Some useful points are made in David's article about the KiwiSaver review. However, the terms of reference of the review are far too narrow to give any hope to anyone with more fundamental concerns about KiwiSaver.
Over in the UK the Safe Home Income Plans group intends to become the Equity Release Council. The new grouping is similar conceptually to the approach being adopted by our own Financial Services Council. It is a broadly based group that seeks to attract the support of lots of stakeholders in the sector, right the way up and down the value chain: product providers, distributors, and service providers. Although this can increase scale and influence it can mean bringing some conflicts within an organisation - after all participants sharing a value chain frequently disagree over where costs and benefits should be shared through the chain.
Here in New Zealand the Safe Home Equity Release Plans Association (SHERPA) has decided not to take this approach, instead preferring to collaborate with others, such as adviser bodies, on matters of mutual interest when they arise.
I would just like to make the case for two additional types of situations in which people should be allowed to withdraw some or all of their KiwiSaver funds. Before I do that, we should just review the current reasons allowed for withdrawal and the rationale for them:
- Buying a first home
- Serious Illness
- Permanent Migration
You can check out the details at the Inland Revenue's KiwiSaver site, at this link. However, the reasons are basically these:
- Buying a home is highly correlated with well-being in retirement. So we encourage people to achieve that lfie goal.
- Hardship is obvious - no point retiring Okay if you're so broke that you, or your family, are in dire straits right now.
- With serious illness/disability it's again obvious: we should let you enjoy your money while you can.
- Permanent migration is simply about natural justice - is the money yours or isn't it?
I would like to suggest two more circumstances in which funds could be withdrawn which are, I believe, entirely consistent with these principles.
- To obtain a degree
- If your life expectancy means you are likely to die before the age of eligibility for New Zealand superannuation
Higher education is so strongly correlated with increased income that if you haven't already got a degree, and you are still young enough to benefit from many years of increased income should you complete one, then it's simply enlightened self-interest to allow a person access to some of their KiwiSaver funds. Once qualified they may well contribute far more. Allowing some access right now will encourage them and reduce the student loan burden.
Life expectancy is a cousin of the existing terminal illness facility. A good number of people while not current ill or disabled will have a much lower life expectancy. For them we are doing them a disservice by requiring them to save money they will never get to enjoy.
Results just in from the Quotemonster survey of how many companies advisers have access to:
Of course, Quotemonsters would have access to many companies. Those that don't aren't likely to want to highlight all the companies that they can't deeal with. A good guide for consumers might be: "how many companies did your adviser present and discuss before making a recommendation?"
I ask the question "are you a broker?" over at goodreturns, referring to it's old-fashioned meaning, not it's meaning as defined in the Financial Advisers Act. Check it out over there.
I've just read Rick Vassar's book "Hide! Here Comes The Insurance Guy..." and beyond the hokey title this is actually a very good little book. Mr Vassar is obviously an intensely practical risk manager. Although his experience relates primarily to property and casualty insurance (what we call fire and general) there are generic lessons on risk management as a discipline and much of what he says is typical of all types of insurers.
There are many great passages in the book, but in my favourite our hero describes a scene in court. The opposing party's lawyer was examining Mr Vassar and showing some exasperation he asked to go off the record and exclaimed "what a scumbag". After being put the next question our hero said that he'd just like to say on the record that the lawyer had just referred to him as a scumbag off the record.
This is a useful report - well worth a read, especially the statistical appendix, which has premiums written, growth rates, per capita spend, and so on. Some of this will form part of my next article in Asset which I was researching today.
After my post on the use of social media I thought I'd quickly scan Facebook for Kiwi Insurers or Insurance Advisers on what is arguably the worlds most powerful social media engine. Can you guess what I found on typing the word insurance in?
Not a thing.
That's right. At present, not a single New Zealand insurer is doing anything that gets it in the first half a dozen pages of search results on Facebook. Not one.
- The first seven results are all internationals.
- On the first page after this group you get me, and you get my running coach and all-round experienced insurance executive Aneel Ravji.
- On the next page you get the first New Zealand adviser - from BraveDay - well done Brave Day, you appear to have a social media pulse! A quick check of their website reveals a smart looking site and the ability to follow them on Twitter and Facebook. Given the number of tweets there is obviously a commitment to regular content creation as well.
- On the next page you get a couple more insurance staff who have obviously made a few posts.
I had written about how corporates should engage some consulting advice in order to get a better presence in social media (and received a good natured ribbing for the apparently self-serving nature of this comment). Although I wasn't actually holding myself out as a consultant in social media. But how about this: since there is virtually nothing happening, you don't need rocket science. You just need to pull on you bathers and hop in: the water is warm!
Some companies, it has to be acknowledged, have used social media to good effect on a campaign basis. Sovereign is one, with their recent game about life choices.
This is a fascinating case, reported by Natalie Holt, where a solicitor has apparently been referring people to a financial adviser that did not meet the required definition of independence. There were other factors involved as well, including a loan from the financial adviser to the solicitor.
Although this story was really about the rules the professional body for solicitors enforces, it may suggest to advisers familiar with the provisions of our Code of Practice to consider the related party issues carefully.
Check out the whole story at UK Money Marketing.
Quotemonster has cool statistics for those with login accounts (grab one, its free) here is the selection for last week:
- Average amount of life cover quoted: $374,000
- Average amount of Trauma cover quoted: $134,700
- Highest annualised premium: $59,498
- Average time taken to prepare quotes: 9.15seconds