« February 2006 | Main | April 2006 »

KiwiSaver = Administration

"KiwiSaver is about Administration, not Funds Management"

This was the most significant insight culled from the ASFONZ conference, at which Phillip Mathews, our partner in KiwiSaver projects, attended. Phillip attended as a late stand-in for the IRD, who are unable to talk to the public during this stage of the legislative process, as KiwiSaver is before the Finance and Expenditure Comittee.

The comment is insightful because for all the talk about fee caps and subsidies, default funds and the like the main impact on the ability of companies to offer KiwiSaver accounts will be the efficiency of their administration systems and processes.

That's why we are running an Administration forum in May.


UK Estate Agents Under Fire

In the UK estate agents are under fire - for a variety of mis-selling practices. One even obtained a false passport for one mystery shopper sent by the BBC's investigative team for the programme "Whistleblower".

AIA's recent key opinion survey identified that financial advisers felt that real estate agents should be regulated just like financial advisers. If anything like these UK examples happens here you can see why they would think that. Maybe they already know what Whistleblower only recently discovered.

Read more about it over here.


Generic Personal Statement

It is high time the industry had a look at this. Think about where your differentiation counts - it is not the application form. That is simply a hygiene factor - it can be fine, or it can be bad. While there are many subtle differences between the forms, in practice the differences are slight. Here is what we could use: a generic form, plus a quote, and a small authorisation form specific to the firm. That would be fine. It would not be used for every case. It would typically be used for:

a) cases where there was some concern around underwriting and the adviser legitimately wished to have two or three underwriters look at a deal.

b) placing cases with people other than your main carrier, so that you do not need to carry a dozen different forms around with you.

Then, get smarter still and deliver it online, or straight out of your CRM. A pipe dream, no, the Aussies have exactly the same piece of industry infrastructure. So no excuses. It can be done.


Savings and Compound Interest

I was intrigued by this quote from Mary Holm:

"There's another important point in all this. These days term deposit rates are way higher than inflation, which is around 3.2 per cent and is predicted to fall to around 2.3 per cent over the next several years."

So I jumped on the ASB Bank website and took a look. The highest rate for the deposit she was talking about was 7.3% - and we are at the height of the interest rate cycle (we all expect - including Campbell). So we take tax off the 7.3 and get a real after tax return of either 4.4% at 39% tax rate or 4.9% at 33% tax rate. Then take off inflation: a net real return of 1.25% or 1.69%. Nothing like the rates of return quoted in the article.

Pitiful. The returns I mean.

Hardly supportive of the argument advanced either. Compound interest may be your friend - but tax and low returns are not. So rather than give the impression that saving in term investments is going to do it, better recommend something both more tax effective and with higher growth potential.

We won't worry about what inflation will fall to - because interest rates will fall too.

Link to the original article is here: http://www.nzherald.co.nz/section/12/story.cfm?c_id=12 &objectid=10369942


Asset Management Strategies

This review is fascinating - worth getting the paper for some:

From The Economist of the paper "Winning Strategies for US Asset Managers", (in the McKinsey Quarterly February 2006 - By David A. Hunt, Nancy Szmolyan and Rick Wurster)

Intro: Traditional asset managers, facing increased competition from hedge funds and others, are under pressure to cut costs and show investment returns. McKinsey surveyed US asset managers in 2005 to find which strategies performed better than others.

Link: http://www.economist.com/business/globalexecutive/reading/displayStory.cfm?s tory_id=5592585