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Friday Fun - Trend in Business: Sweatworking

The struggle to fit in exercise can drive people to unusual solutions. By now virtually everybody will be familiar with the fact that Steve Jobs briefed Walter Isaacson during a walking meeting.

So check out the trend towards 'sweatworking' highlighted here.

Well, I like to run, and at present I'm trying to find a way to add an hour a week to the three hours a week I currently spend running. So converting a couple of half-hour coffee / catch-up meetings into a working run - that's attractive. Anyone wishing to just chat (rather than book me for proper paid work) can get time this way.

Scared, But Uninsured: We Have The Numbers

The Council for Disability Awareness has an interesting chart showing the percentage of people that would "feel devastated" in a number of insurable situations, and the percentage that actually insurer themselves. For example:

  • 88% said that they would feel devastated if their home burned down, and 74% actually have fire insurance.

I can't quite understand why the figure is that low, but hey, it is the land of the free... on the other hand, that represents prudence when compared to income protection:

  • 78% said that they would feel devastated if they were disabled and unable to work, but only 10% have income protection insurance. 

The chart is instructive and can be found at this link.


Quotemonster Statistics

Here are the latest weekly statistics from Quotemonster:

  • The average amount of life cover quoted in the last 7 days: $334,810
  • The average amount of trauma cover quoted in the last 7 days: $144,985
  • The highest Annualised premium quoted in the last 7 days: $171,516.00
  • The average amount of time the monster takes to quote in last 7 days: 8.99 seconds

The Basics of Estate Planning

Insurance companies are great at telling you about all the things you can insure. Sometimes you need to be reminded that it's about catastrophic risk 'what insurance is for' as one adviser told me today.

Well, did you remember to ensure that the cover you set up would be available to the people who need it when they need it?

Some people clearly haven't, as half of all Kiwis don't have a Will.


Statistics show Causes of Disablement Are Different to Causes of Trauma

The Council for Disability Awareness (US) has just released their new research. Hat tip to Hank Stern for drawing my attention to it. There are masses of good statistics in the research paper and I highly recommend that you pop on over to their site and review the data there. But for my mind the key issues were:

  • Male claims have gradually reduced, but female claims are rising
  • 45% of new claims were for people under the age of 50
  • Injury was the cause of only about 10% of new claims
  • The big causes of Trauma (Critical Illness) claims - cancer and heart disease are much lower causes of long-term disability:

Trauma vs Disability Incidence table for Blog

Advisers considering the idea of 'replacing' income protection with a level of trauma cover should bear this in mind. Although Cancer, for example, does cause disability, it is not usually long term. The largest cause of long term disability isn't covered by ACC, and won't be covered by trauma insurance: it is diseases and disorders affecting muscles, bones, and connective tissue: think arthritis, bad backs, necks, and hips.

Playing it Safe

Tony Vidler has this post on how advisers can play it safe in the giving of personalised financial advice. Although this example includes a visual relating to an investment situation, don't dismiss it as applying only to AFAs advising on investments. As we have seen from recent FMA guidance on '...skill, care, and diligence' the principles of understanding objectives, collecting data, having written instructions, testing to see if you have sufficient information, and advising only where competent, are all applicable to RFAs as well.

Financial Literacy: fine so long as you don't ask what it is...

David Chaplin has done a fine job of exposing the fragile concept of financial literacy. Check out his column over at the New Zealand Herald. While David cheerfully makes fun there is a serious point underlying the humour: financial literacy is something everyone can support so long as no one actually defines it. The challenge is that all is not as it seems.

Financial literacy is most often talked about in connection with these 'good things:'

  • Saving more generally
  • Increasing KiwiSaver contribution levels specifically
  • Reducing debt generally
  • Reducing 'bad' debt, such as credit cards
  • Buying a home
  • Avoiding scams
  • Investing wisely

The problem is that these generalisations cannot apply uniformly. Even something as simple as 'save more' isn't actually applicable to everyone. When my children are contemplating further education their new debt position will rise. Any decent financial adviser can think of several common situations in which saving is the wrong answer - not just a little wrong, a lot wrong in terms of maximising long-term financial well-being. 

KiwiSaver was David's example, but given the overwhelming weight of debate on the side of increasing contributions it seems only fair to mention situations in which mandatory increases in contributions will cause harm such as: reducing the disposable income of the poor - who should spend more on essentials such as a better diet and education, locking up capital in a form that cannot be accessed to start one's own business - reducing entrepreneurship, taking money away from repaying all that bad debt journos keep banging on about...

Buying a home isn't a one way bet either. The more you read, the more confused a new buyer might become. Are house prices overvalued (should I therefore rent while I can save) or is home ownership such a key to a happy retirement that I should obtain a property at any cost? Once again, the examples could be extended.

Financial advisers should see their opportunity here. Financial literacy, when limited to general concepts and sufficient skills to make good financial decisions is fine. One size-fits-all prescriptions extended to the point of prejudice are unhelpful in the extreme. As Chaplin pointed out, they can end up sounding eerily like financial scams.

On the other side of a hill of cheap generalisations is personalised financial advice. The law says you can only get that from a financial adviser.


Partners and Fidelity

Grumpy commenters on the Goodreturns article about Beaton scoring Partners and Fidelity Life five stars should ask themselves, really, whether this result was such as a surprise. These two companies relentlessly pursue the third party adviser market to the exclusion of others. That focus shows up in these ratings.

That's not to say that they are objectively the best companies overall. What makes a company 'best' is perhaps as hard to say as what makes a car 'best'. Mercedes may make the 'best' cars. But Toyota sells more than anyone else. Service, market share, financial strength, product innovation, product range, we could go on... all these, could change the rankings in the eyes of consumers and other types of distributors. But leave Beaton alone.