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David Chaplin just called and we were talking about his recent article on faith-based investing. He is so concerned that the additional selection processes required by investment schemes that meet specific religious guidelines add to cost that he joked "religion costs 25 basis points." Read the whole article, it is well worth it. Link.
Rob Stock absolutely nails it in his article last week on general insurance. In effect he points out that there is is actually very little choice in the fire and general insurance market, and consumers have to work hard to overcome their inertia and ensure effective competition by doing comparisons because:
"Online comparison websites and quote machines have failed to materialise"
What's often overlooked is that the biggest impact these tools have isn't on the direct to consumer market, it's on the current adviser market: even advisers find it time consuming to build effective comparisons and online comparison tools aimed at advisers can help ensure better competition for all the existing channels.
There was no live link at the time of writing, but we have asked Rob for one.
Here are some recent key numbers from www.quotemonster.co.nz:
There is simply no better way for financial advisers to quote the market. There are a number of options for advertising on the site from skyscraper and tile ads, email inbox ads, to pop-up messages and more. Advertising is great - it helps us to keep our core quoting function free to financial advisers.
You can check out the videos showing the basics of using the site here: Link
Advisers complain at a lack of product development in the group risk space. Some insurers are optimistic about the progress of their new products.
Andrew Potterton, head of proposition development at Unum Insurance speaks of the benefits of their innovative product SPI (Sick Pay Insurance) “It can ensure consistency of treatment and can minimise discrimination risks and the potential adverse impact of absence on staff morale. Employers value our ability to tell them how long employees will be off for and also in some cases to suggest that perhaps some shouldn’t be taking time off.”
Unum is happy to have a growing marketplace and expects other group risk players to follow suit in a couple of years.You can read the full article here: Link
One of the most annoying things I ever read was a comparison of investing with a) a financial adviser, b) a stockbroker and c) the return in the market. The financial adviser, using funds, a platform and charging a monitoring fee was, of course, the most expensive. That wasn't the problem. I don't mind expensive - I would like to own a more expensive car, for example. The problem was example c) 'the return in the market' because it cannot be bought, unless you meet a broker who will do your trades for nothing.
The illusion that you can get something for nothing is persistent, but remains just an illusion. It is particularly common on financial services, perhaps because of the intangible nature of the sector. Sadly it is peddled by some unscrupulous financial advisers as a way to get people to buy some of the more fanciful schemes.
Of course, a financial adviser costs money, and if he or she simply recommended what you were going to buy before you met them then you would have gained nothing - but that almost never happens. Some people might tell themselves they would have bought those funds, shares, or bonds, without the advice but the true DIY investor is very rare too.
What the financial adviser has often done is change how the clients think about their money. That may sound a little ephemeral but ideas, attitude, and confidence are all the necessary pre-requisites for decision, and without decision nothing happens in life. If the adviser had not been on hand that windfall inheritance or the proceeds from a business sale might have been spent very differently.
Seth Godin has a marvellous description of the power of changing the story around money at this link.
Construction Cost Consultants, a group of quantity surveyors warned that changes in home insurance policies are leaving up to 93% of home owners underinsured to the tune of 25%-50%.
Gary Caulfield, managing director of Construction Cost Consultants Residential, says "Insurers are very clear in policy renewal documents that their customers should not rely on the default sum provided, but should seek a more comprehensive assessment on which to base their sum insured."
You can read the full article here Link
Jane Bawden, who's the recently appointed Chair of Accuro Health Insurance, says “It’s a totally irresponsible decision for young people to have their car, their possessions and their house insured but they take their health for granted. They can’t enjoy any of those if they develop a medical condition or face rehabilitation after injury”
You can read the full article here: Link
Susan Edmonds at Goodreturns identified that the Reserve Bank has already had to use its IPSA powers:
"The Reserve Bank would not say which insurers had had to be the target of the IPSA powers during licensing – saying it would not comment on individual businesses.
But a spokesman said some insurers had taken a more formal, legalised approach to their interaction with the bank and it had needed to respond in kind."
You can read the full article here: Link.
Fidelity hs this video explaining why they are investing in Lucas Remmerswaal's campaign to teach financial literacy.
In case you were reminiscing about Whole of Life policies this headline is a good example of why you should not: "Zero Bonus for Policyholders" by Rob Stock exemplifies why consumers, followed reluctantly by advisers and insurers, moved away from Whole of Life and Endowment offers. We did lose the concept of permanent insurance, and entered a world of rate-for-age life insurance. There are problems with that too, but a straight-forward return to whole-of-life will not do. The solution will be something else - probably a development of some of the level options that are emerging in the market right now.