advisers who are willing to commit to the profession.

By Mike Moore

S

ome people see the ever increasing regulation of the financial advice business as a great thing and long overdue.

Others see it as an unnecessary intrusion and driving them out of the business As always the truth of the matter lies somewhere in the middle In the 40- plus years that I have been involved in the advisory business, it has gone from the Wild West to having a much more civilised and professional demeanour. Having said this, many people have commented that

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there are still crooks in the business, it is just that they are better-educated!

Worldwide, governments and regulators are doing their best to protect the interest of the consumer. Regrettably, in many ways this has led to the dumbing down of advice and the advancement of a robo advice mentality.

I am sure that the original regulators did not envisage the desirable outcome being that there are so few advisers, the vast majority of Kiwis cannot get quality advice from an educated professional. Regrettably, that is starting to happen as the bar to entry

continues to rise.

Our thoughts on the matter are that it is high time that the older advisers made an assessment of their position and either upskilled or exited.

This will leave the marketplace free for people who are totally committed to their business and are prepared to put in the investment, time and energy and money to further grow their practice. This may mean the concentration of individuals into small groups or large firms simply because the back office resources required are ever growing.

PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

Once you add on another layer of registration and compliance this will become an even greater imposition. However, no matter what some people think, this is inevitable.

It only takes one or two high-profile trials and publicity campaigns for individuals to lose confidence in their financial adviser. To avoid that, it is important that the average Kiwi is satisfied with the quality of advice and looks to advisors as trusted professionals.

One scenario is that because of the negative nature of insurance advice, all about claims, death and disabilities, it is generally conceded that this is an emotional as well as a financial decision.

In the past it has been tilted too far in favour of the emotional purchase, in the old days there used to be a saying that you “back up the hearse until they can smell the flowers”!

At the other end of the spectrum a 20-page analysis of someone’s financial situation is not likely to motivate them to take the necessary action about such emotional issues such as life insurance, medical, disability etc.

One of the main benefits that a good adviser brings to the process is holding the client accountable for their decisions. Someone has to sit down and go eye-to-eye with the client and show how the best way forward for the client is they make the tough decisions.

This is where the relationship comes into play. No matter how much we have roboadvice, banking tellers selling products and some individuals being unprofessional, the vast majority of decisions are made around a quality person giving advice and encouragement to a quality client.

One of the main benefits that a good adviser brings to the process is holding the client accountable for their decisions.

SO WHAT DOES THIS MEAN TO YOU? Firstly if you think things are not going to change, get over it. It is going to happen, most likely we will look like a state of Australia soon, with registration of businesses and subsequent flow through of individual registration for every adviser.

NOW IS THE TIME! If you are thinking of buying, selling or improving your practice, the middle of winter is the best time to take action.

Secondly, if you are not prepared to commit time and energy into upskilling, getting all the necessary qualifications and prepared to work under a tighter regime then it is time to go.

Luckily at this stage of the process, there are plenty of keen people who would like to buy the opportunity to talk to your clients and perhaps give you the chance to pass the baton.

If you are young, enthusiastic and ambitious, this is your opportunity. There is going to be a huge number of Kiwis who are keen for advice and do not know where to find it at an affordable price. If you can develop the business and build trust relationships with clients and their advisers such as accountants and solicitors, then you are looking forward to a lifelong career. This will mean that you will have to exhibit professionalism every step of the way.

We are keen to participate in this transition.

For the last 15 years we have been in the business of assisting many of the longer-term advisers hand on the baton to the new bright eyed, bushy-tailed advisers seeking to grow.

We see this process accelerating over the next three or four years and we are providing advice on how best to implement it.

To achieve this it is high time that you gave serious thought to your next year’s plan.

If it includes future growth and expansion and education then we think you are on to a winner. If it is all too hard, or it does not fit your lifestyle profile by all means give us a call.

The client’s best interest drives the professional adviser. Be it risk, investment, fire and general insurance or mortgages, as long as you are continually reviewing your processes with that in mind there is nothing to fear from the evolving regulatory process.

Mike Moore is the principal of Mike Moore Marketing Limited. www.mikemoore.co.nz

Mike Moore 021 974 231

Maree Porter 021 874 231

maree@mikemoore.co.nz

CONTACT US TODAY! www.mikemooremarketing.co.nz 025

INVESTMENT

{

}

Accelerating technology disruption - what does it mean for portfolios?

By Shane Solly, Director & Portfolio Manager at Harbour Asset Management

T

he convergence of major technology innovations over the past decade has created an accelerating pace of change for many businesses.

It’s true that technology change has been a constant challenge and opportunity for economies and business, since well before the Industrial Revolution (the transition to new manufacturing processes between 1760-1840). But just as the Industrial Revolution changed the way people work and live, convergence of new technologies has begun to change the way economies operate and how people live now. We don’t perceive this change as happening with a big bang; rather it is a progressive evolution.

This accelerating pace of change is not about any single technological breakthrough. It's about major breakthroughs over the past decade, combining to change commercial business ecosystems.

Accelerating technology disruption

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creates both threats and a opportunities for investors.

WHY THE ACCELERATION?

There are a number of technologies that have evolved over the last decade, where scientific breakthroughs have been followed by significant improvements in the economics of usage.

Technologies at the heart of this change process include big data, artificial intelligence, deep learning, the Internet of Things (and system of systems), cloud computing, advanced robotics, battery technology, and improving solar technology.

Separately, each of these technologies are impacting on how companies are managed. But these technologies are no longer unrelated. Significant improvements in access and reductions in costs mean that big data, the Internet of Things and artificial intelligence are converging and disrupting existing processes and businesses.

Big data refers to the processing of large or complex data sets. Improved data capture, lower data storage cost, cheaper and more efficient data analysis, search, querying, updating and information privacy are making the use of big data approaches available to a wide range of commercial users. For most businesses big data is being used for predictive analytics, user behavior analytics, or certain other advanced data analytics methods that extract value from data. Big data is proving particularly useful for improving sales conversion rates (the right products, at the right time, in the right place) and reducing inventory levels (allowing businesses to quickly adjust inventory holdings if products are selling or not selling). It also has huge implications for healthcare and education.

The Internet of Things (or IoT) is the internetworking of physical devices, vehicles, buildings, and other items embedded with electronics, software, sensors, actuators, and network connectivity which enable

INVESTMENT

these objects to collect and exchange data.

IoT devices remove manual processes from some industries, and improve quality and safety in others. For example, IoT components play an integral part in the evolution of driverless cars. System of systems is a collection of task-oriented or dedicated systems that pool their resources and capabilities together to create a new, more complex system.

These offer more functionality and performance than simply the sum of the constituent systems. Energy distribution utilities use IoT as a ‘system of systems’ to improve the efficiency of electricity distribution grids, allowing them to make better decisions about investment in new capacity – for example whether to install a storage battery or additional cabling into a faster growing part of the electricity grid.

Artificial Intelligence (AI) is intelligence exhibited by machines. In computer science, the field of AI research defines itself as the study of "intelligent agents": any device that perceives its environment and takes actions that maximize its chance of success at some goal.[1] AI machines mimic "cognitive" functions that humans associate with other human minds, such as "learning" and "problem solving".[2] Companies with large logistics warehouses are increasingly using AI-enabled robots to complete repetitive or dangerous tasks, improving efficiency and safety.

SOME WAY TO GO

As investors, while accelerating technologydriven disruption is an established trend in many cases, there is some way to go in terms of the impact on current company profitability.

Many company executives are adopting these technologies because they stack up.

The convergence of these technologies is redefining how businesses are operating, strategising and competing.

The best possible way to get exposure to accelerating technology convergence is by making investments in multiple beneficiaries of the change.

Shane Solly These technologies are becoming essential for companies that want to remain competitive. Companies that are not adapting to the change are at risk of falling behind in a competitive landscape now driven by technology convergence.

Companies increasingly know they have to adapt to the rate of change, but they also know they have to invest to meet the change. Some companies have to invest to stand still. Others will invest

and improve their competitive positioning and profitability. At Harbour we look for companies where the accelerating rate of technology change increases returns to shareholders, either as a user of the technology or a supplier of the technology.

We also look to minimise exposure to those companies that are challenged by the rapid rate of change – either because these businesses have to invest significant capital to keep up, or because such businesses are at risk of being replaced by new alternatives.

In our opinion, the best possible way to get exposure to accelerating technology convergence is by making investments in multiple beneficiaries of the change, including those that may not appear to be the most technology-centric business.

At a macro-economic level, technology convergence has the potential to constrain global inflation as economies deliver the same or greater productivity, with more efficient use of resources as a result of better use of data. Lower-than-historic levels of inflation may mean interest rates stay lower for longer.

While the full impact of accelerating technology disruption may take time, investors need to be aware of the potential impact of convergence of technology on the sustainability and growth potential of some industries and companies, and its impact on broader economies. In our view, we see this convergence as supporting an extended period of low inflation and company profitability. But not all companies and industries will make a smooth transition, and selective investing is required to navigate the change.

Sources: (1) Artificial Intelligence: A Modern Approach: Russell & Norvig 2003, (2) Jump Up: Russell & Norvig 2009 This column does not constitute advice to any person. www.harbourasset.co.nz/disclaimer/

027

ASSET REGULATION DATA ADVISER

STEP PROCESS TO PLAN FOR CHANGE

Put the processes in place now to achieve the business you want in the future, says Barry Read.

I

t has been said that we don’t plan to fail but sometimes we fail to plan.

With the upcoming changes proposed by the Financial Services Legislation Amendments Bill in front of Parliament, all financial advice businesses now have a chance to plan for the new world as licenced financial advice providers.

The legislation sets out the timeframes and key steps for the introduction of the bill so we have put together an example plan of how financial advisers can start planning for the implementation of the bill.

1

WHAT DOES THE FUTURE LOOK LIKE?

The first step with any plan is to imagine the

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WWW.GOODRETURNS.CO.NZ

outcomes. What sort of business do you want to have in the future?

We have the opportunity to assess what the future could look like. So the first step in the plan is to ask yourselves "what would my ideal practice look like in three years’ time? What types of advice services do we want to be offering, what type of clients do we want to be dealing with, what products do we want to be offering and how do we want to be offering these products and services, and how many advisers will we have?"

If you can clearly articulate your practice of the future, then assessing the options that will come up from the legislative changes will be a lot easier.

To be completed by October 30.

2

IDENTIFY THE GAPS

The next question to answer is where are you now and what are the gaps between where you are and where you want to be?

The key is to work out how you will address these gaps in your business processes to be able to meet the potential gaps. If you review the Current FMCA guide to licensing guide and the QFE ABS requirements we can start to estimate the requirements for a licence application.

We will then; ➤ Agree and develop policies, processes or procedures for the services offered– streamlining where possible, and/or ➤ Agree a development plan for internal procedures and controls to meet the FMC Act requirements.

REGULATION

While there are a lot of unknowns about licencing there is still time to plan for the future.

- Barry Read

group or managing agency. For individual advisers you will probably start to receive offers from other entities and if you have completed steps one and two you will be able to assess if these entities will be able to support you practice in the future.

To be completed by August 31, 2018.

5

DEVELOP OUTSTANDING ITEMS

By now you should have all the information required and you can review all the work completed and do final checks before applying. We should also know the actual costs by now.

September 30, 2018.

6

APPLY FOR TRANSITIONAL LICENCE OR TO JOIN ANOTHER ENTITY.

For example, organisational structure, governance procedures, fit and proper people, culture, compliance procedures.

Your application needs to clearly set out how you will meet these criteria.

To be completed by March 30, 2018.

The key here is to start to document how you recruit, train, remunerate advisers and then document the processes and controls for your advice processes.

To be completed by December 31.

3

KNOW THE LEGAL REQUIREMENTS

Hopefully we will know by now the timing and implementation timetable as well as more details about the licencing requirements.

You can start to measure how you will meet the legal eligibility criteria in the FMC Act for your licence class.

Get familiar with the minimum standards for your type of licence and eligibility criteria in our licensing guides.

4

ASSESS THE ADVISER COMPETENCY STANDARDS FROM THE CODE COMMITTEES

Before you submit your licence application: ➤ Read all parts of the relevant guide for your licence type on our website. ➤ Prepare answers to the questions in part B. ➤ Check the comments in part C for any additional supporting evidence you need to provide. ➤ Your application should include the following information about your business: ➤ A clear description of its operating model and ownership. ➤ The operating model. ➤ The products and services offered. ➤ Your target customers. ➤ Organisational charts that show reporting lines.

If you have decided to not apply directly you will have to join another entity who is applying for a licence.

While there are a lot of unknown’s about licencing there is still time to plan for the future and take control of the decisions for your practice. Remember a goal without a plan is just a dream.

Barry Read runs Independent Development Solutions (IDS), specialising in helping advisers meet their compliance requirements.

We should know now the actual licensing requirements and the Code Committee should have a draft code ready for review.

From this we will be able to develop the following requirements; ➤ Adviser recruitment criteria for the licenced entity ➤ Adviser training requirements ➤ Adviser contractual requirements ➤ Adviser accreditation ➤ Adviser compliance programme At this point you will be able to review these with your practice to ensure they would join the organisation if you are a

029

PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

THE MODEL INSURANCE STATEMENT OF ADVICE Aussies take note, here’s one way we’re doing it better. By Russell Hutchinson

A

{ RUSSELL HUTCHINSON } 030

WWW.GOODRETURNS.CO.NZ

pparently, there are many enviable things about New Zealand generally, and the financial services industry in particular. Visiting Australians such as Financial Services Council chief executive, Sally Loane, noted that there was a lot of construction going on in Auckland, a seemingly robust economy, and a welcome lack of politics affecting the financial services industry.

With a wide-angle lens, there is much to be grateful for right now: the economy in broadly good shape, and much of that construction in Auckland is for new transport infrastructure.

Something I am reminded we need almost every time I travel to the city.

Of course, look closer, and there are

always problems. The recent demonstrations outside parliament show that there is growing impatience with slow progress improving mental health services. That suicide now accounts for more deaths than road accidents shows that even a heartless economist could probably make a case based on the cost to the economy of those early deaths. It reminds me too, of a worrying trend to more companies excluding suicide for longer in their contracts.

Which brings me back to financial services.

Although the grass may look greener from the other side of the fence, as I specialise in insurance, I have cause to believe those people that say we currently have it pretty good, and should try to keep it that way. The best recent example was ASIC’s model statement of advice (SOA) for insurance.

This neatly shows the difference between a principles-based regime and a more prescriptive one. You can check out the review of the ASIC draft SOA in the box below. My summary is: It’s awful. So far, we have not had the FMA write a draft statement of advice, and I hope they never will. I expect regulators to write good regulations, not good statements of advice. Hopefully the new law, the new code, and the regulations that will accompany it will keep up that fine tradition. It means more flexibility.

Take the view of Tony Vidler, who recently said that a statement of advice should be "a statement" meaning a clear, brief, declaration of what is advised. His view is that this can probably be achieved in a few pages. That would be a big improvement, and I think it can be done, too, but only with a fairly big "appendix" for the odd detail-obsessed client. The appendix should contain everything that is “boilerplate” – meaning, not actually specific to the client – has to be put "to the back" somewhere. So, all that stuff the Aussie regulator filled pages with: Product descriptions, tax, and so on, leave it to the appendix.

But even before you get to writing the statement of advice, it is best to consider stwo more stories.

The first is that the UK’s Financial Conduct Authority found when reviewing insurance renewals notices most consumers gave up reading on the first page and were only able to recall receiving the renewal, not any actual content. When you’re actually writing a statement of advice, you may have some more engagement from the client, but what you say

PRACTICE ASSET REGULATION DATA MANAGEMENT ADVISER

I expect regulators to write good regulations, not good statements of advice. is more likely to sink in than what you write.

You still need the document, of course, but most people won’t read it.

Then there’s behavioural economics, and one concept in particular, that of revealed preferences. Simply put, what people say matters less than what they actually do. In the context of an insurance recommendation that plays out as the difference between their stated goals and what they actually buy. Expect to heavily revise the statement of advice into a final record of advice after the client reconciled their desires with their budget.

All that leads me to reflect on the need for flexibility, rather than regulated structure.

The flexibility to allow the scope of the engagement to be whatever you and client agree, subject to consumer preference, and your own capability to give advice.

The flexibility to offer a statement of advice, or a record of advice, depending on the process. The flexibility to keep standard stuff in an appendix, and the flexibility to respond to unique advice engagements creatively, without having to ask the FMA to produce a draft first.

In short a plea to the Code Working Group to keep the essence of what we have now, which is so much the envy of others.

See right page - the cover page of ASIC’s draft Statement of Advice (SOA) for insurance recommendations. It is supposed to be short, if so, that's a sharp indictment of existing SOAs which must be a lot longer, as it is 27 pages of content.

Half of the front page is dedicated to commission disclosure in both percentage and dollar terms. For those of you unfamiliar with the Australian life insurance scheme for commissions, those numbers are real.

Interestingly, ASIC did not envisage this adviser charging a fee to ‘top-up’ the commission as Trowbridge suggested they

would when it was proposed in his reports.

It manages to do a very detailed job of looking at customer requirements, objectives, and scope - and appears to offer so much detail as to make this section hard to read, and hard to automate, but comprehensive.

The sections discussing differences between products were quite limited and high level, probably failing to cover important items, but as an example of style, entirely satisfactory.

At this stage, we have an immediate issue with the report: we think best practice is for a cover page to ensure that confidential information is covered should the report be carried away from the meeting or the client meeting temporarily interrupted by a third-party.

Commission disclosure is repeated in more detail in the pages just before the implementation page, at the very end of the report as well. The document does commission disclosure very well – clearly ASIC rates this a high priority, even after limiting commissions.

Curiously, although the report talks about future premiums, it doesn’t bother to estimate or forecast them, which would have been powerful, useful information for the client, given the products are all rate-for-age. We think that is another black mark against the report. Increasing premiums on rate-for-age contracts are the single largest sustainability issue for consumers.

Nowhere are the financial strength rating, service, or other strengths and weaknesses of the recommended insurer discussed. That is another black mark against the example for us.

It doesn't give any prominence to the list of companies considered in the advice process, just a standard section on approved provider list (APL) and reference to another document. We think that's a failing: an actual list of the companies in the APL should at least be shown, because that speaks far greater volumes about the extent the advice considered alternatives. Although, some companies will be delighted that ASIC allows them to bury their short list in another document that will rarely be seen, we were expecting more upfront disclosure on the breadth of advice.

The page dealing with the reasons for switching is limited, and I cannot see any discussion of the underwriting process or risks of switching relating to pre-existing conditions, both essential elements of the feedback our own FMA has been giving advisers.

It does include an implementation checklist, but with no underwriting examples. It is significant to many applicants the amount of medical data and/or tests required, and we think it best practice to explain these options.

Also, jargon is used a lot without explanation in the narrow ‘key features of new policy’ section of the recommended products section In short, it is long, and doesn’t actually help the reader understand critical aspects of the recommendation.

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

031

ASSET ADVISER

For more information call 0800 888 361 Latest 1 Yr 3 Yr 5 Yr Transaction Return Return Return Exit Price % New Zealand Insurance Fund Miscellaneous Booster KiwiSaver Capital Guaranteed 1.0816 2.37 --Booster KiwiSaver Options 1.2316 0.22 --Fidelity Life Super-Sup Options --0.16 4.78 6.28 Kiwi Wealth KiwiSaver Scheme -2.61 3.44 -CashPlus Fd NZ Funds KiwiSaver Growth Strategy 1.5818 6.99 6.10 11.59 NZ Funds KiwiSaver Income Strategy 1.3199 3.49 3.73 4.10 NZ Funds KiwiSaver Inflation Strategy 1.3098 -0.16 2.56 5.44 Westpac KiwiSaver-Capital Protect Plan 1 2.3004 9.76 11.45 14.62 Westpac KiwiSaver-Capital Protect Plan 2 2.0649 9.75 11.44 14.61 Westpac KiwiSaver-Capital Protect Plan 3 1.9797 9.73 11.44 14.61 Westpac KiwiSaver-Capital Protect Plan 4 2.0448 9.75 11.44 14.61 Westpac KiwiSaver-Capital Protect Plan 5 1.7778 9.75 11.45 -NZ Insurance Cash AMP KiwiSaver Cash Fund 1.4742 1.68 2.48 2.58 AMP NZRT Cash Fund 1.46715 0.63 1.46 1.56 AMP Prem PSS OnePath NZ Cash 1.56945 2.00 2.67 2.73 AMP PSS Select Cash 1.47946 1.80 2.47 2.50 ANZ Default KiwiSaver Scheme-Cash 1.4039 2.32 2.92 2.91 ANZ KiwiSaver-Cash 1.3086 2.34 2.98 2.93 Aon KiwiSaver ANZ Cash 15.0988 1.84 2.47 2.48 Aon KiwiSaver Nikko AM Cash 14.1154 2.26 2.89 3.01 ASB KiwiSaver Scheme's NZ Cash 1.426 2.14 2.94 2.90 BNZ KiwiSaver Cash Fund 1.1327 2.59 2.82 -Booster KiwiSaver Enhanced Income 1.4855 1.87 2.72 2.88 Fidelity Life Super-Super Cash Portfolio 2.8344 0.89 1.42 1.52 Fisher TWO KiwiSaver Scheme-Presv 2828.71659 2.38 2.90 3.07 Kiwi Wealth KiwiSaver Scheme Cash Fund -2.73 3.28 -Mercer KiwiSaver Cash -2.15 2.91 2.95 NZ Defence Force KiwiSaver Cash -1.94 --OneAnswer KiwiSaver-Cash Fund 1.3583 2.20 2.85 2.80 SIL 60s + Sup Cash Fund 2.168 2.06 2.51 2.42 Westpac KiwiSaver-Cash Fund 1.3693 2.29 2.93 2.93 NZ Insurance Equity Region Australasia AMP Prem PSS OnePath NZ Shares 2.17832 -1.37 6.65 13.20 Aon KiwiSaver Milford 3.065 7.36 10.92 15.01 Booster KiwiSaver Socially Rsp Inv Gr 1.6525 8.71 9.29 9.97 Booster KiwiSaver Trans-Tasman Share 1.4089 8.65 7.60 6.63 Milford Active Growth KiwiSaver 3.08905 7.52 11.05 15.17 OneAnswer KiwiSaver-Australasian Share 1.7373 1.97 10.77 16.19 NZ Insurance Equity Region Australia AMP KiwiSaver Australasian Shares 1.0629 ---New Zealand Insurance Fund Equity Region NZ AMP Prem PSS ACI NZ Shares 2.49102 3.54 13.27 16.40 AMP Prem PSS ACI NZ Shares Index 2.21427 5.88 13.41 16.88 Fidelity Life NZ Shares Portfolio 6.226 3.86 10.14 11.94 Fidelity Life Super-Super NZ Share -6.97 10.64 12.25 SIL 60s + Sup NZ Share Fund 5.4682 3.22 10.73 15.96 New Zealand Insurance Fund Equity Region World AMP KiwiSaver International Shares 1.14 ---AMP KiwiSaver Passive International 1.1341 ---AMP Prem PSS ACI Global Shares Index 1.98637 9.22 11.85 13.07 AMP Prem PSS ACI Global Shares 2.24205 21.41 8.76 15.28 Index Hdg AMP Prem PSS FD Intl Share Fund 1 Value 1.23106 10.45 9.47 11.93 AMP Prem PSS FD Intl Share Fund 1.37095 14.06 13.21 13.16 3 Growth Booster KiwiSaver International Share 1.8059 14.92 10.42 12.68 FANZ Lifestages KiwiSaver High Growth 1.1307 9.66 --Fidelity Life Aggressive 3.4476 5.63 9.60 10.57 Fidelity Life International 2.42 11.80 7.91 10.29 Fidelity Life Super-Sup Intl -14.46 8.73 10.80 Fidelity Life Super-Super Aggressive -9.04 10.41 11.06 Fisher FuturePlan - Intl Coms 2.94624 13.14 6.24 11.11 Fisher TWO KiwiSaver Scheme-Eq 4126.13365 9.83 9.00 12.93 Mercer KiwiSaver Shares -13.30 --NZ Defence Force KiwiSaver Shares -13.07 --OneAnswer KiwiSaver-Intl Share 1.7053 13.33 13.78 15.11 OneAnswer KiwiSaver-Sustainable Int Shr 1.6392 8.48 10.47 11.17 SIL 60s + Sup International Share Fund 3.2432 13.15 13.34 14.59 New Zealand Insurance Fund Equity Sector Global - Real Estate AMP KiwiSaver Property 0.9599 ---OneAnswer KiwiSaver-Intl Property 1.3243 1.02 7.19 11.25 New Zealand Insurance Fund Equity Sector NZ - Real Estate MFL Property Fund 3.8148 -0.89 9.85 13.25 OneAnswer KiwiSaver-Australasian Prpty 1.7532 -1.78 11.24 13.65 New Zealand Insurance Fund Global Bond AMP KiwiSaver International Fxd Intr 0.996 ---AMP Prem PSS Blackrock Global Fixed Int 1.9577 2.47 5.06 5.16 AMP Prem PSS PIMCO Global Fixed 2.3128 4.85 5.64 6.24 Interest Name

Size Morningstar Rating $M Overall 45.55 91.60 13.03 79.66 85.38 18.68 61.37 12.21 10.11 15.87 22.53 18.72

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

83.39 109.59 3.86 1.07 4.37 327.82 3.87 1.34 408.85 118.48 18.51 4.15 27.52 120.97 15.51 0.30 34.02 1.62 304.58

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

4.35 117.84 28.08 6.00 693.17 25.87

2 3 2 1 3 4

0.57

--

4.73 8.83 1.41 6.59 23.33

4 3 1 1 3

0.67 0.92 9.11 11.40 5.60 5.61 9.36 43.60 0.62 0.45 22.19 9.74 24.53 83.69 12.35 2.94 39.19 6.13 13.53

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

1.12 8.15

-3

499.13 16.87

2 4

0.31 2.19 2.36

-4 5

Name

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

AMP Prem PSS SSgA Global Fixed 1.95592 0.99 5.19 Int Index OneAnswer KiwiSaver-Intl Fxd Int 1.6679 1.42 4.89 New Zealand Insurance Fund Multisector - Aggressive AMP KiwiSaver LS Aggressive Fund 1.4568 11.66 7.32 AMP NZRT AMP Aggressive 2.99643 10.57 6.48 AMP PSS DynamicMkts Growth 1.814 10.99 6.84 AMP PSS Select Growth 1.70979 10.92 6.82 Aon KiwiSaver Russell Lifepoints 2045 8.3168 10.25 10.68 Booster KiwiSaver Asset Class Growth 8.1876 11.84 -Booster KiwiSaver Geared Growth 1.9495 13.83 11.33 Booster KiwiSaver High Growth 1.4518 10.25 9.06 Fisher Funds Growth KiwiSaver Fund 1.8952 8.63 9.04 Fisher FuturePlan - Growth 2.84553 7.38 7.60 Generate KiwiSaver Focused Growth Fund 1.4429 8.26 11.19 Kiwi Wealth KiwiSaver Growth -13.35 8.83 Mercer KiwiSaver High Growth -12.27 10.62 NZ Defence Force KiwiSaver High Growth -12.02 -New Zealand Insurance Fund Multisector - Balanced AMP KiwiSaver AMP Global Multi-Asset 1.0571 --AMP KiwiSaver AMP Responsible 1.0474 --Invmt Bal AMP KiwiSaver ASB Balanced 1.0596 --AMP KiwiSaver Fisher Balanced 1.7331 6.10 7.53 AMP KiwiSaver LS Balanced Fund 1.5945 8.21 6.13 AMP KiwiSaver LS Moderate Balanced 1.5801 6.84 5.67 Fund AMP NZRT AMP Balanced Fund 2.82874 7.22 5.29 AMP NZRT AMP Global Multi-Asset 1.05497 --AMP NZRT AMP Moderate Balanced 2.07888 5.78 4.79 AMP NZRT ASB Balanced Fund 1.98307 7.04 7.63 AMP NZRT Fisher Balanced 2.33038 5.06 6.66 AMP NZRT Nikko AM Balanced 2.50334 4.42 8.38 AMP NZRT Responsible Investment Bal 1.05359 --AMP PSS DynamicMkts Balanced 1.83212 7.56 5.56 AMP PSS Lifesteps Consolidation 1.75547 6.06 5.19 AMP PSS Lifesteps Progression 1.84573 7.42 5.45 AMP PSS Select Balanced 1.77491 7.51 5.56 ANZ Default KiwiSaver Scheme-Balanced 1.6594 5.98 7.94 ANZ KiwiSaver-Balanced 1.7323 6.06 7.87 Aon KiwiSaver ANZ Balanced 23.9678 6.24 7.73 Aon KiwiSaver Russell Lifepoints 2025 8.6917 7.18 8.36 Aon KiwiSaver Russell Lifepoints Bal 8.8212 8.93 9.68 ASB KiwiSaver Scheme's Balanced 1.7257 8.76 8.98 BNZ KiwiSaver Balanced Fund 1.391 9.89 8.30 Booster KiwiSaver Balanced 1.6641 7.00 7.39 Booster KiwiSaver Socially Rsp Inv Bal 1.2675 5.84 -Fidelity Life Balanced 4.3789 5.26 6.32 Fidelity Life Super-Super Balanced -6.27 -Fisher FuturePlan - Balanced 3.91524 5.93 6.73 Fisher TWO KiwiSaver Scheme-Bal 4695.57556 6.86 7.51 Kiwi Wealth KiwiSaver Balanced -9.05 7.28 Mercer KiwiSaver Balanced -8.33 8.26 Milford KiwiSaver Balanced 2.01017 9.38 10.94 NZ Defence Force KiwiSaver Balanced -8.13 -OneAnswer KiwiSaver-Balanced 1.7558 6.09 7.97 Westpac KiwiSaver-Balanced Fund 1.681 6.63 8.24 Westpac Retirement Plan - Balanced Port 3.5035 5.56 7.09 New Zealand Insurance Fund Multisector - Conservative AMP KiwiSaver ANZ Conservative 1.0188 --AMP KiwiSaver Default (Default) 1.5857 4.87 5.31 AMP PSS Select Income 1.74906 1.46 3.88 ANZ Default KiwiSaver Scheme Cnsrv(Dflt) 1.657 3.37 5.99 ANZ KiwiSaver-Conservative 1.6228 3.32 5.71 Aon KiwiSaver Russell Lifepoints Cnsrv 9.3146 5.45 6.94 ASB KiwiSaver Scheme's Cnsrv (Default) 1.6834 4.92 6.00 BNZ KiwiSaver Conservative (Default) 1.2538 5.93 5.93 BNZ KiwiSaver First Home Buyer Fund 1.0802 4.92 -Booster KiwiSaver Default Saver 1.1763 3.86 -FANZ Lifestages KiwiSaver Income 1.0603 2.38 -Fisher Funds Conservative KiwiSaver Fund 1.5242 4.35 5.90 Fisher FuturePlan - Capital Prot 1.21234 1.50 1.50 Fisher TWO KiwiSaver Cash 1.66462 4.56 5.96 Enhanced(Dflt) Kiwi Wealth KiwiSaver Conservative -4.50 5.40 Kiwi Wealth KiwiSaver Scheme Default Fd -5.58 -Mercer KiwiSaver Conservative (Default) -4.88 6.22 Milford KiwiSaver Conservative Fund 1.59446 7.10 9.02 NZ Defence Force KiwiSaver Conservative -4.24 -OneAnswer KiwiSaver-Conservative 1.6393 3.38 5.73 Westpac KiwiSaver Default 1.1673 3.66 -New Zealand Insurance Fund Multisector - Growth AMP KiwiSaver ANZ Balanced Plus 1.9316 6.87 8.56 AMP KiwiSaver ANZ Growth 1.0737 ---

4.89 4.43

8.65 2.53

4 2

10.95 9.88 10.37 10.46 14.16 -12.15 10.73 11.56 10.49 -13.29 13.23 --

256.62 256.01 3.96 34.01 14.38 44.96 8.33 173.37 1320.18 71.78 200.08 1058.04 121.07 8.03

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

---9.20 8.39 7.54 7.35 -6.48 8.55 8.22 9.20 -7.70 6.96 7.70 7.79 9.40 9.96 10.00 10.61 12.09 10.08 -7.56 -7.39 -8.53 9.31 9.81 10.08 13.18 -10.06 9.99 8.80

3.27 3.27 2.89 35.52 799.63 548.91 786.16 1.01 278.47 74.22 157.73 157.00 1.99 3.14 7.29 2.78 47.56 94.92 1702.09 27.68 17.79 103.93 1045.02 216.83 370.04 28.32 5.46 238.92 120.33 596.63 1270.20 296.12 158.93 28.53 469.27 1158.72 99.10

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

-5.74 2.98 6.28 6.23 8.08 5.97 ----6.56 1.54 6.19 5.94 -6.95 --6.27 --

2.84 1327.05 1.64 1027.21 647.24 75.54 3482.24 410.45 48.37 38.96 52.10 540.35 21.45 704.43 523.65 113.87 1059.17 36.06 1.46 399.02 111.30

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

11.12 215.08 -- 3.18

3 --

Latest 1 Yr 3 Yr Transaction Return Return Exit Price % AMP KiwiSaver ASB Growth 1.0856 --AMP KiwiSaver LS Growth Fund 1.5004 10.50 6.84 AMP KiwiSaver Nikko AM Balanced 1.7165 5.42 9.16 AMP KiwiSaver Nikko AM Growth 1.0622 --AMP NZRT AMP Growth 2.11944 9.40 6.02 AMP NZRT ANZ Balanced Plus 2.43932 5.81 7.71 AMP NZRT ANZ Growth 1.0749 --AMP NZRT ASB Growth 1.07714 --AMP NZRT Nikko AM Growth 1.0492 --AMP PSS Lifesteps Growth 1.80257 9.79 6.36 ANZ Default KiwiSaver Scheme1.6647 7.62 9.08 Balanced Gr ANZ Default KiwiSaver Scheme-Growth 1.6586 8.89 10.02 ANZ KiwiSaver-Balanced Growth 1.7665 7.65 8.97 ANZ KiwiSaver-Growth 1.7808 8.96 9.91 Aon KiwiSaver Nikko AM Balanced 17.3452 5.47 9.27 Aon KiwiSaver Russell Lifepoints 2035 8.5754 8.91 9.69 Aon KiwiSaver Russell Lifepoints Growth 8.7433 10.26 10.62 ASB KiwiSaver Scheme's Growth 1.7046 11.12 10.46 BNZ KiwiSaver Growth Fund 1.4683 12.28 9.35 Booster KiwiSaver Balanced Growth 1.6263 8.53 8.33 Fidelity Life Growth 4.2197 7.32 7.62 Fidelity Life Super-Super Growth -7.63 7.50 Fisher TWO KiwiSaver Scheme-Gr 1.65482 8.34 8.37 Generate KiwiSaver Growth Fund 1.4021 5.21 10.33 Mercer KiwiSaver Growth -10.94 -NZ Defence Force KiwiSaver Growth -10.66 -OneAnswer KiwiSaver-Balanced Growth 1.7916 7.67 9.00 OneAnswer KiwiSaver-Growth Fund 1.8037 8.97 9.98 SIL 60s + Sup Balanced Fund 4.0727 7.52 8.50 Westpac KiwiSaver-Growth Fund 1.721 7.58 9.45 Westpac Retirement Plan - Dynamic Port 3.9498 6.53 8.36 New Zealand Insurance Fund Multisector - Moderate AMP KiwiSaver AMP Income Generator 1.0365 --AMP KiwiSaver ASB Moderate 1.0364 --AMP KiwiSaver LS Conservative Fund 1.682 4.30 4.57 AMP KiwiSaver LS Moderate Fund 1.6161 5.75 5.16 AMP KiwiSaver Nikko AM Conservative 1.0259 --AMP NZRT AMP Capital Assured Fund 2.44253 4.09 4.29 AMP NZRT AMP Conservative 2.68692 3.24 3.65 AMP NZRT AMP Income Generator 1.03703 --AMP NZRT AMP Moderate 2.06446 4.71 4.24 AMP NZRT ASB Moderate 1.04432 --AMP NZRT Nikko AM Conservative 1.02017 --AMP PSS DynamicMkts Conservative 1.76532 3.43 3.84 AMP PSS Lifesteps Maturity 1.68126 3.21 3.78 AMP PSS Lifesteps Stability 1.77005 4.88 4.42 AMP PSS Select Conservative 1.75574 3.46 3.85 ANZ Default KiwiSaver Scheme-Cnsrv Bal 1.6562 4.55 6.82 ANZ KiwiSaver-Conservative Balanced 1.685 4.64 6.78 Aon KiwiSaver Russell Lifepoints 2015 8.9112 5.45 7.03 Aon KiwiSaver Russell Lifepoints Mod 9.1993 7.08 8.31 ASB KiwiSaver Scheme's Moderate 1.7216 6.28 7.40 BNZ KiwiSaver Moderate Fund 1.3255 8.28 7.34 Booster KiwiSaver Asset Class Cnsrv 3.5175 5.66 -Booster KiwiSaver Moderate 1.6289 4.43 5.84 Fisher TWO KiwiSaver Scheme-Cnsrv 1.72736 4.77 6.04 Generate KiwiSaver Conservative Fund 1.2406 0.71 6.74 Mercer KiwiSaver Moderate -6.04 -NZ Defence Force KiwiSaver Moderate -5.82 -OneAnswer KiwiSaver-Conservative Bal 1.7008 4.64 6.75 Westpac KiwiSaver - Moderate 1.2015 4.94 -Westpac KiwiSaver-Conservative Fund 1.6122 3.87 5.79 New Zealand Insurance Fund NZ Bonds AMP KiwiSaver NZ Fixed Interest 1.0046 --AMP Prem PSS ACI NZ Fixed Interest 2.04286 2.26 5.55 AMP Prem PSS OnePath NZ Fixed Interest 1.8597 1.36 5.02 Fidelity Life NZ Fixed Interest 3.9887 2.09 3.56 Fidelity Life Super-Super Fixed Int -1.84 3.40 OneAnswer KiwiSaver-NZ Fixed Interest 1.6499 1.91 5.49 SIL 60s + Sup NZ Fixed Interest 2.903 1.50 4.89 Westpac Retirement Plan - Accum Port 3.2524 1.29 2.64 New Zealand OE Cash AMP AIT NZ Cash - UT35 1.10506 1.90 2.74 AMP ARS-Cash 1.94503 2.02 2.88 AMP Capital Cash Advantage Fund 1.41854 1.47 2.49 AMP Capital NZ Cash Fund 1.63805 2.28 3.03 AMP Capital Term Advantage ---AMP Prem PUT OnePath NZ Cash 1.38838 1.85 2.56 AMP PUT Select Cash 1.32924 1.65 2.36 ASB Cash Fund -0.76 2.02 Name

5 Yr Size Morningstar Rating Return $M Overall -- 2.38 -9.93 611.23 2 10.22 41.81 2 -- 1.82 -8.88 195.15 2 10.10 273.23 3 -- 3.85 --- 1.34 --- 3.34 -9.43 0.37 2 11.10 105.12 3 12.74 88.44 5 11.82 1434.48 4 13.58 2240.68 5 10.28 7.63 3 12.53 16.17 4 13.67 32.12 5 12.17 1197.61 4 -- 194.89 3 9.18 206.14 2 9.21 3.17 3 9.14 98.01 2 11.40 252.92 3 -- 168.33 5 -- 44.83 --- 8.11 -11.91 411.96 4 13.67 314.22 5 11.08 96.77 4 11.81 861.34 4 10.68 106.94 3 --5.36 6.53 -3.31 4.33 -5.48 --4.54 4.53 5.75 4.58 7.73 8.11 8.55 10.07 7.88 --5.30 6.64 ---8.13 -6.50

1.33 0.47 312.75 389.28 1.17 101.05 295.60 0.50 117.17 0.79 1.56 0.82 3.33 5.35 9.67 31.35 800.27 4.83 18.68 1265.96 282.82 15.04 131.08 124.42 91.69 55.64 1.88 153.51 215.08 2148.87

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

-- 0.29 4.14 11.47 3.44 2.22 3.22 0.21 3.18 1.26 3.85 6.60 3.28 7.58 2.55 18.24

-4 3 2 1 3 2 1

1.98 2.98 2.86 3.10 -2.65 2.42 2.46

---------

10.10 11.81 94.73 4643.61 -2.71 3.09 266.94

ASSET ADVISER

Latest 1 Yr Transaction Return Exit Price % BT Enhanced Cash Fund 2.0812 2.32 Fisher Cashplus Fund 1.3025 2.20 Nikko AM NZ Cash 1.0226 2.83 NZ Funds Core Cash 1.33149 1.93 New Zealand OE Equity Region Australasia AMP AIT Australasian Shrs-Multi 2.81606 6.42 Mgr-UT07 AMP ARS-NZ & Australian (multi3.32765 7.10 manager) AMP ARS-NZ & Australian (Value) 3.75168 -0.50 AMP NZRT Australasian Shares 1.2876 7.95 AMP Prem PUT OnePath NZ Shares 2.20647 -1.53 BT PS Australasian Diversified Share 2.0721 3.41 Castle Point Ranger Fund 1.3421 14.33 Devon Alpha Fund 1.5623 1.05 Devon Dividend Yield 1.8906 5.83 Devon Trans-Tasman Fund 3.5858 5.05 Forte Equity Trust 1.38041 33.41 Harbour Australasian Equity 2.2904 6.82 Harbour Australasian Equity Focus Fund 1.4197 7.45 Harbour Australasian Equity Income 1.7148 5.01 Milford Active Growth 3.06174 7.14 Milford Trans-Tasman 2.26567 10.31 Mint Australia NZ Active Equity 2.5205 5.64 Nikko AM Concentrated Equity 1.9562 4.81 OneAnswer SAC Equity Selection 2.2072 -1.26 Pie Australasian Dividend 2.2509 6.29 Pie Australasian Emerging Companies 2.8725 3.12 Pie Australasian Growth Fund 4.3708 -8.24 Pie Growth 2 Fund 1.3276 6.92 New Zealand OE Equity Region Australia AMP Capital Australian Share Fund 2.35788 3.22 Devon Australian 1.3252 5.47 Fisher Funds Australian Growth Fund 3.1534 -0.97 Fisher Funds Premium Australian Fund 1.3857 -0.73 Milford Dynamic 1.50066 6.58 OneAnswer SAC Australian Share 3.7328 -1.44 New Zealand OE Equity Region Emerging Markets AMP AIT Emerging Markets - UT65 1.32534 17.65 New Zealand OE Equity Region NZ AMP Capital NZ Shares Fund 2.72105 4.03 AMP Capital RIL NZ Shares 1.84808 4.57 AMP Prem PUT ACI NZ Shares 2.5527 3.48 AMP Prem PUT ACI NZ Shares Index 1.94504 5.38 BT Dividend Share Fund 2.2005 3.96 Fisher Funds NZ Growth Fund 7.4359 7.19 Fisher Funds Premium New Zealand Fund 1.7445 7.34 Fisher Trans Tasman Equity Trust 4.7534 3.08 Forsyth Barr New Zealand Equities 2.4912 9.06 Harbour NZ Equity Advanced Beta Fund 1.3684 5.70 Nikko AM Core Equity 1.9345 5.72 NZ Funds Dividend and Growth 1.747 11.03 OneAnswer SAC NZ Share 4.2728 3.34 Russell Investments NZ Shares 1.5859 5.74 Smartshares NZ Core Equity Trust 1.3184 9.16 New Zealand OE Equity Region World AMP AIT Global Equities-Multi Mgr-UT28 1.17004 17.51 AMP AIT Global Infrastructure - UT04 2.559 13.39 AMP ARS-International Shares (Growth) 1.41671 15.55 AMP ARS-International Shares (Passive) 1.60263 17.50 AMP ARS-International Shares (Value) 1.33377 20.06 AMP Capital Core Global Shares Fund 1.35119 11.03 AMP Capital Core Hedged Global 1.47151 23.42 Shares Fd AMP Capital Emerging Markets Share 1.03814 18.78 AMP Capital Global Listed Infrastructure 1.71182 14.90 AMP Capital Global Shares Fund 2.64667 17.30 AMP Capital Resp Invest Leaders Gl Sh 1.51146 15.34 AMP NZRT International Shares 1.37984 16.78 AMP NZRT Passive International Shares 1.37422 15.96 AMP Prem PUT FD Intl Share Fund 1 Value 1.28458 10.15 AMP Prem PUT FD Intl Share Fund 1.41004 13.95 3 Growth AMP Prem PUT SSgA Global Shares Index 1.73322 10.69 AMP Prem PUT SSgA Global Shares 2.31104 18.02 IndexHdg ASB World Shares 1.5439 18.15 BT PS International Diversified Share 1.6792 15.01 Elevation Capital Value Fund 1.5504 7.93 Fisher Funds International Growth Fund 1.7622 14.19 Fisher Funds Premium International Fund 1.8306 13.97 Fisher Global Fund 4.9558 13.10 Milford Global Fund 1.36314 10.87 Nikko AM Global Equity Hedged 1.7025 17.37 Name

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 2.96 2.99 128.65 -2.63 2.55 35.45 ---- 103.28 -2.74 2.67 58.60 -7.43 10.73 18.92

2

8.07 11.21 8.54 6.55 12.28 8.81 7.12 14.86 10.44 10.80 12.07 10.76 11.25 10.77 10.14 13.40 15.33 6.47 11.97 17.93 10.44 --

11.33 15.85 -13.23 17.13 -14.30 -14.85 -17.05 -15.15 14.96 14.81 18.60 17.31 12.72 17.40 -15.62 --

7.44 5.33 8.34 1.82 186.72 19.82 96.55 77.82 124.69 14.43 175.28 11.02 48.66 731.20 292.85 59.21 32.97 16.67 86.88 85.45 72.60 128.47

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

2.64 7.96 7.67 7.82 10.38 0.23

6.21 11.40 8.17 8.52 -5.94

176.89 25.14 57.32 63.24 167.26 28.70

2 4 3 4 5 1

3.74

2.41

3.07

--

13.60 14.01 13.08 12.62 15.70 11.84 12.00 10.53 15.85 -14.87 13.88 11.04 13.39 --

16.76 -16.28 16.39 18.53 16.71 16.82 14.35 17.84 -17.98 13.76 16.22 ---

479.25 12.70 1.85 4.19 19.06 145.90 84.32 47.66 16.57 108.47 7.32 82.61 119.89 220.67 41.73

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

9.06 9.02 15.37 8.91 11.41 13.32 10.23 6.83 7.50 10.92 7.66 11.13 10.32 9.34 13.09 11.58 10.33 12.23 10.90 8.24 8.64 9.14 6.44 8.28 10.29

11.79 14.38 18.56 14.02 16.67 14.48 17.17 5.70 -14.87 12.65 --11.91 13.09 13.16 16.65 13.88 13.70 10.63 9.20 9.55 12.06 ---

21.90 18.76 7.14 3.61 5.42 838.44 535.51 72.39 309.41 137.55 58.22 8.78 4.68 2.40 2.13 4.30 7.23 148.81 280.86 25.70 35.18 78.26 90.00 319.19 94.27

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

Latest 1 Yr Transaction Return Exit Price % Nikko AM Global Equity Unhedged 1.6841 8.63 NZ Funds Equity Inflation 0.8424 -3.73 OneAnswer SAC International Share 1.9446 13.15 Pathfinder Global Water 1.7809 8.59 Pathfinder World Equity Fund 1.6186 10.23 Pie Global Small Companies Fund 1.3648 14.33 Russell Investments Global Shares 1.7211 12.05 Russell Investments Hedged Global 1.939 19.35 Shares T.Rowe Price Global Equity Growth 1.2843 13.63 New Zealand OE Equity Sector Global - Real Estate AMP AIT Global Property - UT54 3.11312 -1.44 AMP ARS-Listed International Property 3.78006 -0.56 AMP Capital Global Propty Securities Fd 1.49389 -2.02 NZ Funds Property Inflation 1.5199 0.72 OneAnswer SAC International Property 1.3394 0.74 New Zealand OE Equity Sector NZ - Real Estate AMP ARS-Listed NZ & Australian Property 3.25085 -1.19 AMP Capital Listed Property Secs Fd 2.3099 -1.30 AMP Capital NZ Property Fund 2.17184 0.12 BT Property Fund 4.0692 0.65 Mint Australia NZ Real Estate Investment 1.7494 -1.22 OneAnswer SAC Property Securities 3.0813 -1.82 New Zealand OE Global Bond AMP AIT Fixed Interest Income - UT36 1.20108 2.20 AMP AIT Global Bonds-Multi Mgr-UT13 1.96727 0.96 AMP ARS-International Fixed Interest 2.44905 1.58 AMP Capital Global Short Duration 1.08747 2.43 AMP Capital Hdgd Gbl Fixed Intrst Fund 2.3241 2.76 AMP NZRT International Fixed Interest 1.15092 2.09 AMP Prem PUT Blackrock Global Fixed Int 1.81352 2.29 AMP Prem PUT PIMCO Global Fixed 2.31051 4.68 Interest AMP Prem PUT SSgA Global Fixed 1.81061 1.05 Int Index ASB World Fixed Interest 1.1143 1.68 BT PS International Diversified Bond 2.1809 2.98 Fisher BondPlus Fund 2.1545 3.40 Fisher Funds High Income 1.0199 3.79 Nikko AM Global Bond 1.1441 2.87 NZ Funds Global Income 1.4371 3.21 OneAnswer SAC International Fixed Intrst 1.1955 1.35 Russell Investments Global Fixed Int 1.176 4.21 New Zealand OE Miscellaneous AMP ARS-UK Cash 0.68722 -17.43 Fisher Funds Property and Infrastructure 2.2073 14.33 KTAM NZ Australian Long Short Equity 1.28193 -5.66 Nikko AM Income 1.2273 2.49 Nikko AM Multi-Strategy 1.1141 4.50 NZ Funds Core Inflation 1.2952 1.27 NZAM Alpha Fund 1.1165 -4.92 NZAM Global Growth 1.4118 -1.89 Pathfinder Commodity Plus Fund 0.8434 -12.53 Salt Long Short Fund 1.4822 6.10 New Zealand OE Multisector - Aggressive AMP AIT Aggressive Portfolio - UT31 1.86495 10.44 AMP AIT eInvest - Aggressive - MDF7 1.3033 11.48 AMP AIT Growth Portfolio - UT03 1.79122 9.47 AMP Capital Growth Fund 2.48029 9.95 AMP PUT DynamicMkts Growth 1.84186 10.65 AMP PUT Select Growth 1.63235 10.62 New Zealand OE Multisector - Balanced AMP AIT eInvest - Balanced - MDF5 1.23333 8.05 AMP AIT Moderate Portfolio - UT01 1.80933 4.89 AMP ARS-Balanced 1.99161 8.50 AMP Capital Global Multi Asset Fund 1.20976 6.80 AMP Capital Responsible Inv Leaders Bal 1.79772 6.56 AMP PUT DynamicMkts Balanced 1.80582 7.22 AMP PUT Select Balanced 1.70507 7.24 ANZ Invmt Fds Balanced 1.691 5.68 ASB Balanced 1.5531 8.17 Milford Balanced 1.97491 9.18 NZ Funds Core Growth 1.3409 0.72 OneAnswer MAC Balanced 1.691 5.68 Westpac Active Balanced Trust 2.1036 5.91 New Zealand OE Multisector - Conservative AMP PUT Select Income 1.62965 1.32 ANZ Invmt Fds Conservative 1.4757 3.14 ASB Conservative 1.559 4.31 Milford Conservative 1.08595 7.18 OneAnswer MAC Conservative 1.4757 3.14 Westpac Active Conservative Trust 1.8188 3.31 Name

3 Yr 5 Yr Size Morningstar Rating Return Return $M Overall 12.32 -- 127.12 4 3.16 5.52 82.87 1 14.57 16.48 175.39 5 9.51 14.20 13.39 4 10.44 -- 31.81 3 8.83 -- 73.77 3 12.13 -- 58.21 4 10.21 -- 58.83 3 --- 16.99 -8.02 10.97 2.59 6.64 11.16 5.52 5.97 11.96 218.06 5.22 7.24 85.71 6.82 -- 5.21

5 2 3 1 3

10.48 11.64 10.37 12.86 10.98 11.16

11.75 13.04 9.45 13.48 12.41 13.47

4.55 9.25 118.86 75.43 45.65 127.19

1 3 -4 2 3

3.29 3.62 4.34 3.31 4.65 4.43 4.76 5.46

3.31 3.89 4.57 3.85 4.86 -4.94 6.22

91.18 11.01 1.79 200.72 82.40 1.92 1.30 2.29

1 2 2 2 3 2 3 5

5.05 3.28 3.82 4.98 4.95 5.01 3.34 4.75 5.82

4.81 2.98 4.75 5.66 4.96 -3.63 -6.35

4.75 310.99 347.32 153.15 66.40 22.09 118.59 3.20 528.31

3 1 2 4 4 4 2 3 5

-3.22 12.66 7.59 6.14 3.86 2.08 1.52 1.65 -3.48 --

-2.95 13.95 5.93 6.35 -4.46 -3.19 -3.59 --

9.96 75.76 21.78 10.77 120.40 118.91 44.63 54.41 20.69 248.17

-----------

5.77 8.67 99.24 7.02 -- 54.79 5.72 8.39 35.68 6.50 10.28 6.12 6.69 10.27 3.92 6.65 10.31 14.10

1 3 1 4 3 3

5.91 4.32 6.49 5.89 5.89 5.39 5.40 7.50 8.39 10.53 1.83 7.50 7.45

-5.71 8.59 -8.94 7.61 7.64 9.65 9.48 12.78 8.23 9.65 9.50

87.40 96.43 153.61 176.52 46.75 4.86 38.57 213.70 161.43 410.39 88.65 36.33 232.78

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

3.84 5.45 5.38 -5.45 4.87

2.94 5.99 5.34 -5.99 5.65

2.81 50.96 135.09 134.60 9.34 224.43

1 3 2 -3 2

Latest Transaction Exit Price New Zealand OE Multisector - Growth AMP AIT Balanced Portfolio - UT 02 1.87545 AMP AIT eInvest - Growth - MDF6 1.28368 AMP ARS-High Growth 1.7824 ANZ Invmt Fds Balanced Growth 1.8209 ANZ Invmt Fds Growth 1.9197 ASB Growth 1.5124 Fisher Multi Sector Fund 3.0649 NZ Funds Global Equity Growth 1.4955 OneAnswer MAC Balanced Growth 1.8209 OneAnswer MAC Growth 1.9197 OneAnswer SAC Balanced 2.8956 Westpac Active Growth Trust 2.0428 New Zealand OE Multisector - Moderate AMP AIT eInvest - Conservative - MDF2 1.16749 AMP AIT eInvest - Moderate - MDf3 1.20369 AMP ARS-Conservative 2.18397 AMP Capital Conservative Fund NZ 2.33123 AMP Capital Income Generator Fund 1.10401 AMP PUT DynamicMkts Conservative 1.71037 AMP PUT Select Conservative 1.72113 ANZ Invmt Fds Conservative Balanced 1.581 ASB Conservative Plus 1.5475 ASB Moderate 1.5599 Harbour Income 0.9899 Milford Diversified Income 1.62906 Mint Diversified Income Fund (Retail) 1.0347 NZ Funds Global Multi-Asset Growth 0.5277 OneAnswer MAC Conservative Balanced 1.581 Westpac Active Moderate Trust 1.4275 New Zealand OE NZ Bonds AMP AIT NZ Bond - UT36 1.19173 AMP AIT NZ Fixed Interest - UT60 1.72889 AMP ARS-NZ Fixed Interest 2.46835 AMP Capital NZ Fixed Interest Fund 1.66741 AMP Capital NZ Short Duration 1.264 AMP NZRT NZ Fixed Interest 1.21429 AMP Prem PUT ACI NZ Fixed Interest 2.02901 AMP Prem PUT OnePath NZ Fixed Interest 1.73402 BT Corporate Bond Fund 1.6366 BT PS NZ Diversified Bond 1.3244 Fisher New Zealand Fixed Inc Trust 1.2568 Forsyth Barr NZ Fixed Interest 1.6559 Forsyth Barr Premium Yield 1.692 Harbour NZ Core Fixed Interest 1.0958 Harbour NZ Corporate Bond 1.0579 Nikko AM NZ Bond 1.0151 Nikko AM NZ Corporate Bond 1.1473 NZ Funds Core Income 1.53623 OneAnswer SAC NZ Fixed Interest 1.6528 Russell Investments NZ Fixed Interest 1.1728 Westpac Active Income Strategies Trust 1.1828 Name

1 Yr 3 Yr 5 Yr Size Morningstar Return Return Rating Return $M Overall % 7.37 10.22 10.65 7.24 8.56 10.49 5.52 13.38 7.24 8.56 6.85 6.75

5.18 6.52 7.07 8.63 9.53 9.82 6.50 8.89 8.63 9.53 8.38 8.58

7.23 -10.16 11.58 13.23 11.50 9.00 12.31 11.58 13.23 10.95 11.22

107.93 32.06 54.06 153.58 76.42 30.58 11.68 61.30 32.96 19.18 51.09 71.99

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

4.17 5.59 4.56 3.32 5.57 3.29 3.25 4.27 -5.73 3.70 9.84 2.84 -8.43 4.27 4.40

4.30 4.91 4.93 4.30 -3.71 3.64 6.43 -6.82 -12.04 --11.74 6.43 6.14

--5.77 5.05 -4.43 4.45 7.74 -7.29 -13.45 --6.79 7.74 7.39

26.04 91.38 52.20 8.89 112.82 2.11 15.57 170.92 666.15 281.30 2.79 1640.57 39.08 26.71 10.75 425.25

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

2.80 1.87 2.35 2.51 3.25 2.58 2.25 1.23 3.15 2.38 1.48 2.64 2.99 2.83 3.23 2.42 3.62 3.31 1.79 2.59 2.44

5.08 5.11 5.67 5.76 4.53 5.83 5.46 4.89 4.70 5.23 4.86 5.24 5.48 5.35 5.05 5.42 5.79 3.92 5.35 5.42 3.05

2.95 3.76 4.26 4.31 4.18 -4.08 3.34 4.62 4.37 3.65 3.68 4.63 4.37 4.64 4.68 5.38 4.38 3.55 -3.06

26.36 6.47 6.78 1739.38 426.37 7.52 8.06 1.62 71.13 221.62 61.25 13.87 54.21 150.09 327.59 62.08 212.94 127.27 12.66 173.41 13.25

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

Returns are calculated to 31/08/17 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

DATA

KIWISAVER ATTITUDES REVEALED How much do your clients know about KiwiSaver?

A recent ANZ survey offered an intriguing insight.

How important are retirement savings issues in deciding your vote?

Important

38% How much do you know about the industry sectors your KiwiSaver provider makes investments in or what their views are on various sectors?

A lot /a fair amount

How much do you know about KiwiSaver

A lot /a fair amount

70%

Should personal contributions automatically increase for those who have withdrawn funds from their KiwiSaver account for a first home, so they can rebuild their balances faster?

Yes

15%

27%

Have you worked out what your KiwiSaver and other savings are likely to amount to by the time you are 65?

Yes

How confident are you about the reliability of your estimated amount?

35%

Confident

54%

When KiwiSaver funds become unlocked, what would be your preferred option?

KiwiSaver providers give you a set of regular withdrawal amount options for you to choose between

29%

KiwiSaver providers give you access to free professional advice on withdrawal options tailored to your needs and circumstances

62%

Unsure

9%

How would you prefer to access advice about retirement savings?

From a person

34%

A sophisticated online calculator using artificial intelligence which assesses your financial position and provides advice on options

13%

The same sophisiticated calculator, with a person helping to explain how to use it and interpret the results

18%

Online tools

18%

No advice, I'd prefer to do it myself

16%

Other

034

2%

WWW.GOODRETURNS.CO.NZ

Top 10 It's been a busy month on the Good Returns website.

Among the top stories were the sales of Sovereign and who will buy it, a Qrops adviser who was censured for a code breach and how the FMA plans to use its increase in funding.

1

6

2

7

FundSource surprises with awards There were some surprises in the FundSource Fund Manager of the Year awards which were handed out in Auckland. .Sovereign for sale but who will buy? .A sale of Sovereign could be good news for customers and advisers, one industry commentator says.

3

.OnePath sale may be getting close .ANZ appears to have sped up the potential sale process for its life insurance business OnePath.

4

.CBA eyes Sovereign, .CommInsure divestment Commonwealth Bank of Australia has signalled the possible divestment of its life insurance businesses in New Zealand and Australia, but Sovereign CEO, Nick Stanhope, says it’s “business as usual”.

5

No fine for QROPS adviser who breached code A financial adviser has been censured and ordered to operate under supervision for at least six months after being found to have breached the code of conduct.

.Some active managers delivering .little for fee: Report Some New Zealand active equity managers are running investments only 27% different from the index, a new report has found.

. QFEs get licensing headstart .Dealer groups and adviser networks may opt for financial advice provider status (FAP) under the new legislation, but it is expected to be an easier transition for existing qualifying financial entities (QFEs).

8

.Newpark stacks its board .with well-known people Newpark Group has appointed four business leaders to its board, to help design and implement the group’s future strategy.

9

.FMA outlines plans .– has eyes on advisers The Financial Markets Authority is laying out how it plans to use its new, increased level of funding – and advisers can expect to receive attention.

10

.Under-active RFAs may drop out A large number of advisers are not working full-time and may take the chance to drop out when new advice laws kick in.