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Key issues...

It's incomplete, but this is the 'most important' aspects of unfinished business. Stuff required so that carriers (and a good many dealers) can really get cracking:

  • QFE regs - in particular control of advice process, capital requirements, and the types of employment relationships covered
  • Individual versus corporate - there should be the ability for a corporate to give advice - perhaps only if it is also a QFE.
  • The Code of Conduct - so we know what all the requirements will be for authorised status.
  • Guidelines for handling disputes - so we can get an idea of the requirements for registered status.
  • Definition of a financial planning service.

The consequences - or the work that will need to happen after all of that:

  • Offers - what offers companies will make to each segment of the market - QFE, registered, authorised, and dealers
  • Contracts - based on 2 above and the number of people that seek individual authorisation or just registration there is a huge job of contract revision to be done
  • Products and systems - it's not just adviser systems that need to be overhauled - most agency management systems at carriers are incapable of managing the processes required to ensure a QFE channel stays in compliance, or even a channel of registered and authorised advisers is properly managed to reduce risk.
  • Advice processes - unless a company opts for a pure manufacturing role - which promps questions about how they see value creation in their business, then they need to have a theory about how best to offer advice and a process for delivering it. Even if they are only pure manufacturers they will need to be comfortable that the authorised advisers are following an adequate advice process - and this may result in greater interest from product providers in professional associations which can fulfil a vital role in the market by shaping these processes.

Come what may, the next six months looks like being a very busy time. You'd want to get all this looking ship shape by the time registration of financial advisers commences.


Fiddling with Health Care

Heh - my cage was rattled about the US healthcare reform (thanks Mike Maloney) debate and so I thought I'd post this link. It's all about mandates - I could not believe some of the things covered and some not covered in some of the states government health care mandates (things they make private insurers include by law) and then some of the things covered by priority lists in public care. Link.

The great problem of the US health system is what has been described as the Lobster Lunch Club. The short version is this: you go to a new town and join the local lunch club. Walk in a join the shared lunch table at the appointed time on the regular day - and because you are not feeling very hungry you order a BLT. Only then do you notice how everyone else has Lobster - the most expensive dish on the menu. Then the waiter points on that lunch club rules are that you all split the bill equally, so would sir like to change his order? So those that can afford to be members all get lobster (i.e. loads of medical treatment, unecessary tests, etc), and those that cannot...

The great problem of the New Zealand health system is that no one is allowed Lobster. Everyone pays a much smaller share (although a recent report indicates it's not so much smaller we should be that proud, given our health outcomes) - but the waiter chooses for you. Sizing you up he orders BLT's for everyone, and the occasional case of obvious malnutrition gets a thumping good lunch. We're good at acute care, for example.

A real case from my own experience. A person was told by a health care professional that he did not need to have a certain test. Applying for life insurance the company told him that he really should have a certain test to ascertain the severity of the condition. This difference could be explained by a rationing decision by the hospital specialist.

I have no particular view. I am grateful for the standard of care I have received in New Zealand and the UK under national health systems. I don't particularly fancy the current US system. But I don't think they should move to what we have - it's going to sound all icky, but there must be a third way, which retains the advantages of patient driven care, the effectiveness brought into a system by competiition, and the efficiency that is the halmark of the better national health services.


Stephen Franks on the Financial Adviser Act

Stephen Franks blogs on the Financial Advisers Act, some of it quite good fun. It's been a day of it today with Simon Power making a speech announcing some technical changes to help with implementation. Here's our pick for the top two slots:

  1. A company can give financial advice (it was limited to an individual - which is ludicrous in this day and age)
  2. The definition of "Issuer" may be broadened as the Issuer of a security is often a trustee company - which made the provision for employees of issuers in a QFE to be able to sell their own product without becoming authorised a nonsense.

But, we could be surprised.



Stephen Franks on the Financial Adviser Act

Stephen Franks blogs on the Financial Advisers Act, some of it quite good fun. It's been a day of it today with Simon Power making a speech announcing some technical changes to help with implementation. Here's our pick for the top two slots:

  1. A company can give financial advice (it was limited to an individual - which is ludicrous in this day and age)
  2. The definition of "Issuer" may be broadened as the Issuer of a security is often a trustee company - which made the provision for employees of issuers in a QFE to be able to sell their own product without becoming authorised a nonsense.

But, we could be surprised.



Staying mum...

I constantly hear from people that there is still too much uncertainty to know what to do about regulation. It is true that there is much left to be decided, regulations governing important aspects of the regime are yet to be completed - some very substantial settings to be selected. So, you're right - no need to start work yet then.

Only... the problem is that you compete in a market place for the attention of advisers that can generally choose where they place their business. Right now lots of them would like to hear what you think they should do - if you are a product provider - but instead they are getting this information from people intent on capturing distribution in networks.

Whatever the regulatory solution they are suggesting, they want advisers to make that choice with them. They won't grab everyone, plenty will take their time, advisers being suitably wily, cagey, and streetwise. But all the time you fail to particpate in the debate the other fellow's point of view gains more traction. Which is fine, if you agree with them - but what if those offers are contrary to your strategy?


Weekend Wrap Up

It has been a heck of a week. I survived to reach the milestone of another year! I have hosted relatives to the spiritual heartland of Maoridom on earth - otherwise known as Rotorua. I have learned to play Settlers of Catan. What? I hear you say. Well, the Germans, having been finally dissuaded from the conquest of Europe have moved to more cerebral conquests... And they have become the board game connoiseurs of the world. Well 'Settlers' is the best - and Monopoly is to Settlers what the ZX81 is to Deep Thought. So if you are fed up with the fourtieth submission paper in as many weeks, give the Securities Commission a pass and zap on over to IQ toys and pick up a box. Google the Wired review for a more sensible recommendation.

Remuneration Debate

There have been some really good comments about the commission issue which I would like to draw attention to. As I am out and about today I can't easily re post them as a new article, but I will when I get back to the office.

Meanwhile, please check out the comments by Ed Saul, who focuses on transparency. He makes a good point about not 'hiding' the commission. Although I am less keen on his positioning of the question to clients - as late as the application form is too late in my opinion.

Wayne Ross asks some good questions about what's reasonable. Reflecting on these I think there are clearly a couple of dimensions to what is reasonable. One is what the client agrees to, another, being a crucial check on an imbalance between client and adviser knowledge is a reference to what market practice is.

I haven't yet seen a really good attack on commission yet, and size we've had a bumper week for visitors to the blog - 453 in the last seven days, according to Typepad - that does surprise me. If pushed I will have to play devil's advocate and write on myself.

If you are shy drop it to me by email.

Oh, and a belated hat tip to Brian Lenehan for the reference to NZ Risk Consultants page.