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Retirement Affordability

Bluestone Equity are trailing the release of their HER product with their own take on the provision Kiwis have made for their retirement. It seems they are betting that savings alone will not be enough and HER products will be required.

They estimate typical savings to be at about $60,000 per household, compared with a requirement of more than $400,000. Link here.

Shonky Awards

These awards are good fun - and actually quite sensible too. Awards Link. I can think of how easy it would be to do a special just for financial services - but I do want to continue working in the industry, and it is more positive to rewards those that are doing it right, than it is to necessarily keep focusing on the minority of products that are poor. But still - maybe an idea for the Consumers Institute people.

Mortgage Trails

www.mortgage startegy.co.uk has a straw poll on whether trails should be retained. Gues what 80% of brokers - who, like a politician waving their enabling, restrospective legislation, do have a bit of an interest in it - say yes, retain trails.

Over in Australia, most lenders still offer trails. In fact, for the larger groups the effect of the trails and initial commission level is such that mortgage commission are about 80% higher over 4 years than they are here in NZ.

But NZ providers have been snipping away at trails - why? Are the economics of the business so very different in NZ than Aus? Are repayment rates so very much higher? Wouldn't that be an argument in favour of trails anyway?

Mortgage Rate Meanderings

The mortgage broking team run by my colleague Dave Chubb has seen confusion in a mixture of rising and falling interest rates for home loans as banks jockey for the right rate and term mix. Confusion places a greater emphasis on them to ensure that they counsel clients with caution on selecting their rate terms.

They regale me with
astonishing stories about at how some clients with the mere scrapings of financial knowledge declare with gusto when it comes to rates “I’ll go floating because rates will fall next month after the US mid-term congressional elections”...

Death and Credit Cards

An earlier story about a credit card company continuing to try and bill a dead person has been picked out by a reader as truthful. He related an experience where he called a card company to explain that someone close to him had died and the card should be cancelled... and it took 3 months to make them understand, and then, one year later - they tried the annual charge again! ...and it happened right here in New Zealand.

Life Insurance at All Time Lows

Sparked by a headline in the US noting that Life Insurance is the cheapest it has ever been I made a couple of quick checks here.

Life insurance, for most ages, is at an all time low in terms of price, right now, in New Zealand. This seems to be a subject of no great import at a time when the airwaves are filled with news of corruption and scandal.

In marketing terms this is what we mean by a low involvement product. In layman's parlance, the price for a financial service for which consumer pay a billion dollars a year is at its lowest and nobody cares.

Okay, not nobody - you and I care. But as near as damn it - nobody outside the industry cares. What can we learn from this?

People sometimes talk about price sensitivity as if there were perfect information for all consumers. This is not the case. In fact most purchasers of life insurance have very limited information - although it is not hard to obtain. Then there are those who might buy cover if they knew how cheap it actually is - but don't, because they do not think about the product. It comes back to low involvement.

The challenge for insurers is twofold.

1) As the product is a low involvement one, companies may not be getting full value from the low position of their rates.

2) The lack of sensitivity of the consumers to prices is because of a lack of information and a lack of interest. It is the job of sales and marketing to raise interest and provide information (amongst other things) and that is why the game is mainly about distribution at present, with pricing secondary to that.

Online Payments

Anyone interested in payments efficiency - important economically, and a big driver of e-commerce, of great personal interest to me - should be interested in the position of credit cards in this area.

Credit cards seem to have been sweeping up. This is slightly annoying to efficiency fans like myself, because they tend to have rather high fees for transactions. The following article reporting on changes in Australia following some recent changes in legislation are interesting.


A good story...

Even if this is an urban myth, it will do as this week's Friday fun. Cancel your credit cards...            
Be sure and cancel your credit cards BEFORE you die! This is so priceless, and so easy to see happening, customer service being what it is today. A lady died this past January, and a US Bank billed her for February and March for their annual service charges on her credit card, and then added late fees and interest on the monthly charge. The balance had been $0.00, now is somewhere around $60.00. A family member placed a call to a US Bank:


· Family Member: "I am calling to tell you that she died in January."
· Bank: "The account was never closed and the late fees and charges still apply."
· Family Member: "Maybe, you should turn it over to collections."
· Bank: "Since it is two months past due, it already has been."
· Family Member: So, what will they do when they find out she is dead?"
· Bank: "Either report her account to the frauds division or report her to the credit bureau, maybe both!"
· Family Member: "Do you think God will be mad at her?"
· Bank: "Excuse me?"
· Family Member: "Did you just get what I was telling you - the part about her being dead?"
· Bank: "Sir, you'll have to speak to my supervisor."
Supervisor gets on the phone:
· Family Member: "I'm calling to tell you, she died in January."
· Bank: "The account was never closed and the late fees and charges still apply."
· Family Member: "You mean you want to collect from her estate?"
· Bank: (Stammer) "Are you her lawyer?"
· Family Member: "No, I'm her great nephew." (Lawyer info given)
· Bank: "Could you fax us a certificate of death?"
· Family Member: "Sure." (fax number is given)
After they get the fax:
· Bank: "Our system just isn't set-up for death. I don't know what more I can do to help."
· Family Member: "Well, if you figure it out, great! If not, you could just keep billing her. I don't think she will care."
· Bank: "Well, the late fees and charges do still apply."
· Family Member: "Would you like her new billing address?"
· Bank: "That might help."
· Family Member: " Odessa Memorial Cemetery, Highway 129, Plot Number 69."
· Bank: "Sir, that's a cemetery!"
· Family Member: "What do you do with dead people on your planet?"