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Advisers? No. Advice? No.

I have been worried by the absence of a role for advisers in KiwiSaver for some time. I understand why this is: there is a desire to push fees down. Fees are a major component of the cost of saving (but usually exceeded by tax) and advisers are rather good at making fees higher...

Having said that, the KiwiSaver members will need advice. So far this is a missing component of  the KiwiSaver project. This modest call for an innocuous recommendation to seek advice was rejected.

Yet KiwiSaver is not without moral hazard for the government. If lots of people are put in default funds which are predoninantly cash funds - and stay there - believing that all is well, then that will constitute some pretty bad advice. The kind that, if it were provided by a financial planner, would get a sound pasting in the pages of Consumer magazine, for instance.

This doesn't need to happen and can still be fixed.

Friday Fun

Apologies for lite-blogging over the past few days - we have been flat out with business over the past few days and there has been little respite at home either since the arrival of number three.

However, I am writing this on Friday eve, and you deserve some effort as you sip your java Friday afternoon  and ponder - briefly - what the weekend holds and permit yourself a minute to peek at this blog. So financial services can go hang for a a few minutes. You deserve to have some fun.

Scrappleface nearly knocked me out with this terrific post.

I loved this website just for the title "What would Tyler Durden Do?" although the content is pretty much Arena or Esquire level and may not suit all corporate firewalls. For those wondering, Tyler Durden is the psychopathic alter ego of the man from Fight Club.

That'll do - more on KiwiSaver, Tax, Inheritance, Trusts, Advisers, and Recruitment is all swirling around in my head ready to be unleashed upon you on Monday!


One of the items that we used to talk about a lot when Sovereign was a young company was its reinsurance. Advisers wanted to know how much and what kind of risk we carried - given that at that stage the business was small, and this was part of an overall credibility picture.

However, not withstanding that life has changed for Sovereign, advisers should still take notice of who reinsures the risks that they place with local insurers. Of course, reinsurance is only one part of the picture. The claims paying ability rating for the company is a better indication of, well, the ability to pay claims. Yet knowing a thumbnail of reinsurance details tells us some useful things: what scope the underwriters you are talking to have to negotiate, whether the likely claim will also involve the reinsurer or the claim decision will be undertaken entirely in New Zealand, and also whether it is likely that their reinsurer has seen this application before, based on who has previously insured or considered the deal - useful for advisers seeking a genuine second opinion on a clients case.

Advisers - If you would like to help build the re-insurer map, drop me a line, we'll share the results.

KiwiSaver Forum

We are running a 'Kiwisaver Implementation Forum' (sponsored by InvestmentLink) on May 10th. Already we have acceptances from a dozen of our key participants and will shortly announce the international speakers.
The forum is to follow up the executive forum on KiwiSaver back in February.  Now there is a lot more "flesh on the bone" provided by the issue of the KiwiSaver bill and the IRD decisions on admin process, the next forum will focus on administration - as the more of it that is electronic, the better for providers given the small balances involved.

Drop me a line if you are interested in information about the forum.

Tax Changes

Tax. An ugly and inescapable thing. Democracy, it is said, is the unpleasant sight of everyone trying to live at everyone else's expense. Many thousands of words will be written about the proposals - some recent ones were written by my own editor (for my monthly column in Asset) David Chaplin.

David wrote that article before the announcements were made. Asset is monthly after all and on occasion has to plan for future events somewhat. The newspaper's equivalent of having laid out two headlines depending on which team wins the late games in the rugby. Given that problem, the column is probably a masterpiece.

However, four key points were made as possible consequences - and they all appear benign:

  1. NZ would be a tax favoured investment destination and capital might flow back to the country from both individuals and fund managers.
  2. Vehicles such as Managed funds would become more attractive to investors with the individual tax anomaly now erased.
  3. Fund managers would switch to more active management styles with the tax break given to passive funds ended.
  4. Investors, both individuals and collective vehicles, would be encouraged to invest outside the Grey List countries and hence have a more diversified portfolio.

But on closer inspection - are these really benefits? Looking point by point...

  1. Maybe - but is it good advice to invest more in New Zealand, when most investors have such a very large exposure anyway?
  2. Encouraging investment in managed funds rather than directly is not the object of this tax change and nor chould it be - there should simply be a level playing field between approaches (including property - which is still left out entirely, and appears to the area of real distortion).
  3. Encouraging Active Investment styles among managers is also not an objective, and according to some sources is not proven to add value to investors anyway. The tax break given to passive property investment remains - which is probably a bigger evil.
  4. Point four and point one cannot both be true - overall investor portfolio direct holding and diversification will suffer - and this is probably bad for investors.

New Arrival!

We welcomed Matthew Robin Hutchinson into the world today. He was born around 3.15pm and weighed in at 4.24 Kilograms. Fran is doing fine too. I am delighted. If you are squeamish I recommend you do not click on the photo!

20060318_008 Without waxing too poetical, I was given pause for thought by a friend who has recently been bereaved. I was then reminded of my colleague Ted Gruebner who said to me on a couple of occasions "Life is a NOW deal". Life - its a fact - comes and goes. Right now I am grateful for what life has brought and I am very thankful for it.

Actuaries and The Morris Report

Noting the comments at Goodreturns I have meant to make a quick post on this subject before. The UK-based institute of actuaries says they support the recommendations in the Morris report and provide a helpful link to the full report copy. My comment on whether actuaries need similar supervision here is twofold; while actuaries may point to the absence of failures (although one might mention ACL) that does not mean that failure cannot occur in similar ways to that of Equitable Life in the UK in the future; secondly, that while there may be a case for greater supervision, in our tiny market, we should work hard to make sure our mechanisms can piggy back on Australia's or it needs to cost very, very, little.


I am in technology hell right now. Sunday morning my poor, long-suffering, telephone has finally given up the ghost. I am off shopping for the new thing - at present some new incarnation of Imate looks likely. In the meantime, please accept my apologies, and call the office. I am buying that promised mobile data card at the same time.

However, I am unavailable Monday, as I will be attending Beloved in hospital for the birth of number three (she's booked in for a ceasar). Blogging will likely be light too.

Chatswood Consulting remains open for business, nonetheless:

Margaret Stanley, my colleague in the consulting business will be there, and my partners in KiwiSaver (Philip Matthews) and Training and Communication (Michael Larsen) are also both about. The mortgage team is active aswell, with David Chubb, Rob Stewart, and Bruce Tier all working as usual, and contactable via the office.

Tuesday and for the balance of the week I am contactable and expect to be working about 4 to 5 hours a day until Good Friday.