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Underwriting: The Bidding War

There seems to be a bidding war going on, of which experienced underwriters are deifnitely the beneficiary. Life underwriters must walk the delicate line between commercial flexibility on the one hand and prudence on the other. This is not always done successfully and once a reputation with reinsurers is gone - it is very hard to recover. For those that continue to walk this line, the rewards seem to be getting better and better. Senior underwriters are picking up packages of $100k to 120k.

It also seems that companies have forgotten at least temporarily how to train new underwriters. It does take time - but it can be done. This may be because many operations areas are no longer led by senior underwriters who were able to undertake training themselves.

Also, the environment has got tougher. An Australian consultant recently estimated that there were more than 130 underwriting positions vacant in Sydney. I personally know of three underwriters that have made that journey - and taken the money and lifestyle on offer. Although housing costs are a negative the lure of the bright lights has definitely got something about it for many of these folk.

At this price serious investment in underwriting skills development and automating basic underwriting functions makes a lot of sense. The time to start investigating these options is before you have several underwriters leave in quick succession - creating a big, expensive hole in your operational capability. If you want to discuss your underwriting strategy, drop me a line at russell.hutchinson@chatswood.co.nz.


Retirement Commission

I recently visited the Retirement Commission as a part of constructing our workshop on Kiwisaver and met with their Executive Director, David Feslier. I've spoken with David in the past as a result of work on Home Equity Release Loans, and to meet him in person was great.

The Retirement Commission has a wealth of resources and some strong opinions on retirement planning. Their twin websites are a real treasure; the www.retirement.org.nz site being strong on research, and www.sorted.org.nz being a great consumer site. Apparently Sorted will hit about 90,000 page views this month - a huge number, and indicative of how useful it is.

We discussed things like how to promote retirement savings within the context of other financial goals - like repaying your mortgage before retirement - and the balance between them. We also looked at tricky issues like the fine dividing line between information and advice, and how employers need to steer clear of providing advice.


Typepad

Typepad is a super home for blogs - yet recently, because of upgrading servers, they have had some problems. You may not have been able to reach the blog recently - for which we apologise. We are very much alive and well.


Tower Again

This is probably the best indication Tower is serious about customer service. Jo Hutchinson has been appointed Head of Operations for Tower. She joins the company after eight years with Sovereign, where she was also Head of Operations. Jo is good at what she does - and don't make the same assumption Air New Zealand always did and think I'm saying that because of some family relationship!


Kiwisaver Update

"The biggest experiment in behavioural finance the world has ever seen" Was one comment used to describe Kiwisaver during a series of recent meetings we have had to learn more about the programme.

At Chatswood we believe that Kiwisaver is so important that most financial services companies will need a Kiwisaver strategy - even if that is 'only' about understanding how Kiwisaver will affect their markets. It will have an effect, even if you do not intend to be a qualifying fund manager.

So, we've been doing some work on the subject to increase our understanding and help clients build their understanding of what will happen.

Firstly, you have to believe it will happen in some shape or form. While nothing is ever a certainty, this has all the hallmarks of being a high priority for the new government.

  • - It is one of the '7 pledges' on the card and as such all the coalition partners have signed up to supporting it (whatever shades of definition are applied to the term 'coalition partners').
  • - Apparently Michael Cullen personally holds it as a high priority.
  • - The MED, IRD, and Treasury are all working hard on developing the details of the policy.

You should be especially concerned about setting strategy if:

  • - you are an investment company (whether you will serve the market or not, it will affect funds flow and direction).
  • - you are an employer. Especially if you currently have a super scheme, dormant or not.
  • - you are an adviser. Especially if you have ever sold a group scheme, and still receive some trailing commission from it. Or if you currently sell regular savings contracts of any type.
  • - you are a bank which sells regular savings products of any sort.
  • - you are a potential client of Kiwisaver.

Over the coming weeks I will write more extensively about a series of meetings we had with the MED, Retirement Commission, NZFBA, Fund Managers, and Technology providers.


TOWER People

It was great to see Jim Minto, CEO of TOWER, post a comment on the blog earlier in response to the comment from the 'Tower-customer' who had some service problems. Service is a difficult thing to get right, and at the end of the day a readiness to fix it is the most powerful weapon a company can have. This is similar to when Jim put his own voice on the telephone system for Tower Health and Life about 5 years ago now. Perhaps it was a small gesture, but it indicated a determination to change and improve the business. Expect more changes.


Accountants and Lawyers

A recent article about Home Equity Release (a subject dear to our hearts) on the NZCity pages  concluded with the comment: "seek independent financial advice from a registered accountant or lawyer". This underlines one of the great problems with getting financial advice in New Zealand. You can either get independent advice, or you can get advice from people who know - but are not very independent.

Having worked with a number of accountants and lawyers over the last year on HER products I know that before you walk in and ask them for some advice they will likely know about as much about the product as you do. Although over time they will handle more of them this will increase their knowledge mainly of the contractual issues. Whereas you may be much more interested in the alternatives - that is, after all, how you are likely to make a decision. Shall I downsize, or use an HER? Shall I do a DIY deal with my kids or do an HER? etc.