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Draft Code on Responsible Lending Includes Credit Insurance - Impact on Insurance Sales Process

Credit-related insurance requires lenders to apply a suitability test if they are going to 'require' a borrower to take out insurance if a new draft responsible lending Code is finalised. Section 9 of the draft responsible lending code requires tests for suitability. Most credit-related insurance is sold by staff in QFEs. Their current procedures are often based on an information-only sales process, and the new requirement, while not constituting a recommendation, will require some advice-like processes to be employed. 

Link to draft Code. 


If you use Wikipedia, and I bet you do, then I would like to take this moment to ask you to donate. Wikipedia is one of humanity's modern miracles of co-operation and co-ordination. It is true that there are many things wrong with it, but the value it delivers to millions, day-in day-out, is incredible. Please visit the site, learn about Wikimedia, and consider donating. 

Promoting Advice

Fred Dodds of the IFA is quoted as saying this is the time to promote advice in this article on goodreturns. Link. This is the time to promote advice, and even the FMA is saying that it would like to promote the use of advisers.

There are challenges with the idea of promoting advice. 

Some product providers may well ask - why would I promote my most expensive channel? This issue was exemplified by the panel session at the recent Newpark conference when Milton Jennings of Fidelity Life pointed out how few insurers sell only through financial advisers. Some advisers, too, may not always wish to promote advice. Some who have no problem acquiring customers might see it as a donation to competitors. Others that increasingly run sales businesses offering both advice and no-advice sales may see the need for a customer access strategy - not a wholehearted push to drive clients into one solution. Consumer groups may see advice promotion as increasing the cost of access to certain products. Look around you at an industry gathering and consider the different views in the room. Not everyone who looks like you is your ally.

I like advice. I also pay for advice, and I even follow the advice. I promote the idea of getting advice. You can see that in the series of posters that Quality Product Research Limited issues which feature prominently in the main title the words "Why you need advice" and always conclude with the instruction "Talk to a financial adviser." Because I deal with lots of advisers I actually want the advice segment to do well. 

It is among the businesses that support advisers you will find those willing to promote advice. The reverse is also true.


Tim Harford's View of the Housing Market

Tim Harford is an observational economist. It is well worth reading his books. In this article he writes about the UK housing market. But he might as well be writing about how it works here, so many of the symptoms are the same, yet with even less cause. Perhaps this quote will tempt you to look further: 

"House buyers are delusional, the housing market is broken and a housing boom is the economic equivalent of a tapeworm infection."


Keeping Kiwis Covered

Usual reasons for lapses include changes in circumstances, affordability or the recommendation of someone else. According to Asteron Life's claim statistics 2013 the average lapse age is 45 years and the avergae claim for income protection is at 46. Click here to read Asteron Life's list of ways to reduce cost of cover for your clients.

FMA Reports on its 12 Month Performance

The FMA has published its 2014 annual report for the year ended 30 June 2014. During this period the FMA began implementing the largest statutory change in financial services in 30 years. Engaging with the industry to implement the Financial Markets Conduct Act 2013 was one of six major achievements outlined in the report, as the FMA continued to deliver its ongoing regulatory responsibilities.

Chief Executive of the FMA, Rob Everett, said that in completing its third year of operations the FMA was now established as a respected regulator. “This reporting period has seen the FMA become a fully-fledged financial markets conduct regulator. Our focus remains on building confidence in the robust framework that supports the financial markets. We’ve built our capability, processes and expertise so we can administer the FMC Act over the long term.”

Read more here.

Has KiwiSaver Led to Greater Savings?

Results of the DiD analysis suggest the accumulation of net wealth by members of KiwiSaver was some $16,000 less than the comparable accumulation of non members.

Further, in an attempt to hold some of the other factors likely to affect net wealth accumulation constant, the DiD analysis was repeated by age, gender, education, income, wealth, partner and home ownership status. There was a positive effect in only five of the 28 cases examined. In three of these cases the estimated effect was small. In one case, however, the estimated effect was relatively large, at $20,000 in favour of KiwiSaver members. All other cases indicated KiwiSaver members’ accumulated less than nonmembers.

The DiD analysis only holds one factor constant at a time however. To address limitations of the DiD technique various fixed and random effect panel regression models are estimated in which changes in net wealth are related to many factors simultaneously. These include: KiwiSaver membership; income; net wealth; age; gender; partnership status; home and investment property ownership; ethnicity; if the respondent was born in New Zealand; education; labour force and health status. With four observations over time on assets and liabilities in SoFIE it is possible to measure three changes in net wealth for each of approximately 10,000 individuals. This provides nearly 30,000 observations for inclusion in each regression. 

The effect of KiwiSaver on net wealth accumulation is estimated to be negative in all model specifications examined, although the coefficient estimates are typically not statistically significant at conventional levels.

Read more here.

Fidelity Life's Adviser Mobile App

Fidelity Life's free AdviserMobile app works across smartphones and tablets to quickly work out a client's Body Mass Index and calculate any loading they may have on their insurance premiums. It also includes a handy Mortgage Repayment top-up calculator for Income Protection, as well as access to product fact sheets. Click here to find out more.

CPI Price Changes Over the Past 100 Years

The consumers price index (CPI) tracks changes to the prices of goods and services that New Zealand households buy. Over the 100 years, annual inflation has averaged 4.4 percent, but it has varied across the decades. In the visual the scale changes so you can clearly see the price changes for each 20-year slice. Click here for more info.

Accuro Supports Your Favourite Charity this Christmas

Every year at Christmas instead of giving gifts Accuro encourages their members and advisers to vote for their favourite charity. The charity with the most votes will receive a $5,000 donation.

This year their chosen charities are KidsCan, the Blind Foundation Guide Dogs and the Wellington SPCA.

To vote visit their Facebook page here. Voting runs from 17th November to 12th December.