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FMA Opens Applications for Personalised Digital Advice

Media release from FMA:

Media release 
MR No. 2018 – 02
22 February 2018

The FMA is now open for applications from providers seeking to offer personalised financial advice to consumers through digital tools and platforms (so-called robo-advice).  Digital advice is automated financial advice generated by computer program using algorithms which is usually delivered through a website or a software application.

Personalised financial advice uses information about a client’s particular financial situation or goals to make recommendations that meet a client’s needs.

Providers will operate under an exemption from the current Financial Advisers Act (2008). This law requires personalised financial advice to a retail client to be given by a human being. Reforms to this law are currently expected to come into force in 2019 and will permit digital advice. When these reforms are introduced, this exemption will be revoked.

Liam Mason, FMA Director of Regulation said, “The decision to allow providers to offer personalised digital advice gained wide support from the market during consultations last year, including from both small start-ups and large financial institutions.

An FMA review of KiwiSaver sales in 2015 found only three in 1,000 KiwiSaver sales or transfers occurred with personalised advice. We believe the introduction of personalised digital advice has the potential to improve consumer access to financial advice, especially for those with smaller sums to invest and KiwiSaver members.”

The FMA consulted on whether to grant an exemption to enable personalised digital advice to be provided under the current regime because it was being increasingly widely adopted off-shore. The FMA has a mandate to promote innovation and flexibility in financial markets.

It is important to note providers of personalised digital advice will not be licensed by the FMA. Any provider seeking to rely on this exemption must apply to the FMA showing its directors and senior managers meet good character requirements. The provider must also meet minimum standards demonstrating their capability and competency to provide the digital service.

The exemption will be granted subject to conditions that require providers to take an appropriate degree of care and to ensure consumer protection safeguards are in place. The conditions are consistent with the requirements that apply to Authorised Financial Advisers, who are human advisers able to offer personalised advice.

More details on how providers can apply to use the exemption and our response to submissions on the second public consultation can be found on our website here.

Providers are not able to offer personalised digital advice until they are named in the schedule to the exemption notice. When a provider is able to offer personalised digital advice, they will be listed on our website.


AMP Mental health awareness campaign

AMP is partnering up with Key to Life Trust and Mike King to raise awareness of youth suicide rates in NZ. 'The I AM HOPE tour is about raising awareness and encouraging communities and individuals to drive the attitudinal and social change that is needed to reverse the incidence of suicide and depression.' Click here to hear more from Mike King on this.




Excellent article on access to cancer drugs

The story of revolutionary immunotherapy drug Keytruda crystallised the debate over our access to high-priced cancer medicines. This article provides an excellent overview of a number of complex issues includeing: Pharmac funding, drug development, price negotiations, and treatment outcomes. Donna Chisholm reports in this article at Noted.co.nz. Well worth a read.

Who wants you?

Excellent salespeople can sell anything to anyone -- even if they don't need it - and arguably, most of what consumers buy, they don't need.

On the other hand, starting with the people who are actually looking for help is a good way to cut out the bullshit. You don't need clever tricks if you're focused on the people that really need you, want you, and you can just get on with serving them really well. Dedicate your energy to that, and a smooth path opens up in front of you.

How do you find them? That's where you may require your own dedication to excellence. It is the difference between an opt-in email list and the 'phone book. The mixing of new and old-technology in that statement is deliberate. Getting people to opt-in, join, and sign up. That's where true brilliance is. It takes time, requires commitment, and also means you have to be able to tell a story. That is the true ability of excellent salespeople - telling the story well to those that want to hear it.

Inspired by this.

Should the couch come with a health warning?

Looking at the chart I was actually pleasantly surprised. Put it this way, to learn that about 70% of people 75+ are still physically active sounds pretty good to me. Which made me suspicious - what's the definition of physical activity? How was the data collected?

Chart from FigureNZ showing the percentage of adults by gender who do little or no physical activity:


Click here to read more details on this data.

Australia: ASIC podcast on conflicts of interest in vertically integrated institutions

ASIC offers a podcast on the conflicts of interest in vertically integrated institutions. This podcast is an effective introduction to ASIC's recent report on the same issue.

The essence of the review is the proportion of the institution's share of the approved product list, compared to the proportion of client assets invested in the institutions' products. That in itself, isn't a problem, and ASIC knows that - so it reviewed the quality of the advice as well to contrast with the funds allocation. They found that in 10% of the advice reviewed, in ASIC's assessment was that the client would be seriously financially disadvantaged. For a further 65% of the advice the advice failed to meet the requirements of the law, breaking down into further categories of issues (listen and read if you want the detail).

The conclusion was the failure of the advice to demonstrate how it would leave the client better off - an interesting and functional standard, much more like our principles-based approach. Also, a good general guide. If you cannot include in the statement of advice a sentence like: "This will improve your financial situation by..." then maybe better look hard at the advice again.

LAST TICKETS: Shaping Futures Leaders' Forum

The Financial Services Council and Workplace Savings NZ are hosting the Shaping Futures Leaders’ Breakfast Forum. It is to be held on the 16th of March and the ANZ Centre in Auckland and will provide a morning of thought-provoking content with Minister Kris Faafoi, Minister for Civil Defence and Commerce and Consumer Affairs, and a panel of industry leaders. Click here to download the flyer with more details.  Download Shaping Futures Flyer

A price on your head: determining the value of a 'life'

Reinsurance Group of America are asking 'How much is life worth?' The article goes on to say 'From a strictly fiscal perspective, however, determining a person’s long-term financial value is exactly what financial underwriting in life insurance seeks to do.' Click here to read more. They have their approach, and, frankly, I dispute the idea that they are determining a person's long-term financial value. They are determining insurable value. The interest that I have in my life is clearly unlimited. The care that others show for that life is limited. The difference is the measure of risk in our society. Insurance is an attempt to bridge the gap a little - by allowing for financial risk transfer so that some of my future value to my family, and the folks I borrow money from, can be replaced should I die. But provocative titles get clicks, and most of us are here for commercial reasons, so I understand.

Different approaches to establishing the value of a life can offer good tools for the professional adviser, life insurance marketer, and would-be digital advice designer. Finding simple ways to get the consumer to think about what they should insure and for how much are central to those roles. Especially since we know that, typically, most consumers a) don't like thinking about really bad news like death and disablement, and b) don't like doing maths.

Given that knowledge here are some uncommon suggestions for talking about values for insurance:

  1. Use the Government's number: "You are worth 3.35million to the government, how much of that do you have insured?" Using a report issued a little while ago by New Zealand Transport you can check out the value of a statistical life. Now, this isn't going to be a match with most reinsurer's views of the insurable amount for most lives. I didn't expect it. But it is a useful challenge to the majority of people currently buying $200,000 life cover and no income protection.
  2. Ask "If someone took away every physical ability, but left you alive, how much compensation should we sue for?" This is not a ridiculous question - I wish that it was. Each year some people left totally and permanently disabled - for sake of argument, think of quadriplegia. They have to be compensated. There is also a method in the madness. Fewer people are suffering early death (before age 65) and people find it easier to think about the consequences if you keep them in the picture.

    In New Zealand ACC handles the payments to the person, but in the UK private settlements must be made. An example is available at this link - it suggests GBP 1.5 million to GBP 3.5 million pounds. Arguably, ranging from the current level in the question above to about two and a half times more. It also handily underlines the problem of projecting costs, and therefore compensation, over a lifetime. The answers, after a bit of stammering, will probably amount to more than the person can afford, so the budget window then becomes the main determining factor. With luck, you have have pried open the budget just a little bit.

Of course, there are perils with over-insuring your life. These are well known, and you can rely, to some extent, on insurers to protect you: they share your concern, as over-insured lives don't live as long, and become bad claims disputes when they are murdered. But it is also rare, and the balance of probabilities is that your cover is low - particularly your income protection insurance.





Gory, but educational

The Body Worlds Vital Exhibition was created by Dr. Gunther von Hagens and is set to be hosted at the Hilton Exhibition Centre in Auckland starting in April. The exhibit uses real human bodies to educate school children how lifestyle decisions can impact the well-being and health of the human body. You can bet that horribly tarry lungs are going to feature in the exhibit somewhere. Click here to read more. I doubt that I shall be able to drag my kids along, but as I enjoy drawing, a bit of gross human anatomy is useful. I may take my sketchbook.

Men, suicide, and four types of silence

Dr Chris Bowden from Victoria University has done some new research revealing that key aspect of young men’s experiences of suicide bereavement is ubiquitous silence. 'His research found the men experienced four types of silence following the suicide of a close friend: personal, private, public and analytic silence.' Click here to read more and to watch the interview with Dr Bowden.