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Strategic Environment 2008 – 2010
Overview During this period almost
every aspect of the financial services industry will change. As we start
the period we are still digesting the impact of the credit crunch.
- Many familiar names
among the ranks of finance companies have disappeared. More will
follow.
- A number of non-bank
lenders have been quickly removed from the market. There will be
more consolidation there.
- Insurance companies may
already be feeling the benefit of an increased appreciation of risk
– and will be welcoming new inflows into their KiwiSaver
products.
- Activists will pursue
legal action on behalf of groups of investors with increasing
vigour.
- Investment advisers are
coming under increasing scrutiny because of the investment
recommendations made over the past five years.
- Regulatory changes will
force many advisers to leave the industry – and require
companies to think in new ways about distribution channels they need
for the future.
For up to the minute
commentary go to our 'blog'.
Legislation
and Regulation
continues to be a major factor as we progress through a heavy period of
reform for the financial services industry in New Zealand.
- Taxation changes for
life companies
- Accounting standard
changes for life companies
- KiwiSaver changes on 1 April,
and continued revisions annually (both planned and unannounced)
- Adviser regulation
In February we
saw many advisers scramble to comply with new disclosure requirements. We
are not convinced that many of them have got it right. The absence of
risk commissions disclosure from many documents is not entirely supported
by the assertion that as a seller of pure risk products these need not be
disclosed.
Distribution
challenges
new distribution thinking focuses on breaking the endless merry-go-round
of bidding up commissions for scarce existing distribution – which
does little more than re-cycle existing clients from one company to
another. Developing fresh new client relationships is the objective of
new structures. We find that these are often based on referral from a
related service (such as accounting, real estate, retail sales, or
business advice). These referrals must occur at the moment of truth.
Generation
Y sales
remain a mystery to most financial services companies. A high advice
model may be the wrong approach for this group. Those keen to experiment
with other options may find themselves limited by new regulatory
structures to offering low or no advice models. This is an emerging area
of work for us – and while we won’t disclose all our thinking
we are happy to explain: remember, the client’s time may be the
greatest cost in the purchase process.
Product
Development –
product development is the new distribution management tool. Greater
diversity in product structures allows a company to manage different
service levels, costs, and reduce channel conflict. Systems stretch
– coping with KiwiSaver, and new tax and accounting rules are the
greatest barrier to effective new product development.
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