An adviser business has put up for sale a lead generation website. A lead generation website is offered for sale as the adviser running the site wishes to focus on their own region, not on serving clients nationally or running a referral business. This is a great opportunity for a national business with the skills to serve the self-employed market. Twenty leads a week are typical from the site. Handover support is offered so you can continue to get the best out of the opportunity. Contact me or my team for further information.
nib has said that members that receive financial advice are better off. In addition, nib CEO Rob Hennin noted that half of nib’s members join via financial advisers. Hennin credited nib’s view by highlighting the findings from an internal study which found that members with advisers have more financial certainty and more health benefits. Hennin used the findings of nib’s internal study and studies commissioned by the FSC to conclude that people who receive financial advice are better off, saying that people with financial advice experience an improvement to their overall health.
“Health insurer nib says it is “absolutely clear” that customers with insurance advisers end up better off, and says advisers have done an “extraordinary” job adapting to the challenges that have come with COVID-19, and multiple lockdowns.
According to nib New Zealand CEO Rob Hennin, approximately half of the insurer’s business currently comes through its adviser channel. He says its internal studies have been clear – customers with advisers have more financial certainty, and also see increased health benefits as a result.
“It’s absolutely clear from our research and the work the Financial Services Council has done that Kiwis who receive financial advice are better off,” Hennin told Insurance Business.
Hennin acknowledged the work advisers have done saying that their response to COVID-19 was extraordinary. Hennin mentioned the increased use of digital tools and other methods to reach and assist clients.
“Advisers have just pivoted and done an extraordinary job throughout COVID-19,” Hennin added.
“They’ve really embraced digital tools and they’ve gone out, consulted with their clients and done whatever they can to ensure they all have access to the care and protection that they need.”” Click here to read more
In other news
In planning for 2021 I found myself researching optimism as an approach to checking assumptions about the future. Why? The Insurance industry has had some pretty awful quarters in terms of production - yet we know some fundamentals about the sector are strong. Is this a bad patch, and if so, when will the recovery begin? Or is this something more persistent, and if so, can anything be done?
Before I tell you my views, let me share a good question. Not my own, but based on some research about examining possible futures, which I will adapt as: "It is helpful to make a distinction between our outlook on the underlying course of events and our ability to influence them."
Some pretty big divergences between views can be traced back to either a perception of the underlying conditions and likely outcomes based on those and also whether we believe anything can be done about them. When separated out it can help to explain a lot of conflicts: the big differences in views between new and old insurers, also some big differences in views between dealer groups, between older advisers and newer advisers, and finally between many advisers and insurers. It all depends on where you stand.
More work on this will come in the next quarterly life and health report - due at the end of March. Inspired by the work of Peter Hayward and Stuart Candy, published in 2020 as The Polak Game.
Susan Edmunds, reporting at Stuff.co.nz, tells us of a client that was surprised by the extent of the fee a mortgage broker charged when they refinanced their loan early. They complained about it to FSCL, here is the essence of their decision:
FSCL said the adviser was entitled to a fee but the terms of engagement were too vague to be enforceable. “The clause did not set out how much the clawback fee could be, or how the fee would be calculated. It simply said that, if the client fully repaid their loan within 24 months, the adviser would be entitled to charge an early repayment fee. For all [the client] knew, it could be a $25 fee, as opposed to $2500.”
Faced with that, the adviser agreed to waive the fee. That's the problem with a vague disclosure - a few examples could have made this really clear. Glen McLeod makes a robust defence of the right to charge such a fee - which I broadly agree with - I just think it should be really clear to a client what the fee will amount to. In the absence of good disclosure, the dispute resolution bodies will rule in the client's favour. I quite like the approach outlined by Bruce Patten, of LoanMarket, in the article. I believe that would stand up to a test such as this complaint.
What will be the big themes for 2021 for life and health insurance?
- Helping people keep their cover through disruption will continue to be a theme - although economic performance has been better than expected there remain quite a few people out there struggling with adjustment to the COVID economy. Several advisers tell me of long conversations that are essentially about conservation. They take time and they generate little revenue - this largely unsung work is of a piece with claims help and is part of the value of the commission model: the adviser isn't expecting to charge a fee for these discussions, they just want to help the client stay covered.
- The shift towards digital - within advice businesses, at insurers, and for consumers. Digital is an enabler of faster transactions, more efficient administration, better accuracy, and more meaningful engagement. More adviser businesses will develop better digital capability and be looking for ways to automate certain processes. That includes digital advice offerings. It also means better underwriting processes built around access to
- Direct - it has shown solid growth - and not merely as a proportion of the market which has shrunk, but in absolute terms. It has benefitted from a big drop in bancassurance and a big push through online social media platforms. I really want to see the quality of the offers improved in 2021, but that will probably require more work in the area above to achieve.
- Regtech - this is the year we begin to see regtech applied to insurer and adviser conduct programmes - analysis of all clients by a range of factors will be a vital complement to human-managed compliance processes.
- Transition - to the new advice regime means that a lot of advisers will be spending a bit more time than usual working on systems, new processes, and disclosure requirements. That will hit productivity for a few weeks. Combined with holidays, will the nadir be the first quarter production figures with a recovery from there, or will the second quarter be the low point? I am expecting recovery and more confidence to recruit and focus on marketing to be able to get traction in at least the third quarter.
- Consolidation - adviser business size is definitely rising. The greater integration and co-ordination required to successfully meet new compliance requirements is reflected in the high number of authorised body structures being disclosed by FMA licensing statistics.
- Consumer knowledge and understanding will continue to rise as more advisers share relevant content in easily digestible digital media. Gradually the focus on what is most relevant and readily explainable will begin to percolate through consumer finance forums changing the general perception of 'good' this will further current consumer trends towards more living products and more packages of benefits.
MBIE released more information on FSLAA in mid-December. Penny Sheerin, partner at Chapman Tripp, has said that these changes are finer details but did highlight that there would be changes to the FSP register to ensure the reduction of registry misuse.
“The Ministry of Business, Innovation and Employment last week released the regulatory requirements that underpin FSLAA.
Penny Sheerin, partner at Chapman Tripp says that any advisers reeling at the updates needn’t worry too much if they are already on board with the changes.
“Really these updates are just the finer details. Tidy-ups to some of the wording of the regulation. Updating terminology to reflect the new regime and a number of other quite administrative points. A lot of it is not ground-breaking new content.”
But Sheerin notes that there is one area which advisers need to pay heed too.
“One thing to note are the changes to the FSP Register, specifically around limitations that have been put in place to limit the misuse of the register. These changes have been talked about for a while but now they are manifesting in the upcoming regulations.””
The Financial Markets Conduct Amendment Regulations 2020 has been updated to change:
“Replacing terminology from the Financial Advisers Act 2008 (FAA).
Replacing references to financial advisers with references to financial advice providers and including transitional provisions to give affected providers time to update documents.
Prescribing eligibility criteria for an entity that wants to be an authorised body under a licence that covers a financial advice service.
Carrying over the effect of the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014 but with some updates and clarifications, and clarifying when assurance reports for assurance engagements must be obtained by custodians.
Prescribing limited circumstances in which a provider of a client money or property service is not required to hold client money and property separate from firm money or property including duties to protect the interests of clients.
Prescribing when firm money that is held together with client money is to be treated as client money.
Prescribing requirements for the record of nominated representatives that must be maintained by providers.
Prescribing the statement that lenders can give to make clear to consumers that the limited exclusion from the financial advice regime relating to lender responsibilities applies.
Continuing duties imposed under the FAA for former authorised financial advisers and qualifying financial entities to retain records.
Carrying over exemptions contained in regulations under the FAA.
Updating a cross-reference in the financial advice disclosure regulations so that financial advice providers are able to refer to their website for information about their legal duties.
Enabling financial advice providers to provide contingency discretionary investment management services (DIMS) without being subject to DIMS licensing requirements (and providing for transitional arrangements). This carries over and updates an existing licensing exemption for contingency DIMS provided by authorised financial advisers.
Dis-applying certain provisions of the Trusts Act 2019 to trusts relating to portfolio investment entity (PIE) call fund units and PIE term fund units.
Updating the information that must be disclosed to investors about the tax consequences of investing in managed investment schemes that are PIEs.
Amending the Financial Markets Conduct (Asia Region Funds Passport) Regulations 2019, including a new exemption from the licensing requirement for financial advice services.”
The Financial Markets Authority (Levies) Amendment Regulations (No 2) 2020 has been changed so that:
“The Regulations set levies for the new financial advice regime as well as for the 2021/22 and 2022/23 years reflecting decisions made earlier this year.”
“The Regulations replace the now redundant terminology from the Financial Advisers Act 2008. No substantive changes to the AML obligations have resulted.”
The Financial Service Providers (Registration) Regulations 2020 has been changed to include:
“A requirement for additional information to be displayed on the Register.
New measures to address misuse of the Financial Service Providers Register.”
The Financial Service Providers (Exemptions) Amendment Regulations 2020 has been updated so that:
“The Regulations exempt certain providers without a place of business in New Zealand from registration on the Financial Service Providers Register if they do not promote services to New Zealand clients.” Click here to read more
In other news
In December the FMA revealed that there has been an increase in transitional licence applications. The latest figures indicate that 97% of the industry is now covered, with 1,356 licences approved and 715 authorised bodies. Further insights indicate that 9,157 individual financial advisers are covered by a transitional licence. John Botica, FMA director of market engagement, has expressed that he is pleased with the engagement levels regardless of the different occurrences throughout the year. Botica has reminded the remaining 3% that they will have until 15 March 2021 to apply for their licence.
“Back in September, things were looking shaky for over 2,000 financial advisers who had yet to apply for their transitional licences.
But now, at the end of the year, the data is showing that a big final surge before the holiday break has seen 97% of the industry covered by a transitional licence.
As of December 20, 1,356 licences have been approved alongside 715 authorised bodies, meaning that well over 2,000 advisers have made the decision to engage with the new regime. Of individual financial advisers, 9,157 are covered by a transitional licence, giving some leeway for double-ups on the FSPR, that means that around 97% of the industry is now covered.
FMA director of market engagement, John Botica is pleased with the results.
“I am very pleased to see advisers taking the transition seriously and engaging [with us] in the process. With everything else that has been going on this year, all of the stresses and strains that 2020 has thrown up, advisers have really answered the call to be part of a regime designed to provide even better customer outcomes.
“Up and down the country advisers make life better for their clients. They should rightly be proud. Licensing numbers show that the overwhelming majority are well on the way to being ready for the new regime.”
Last week the numbers showed that only 8,423 advisers had gained their transitional licence, meaning in the past week there has been a last minute surge of 734 advisers getting covered by a transitional licence before the holidays.
Those 3% of advisers who are yet to gain their transitional licence will have until March 15 to do so if they wish to continue to give financial advice.” Click here to read more
In other news:
Our best wishes for your well-earned break
After years of using the same Christmas-themed card with a traditional tree on it, planning well ahead, we took a much more clearly southern hemisphere approach in January, using some artwork that focuses on what New Zealanders tend to do in the summer: head to the beach. At the time we did not know how particularly appropriate that shift in focus was going to be!
How has the life and health insurance sector performed for its many stakeholders?
While many will want to say good riddance to 2020, reflecting on a challenging year shows that there is an awful lot to admire in how the industry has performed: Insurers were able to reassure clients that their policies would work. They were able to offer a wide range of methods to support clients – allowing premium holidays, refunds, rate increase deferrals, and cover changes that helped people manage through the economic disruption that was a big part of the year. Claims services continued even through a tight lockdown, with insurers finding workarounds for signatures, meetings, and examinations, to help meet clients needs. That was impressive.
Like many others we were grateful for flexibility when we had to reschedule meetings, shift them online, and other aspects of our usual service had to be rapidly reconfigured for delivery in a digital-only context. We are fortunate that we can operate almost all our business functions entirely online – although we will take the credit for making decisions to have most of our IT infrastructure in leading cloud facilities. We are most proud of how the Chatswood and Quality Product Research teams performed through this period to enable continued support to our customers.
Through a period of disruption, what opportunities can be found?
The effects of COVID-19 disruption are real and likely to take some time to flow through the economy and into the financial accounts of insurers. Recent results show what we can expect from others yet to report. Economic modelling suggests the worst period for unemployment lies ahead – although so far, we have outperformed the models. There are reasons for optimism: vaccines, the power of digital to enable change, and evidence of greater flexibility and resilience than expected.
The environment will improve but relying on that alone is insufficient. Plenty of our 2021 workplan is laid out for us due to the scope of legal and regulatory change but merely responding to that will also be insufficient. Every research paper highlighting underinsurance is really underlining an opportunity for growth – those growth opportunities are ones we must build. We must build them - hoping for a mere return to what once was fails to recognise market reality and environmental change.
So, as well as meeting the requirements of the new Privacy Act 2020 that came into force on 1 December; as well as playing our part in the implementation of FSLAA on 15 March; as well as working with RBNZ on the implementation of IFRS 17 and the IPSA review; and as well as working with MBIE on new conduct law, we have to invest in the new. We have to work to bring new products to the marketplace. We have to work with the changed distribution environment – realising the long-predicted increasing business size in advised distribution. We also have to work to build better digital: there is such a great opportunity to displace some of the low-quality online insurance offers with better – an opportunity to open new frontlines against ignorance and indifference through digital advice.
Happy holidays and opening hours information
Opening times: On Tuesday the 22nd of December we will close the office at midday, and open again on the 11th of January, but you can call Russell on mobile any time. Our best wishes to you for the holidays and the New Year.
Thank you for your support, from all the team at Chatswood: Fran, Jerusalem, Kelly, Rob, Ed, Wanyi, Melissa, and Russell
16 Dec 2020 – The FMA published its Annual Report for the year ended June 2020. https://www.fma.govt.nz/news-and-resources/media-releases/fma-publishes-2020-annual-report/
17 Dec 2020 – FMA released its latest regular monthly update, which included advice of two consultations expected to commence in the first quarter of 2021, being:
- Review of the Wholesale Investor $750,000 Minimum Investment Exclusion Exemption Notice
- Potential exemption relief for restricted schemes from certain disclosure requirements
The FMA also advised in the update of the publication of two information sheets as follows:
- How overseas research reports may be provided to retail clients under the new financial advice regime https://www.fma.govt.nz/compliance/guidance-library/providing-overseas-firms-research-reports-to-retail-clients/
- The circumstances that may exclude a lender from some Financial Markets Conduct Act 2013 (FMC Act) obligations related to financial advice. The exclusion applies to consumer credit contracts and certain credit-related insurance contracts. (While noting the sheet is dated as released on 4 March 2020) https://www.fma.govt.nz/compliance/guidance-library/financial-advice-given-for-the-purpose-of-complying-with-lender-responsibilities/
Further FMA guidance identified as published on the FMA website during Dec 2020 includes:
- Complying with the prohibition on the notice of trusts on registers https://www.fma.govt.nz/compliance/guidance-library/complying-prohibition-trusts-registers/
- Disclosure framework for integrated financial products https://www.fma.govt.nz/compliance/guidance-library/disclosure-framework-for-integrated-financial-products/
- Green bonds – same class exclusion https://www.fma.govt.nz/compliance/guidance-library/green-bonds-same-class-exclusion/
17 Dec 2020 – MBIE advised of the publication of various regulations to support the Financial Services Legislation Amendment Act 2019 and other recent legislation changes, including:
- The Financial Markets Conduct Amendment Regulations 2020 http://www.legislation.govt.nz/regulation/public/2020/0315/latest/LMS314185.html - especially noting:
• replacing terminology from the Financial Advisers Act 2008, such as references to “category 2” financial products and authorised financial advisers. Note:
The existing treatment under the Financial Markets Conduct Regulations 2014 in relation to category 2 products (for example in relation to whether a PDS needs to be given) is preserved.
Transitional provisions have been included to give affected providers time to update documents that refer to “authorised financial advisers” and “financial advisers”;
• carrying over the effect of the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014 with some updates and clarifications;
• prescribing limited circumstances in which client money and firm money can be held together, to reflect the effect of existing FMA exemptions for NZX brokers and Non-NZX brokers;
• prescribing when firm money that is held together with client money is to be treated as client money;
• prescribing the statement that lenders can give to make clear to consumers that the limited exclusion from the financial advice regime relating to lender responsibilities applies;
• prescribing requirements for the record of nominated representatives that must be maintained by providers;
• requiring AFAs and QFEs that continue operating in the industry to retain records that were required to be held under the Financial Advisers Act 2008;
• carrying over exemptions contained in regulations under the Financial Advisers Act 2008;
• updating a cross-reference in the financial advice disclosure regulations so that financial advice providers are able to refer to their website when disclosing information about their legal duties;
• enabling financial advice providers to provide contingency DIMS without being subject to DIMS licensing requirements. This carries over and updates an existing licensing exemption for contingency DIMS provided by authorised financial advisers. The regulations also include transitional arrangements where an authorised financial adviser named in a contingency DIMS investment authority is engaged by a financial advice provider;
as well as the following in relation to financial products more generally:
• providing that certain provisions of the Trusts Act 2019 do not apply to PIE call fund unit trusts and PIE term fund unit trusts;
• updating the disclosure information that must be given by managed investment schemes to reflect changes in the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 relating to tax refundability.
- The Financial Markets Authority (Levies) Amendment Regulations (No 2) 2020 http://www.legislation.govt.nz/regulation/public/2020/0318/latest/LMS431850.html
- The Anti-Money Laundering and Countering Financing of Terrorism (Definitions) Amendment Regulations 2020 http://www.legislation.govt.nz/regulation/public/2020/0311/latest/LMS431396.html
- The Financial Service Providers (Registration) Regulations 2020 http://www.legislation.govt.nz/regulation/public/2020/0316/latest/LMS252644.html - especially noting changes to:
- provide for additional information to be displayed on the register, for example, relating to whether a provider is providing services to wholesale or retail clients
- The Registrar will be providing further information about the process for updating existing FSPR records.
- add measures to address misuse of the FSPR, including prescribing a threshold for registration for certain financial service providers and requiring certain providers to include a warning statement that registration on the FSPR does not mean active regulation in New Zealand.
- The Financial Service Providers (Exemptions) Amendment Regulations 2020 http://www.legislation.govt.nz/regulation/public/2020/0317/latest/LMS433122.html
17 Dec 2020 – Privacy Commissioner released the December version of Privacy News, which included information on the release on 8 Dec 2020 of guidance to Ministers and departments to help them determine when personal information can be disclosed to a Minister by a government department. https://privacy.org.nz/publications/guidance-resources/guidance-to-ministers-and-government-departments/
11 Dec 2020 – IRD advised that the US IRS have just issued an FATCA News & Information alert to remind NZ Financial Institutions (NZFIs) registered for FATCA that the Responsible Officer (RO) Certifications are due by 15 December 2020.
11 Dec 2020 – Further to its initial response to the Minister of Finance on 24 Nov, the Reserve Bank published a copy of its updated detailed response to the letter from the Minister on house prices and the role of the Reserve Bank. https://www.rbnz.govt.nz/news/2020/12/reserve-banks-response-to-minister-of-finance
11 Dec 2020 - ASIC releases regulatory guide on product design and distribution obligations in Australia. https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-320mr-asic-releases-regulatory-guide-on-product-design-and-distribution-obligations/
11 Dec 2020 – FMA published “The Auditor Regulation Act (Prescribed Minimum Standards and Conditions for Licensed Auditors and Registered Audit Firms) Notice 2020.” https://www.fma.govt.nz/assets/Reports/Auditor-Regulation-Act-Notice-2020.pdf
13 Dec 2020 – Good Returns reports on a case heard before the Financial Advice Disciplinary Committee on 10 Dec 2020 on “record keeping” charges, with the Committee decision reserved and with details yet to be published on the FADC website. https://www.goodreturns.co.nz/article/976517952/adviser-appears-before-fadc-on-record-keeping-charges.html
14 Dec 2020 – FMA released guidance on financial products that incorporate non-financial factors, such as ‘green’ bonds and ‘socially responsible’ managed funds. https://www.fma.govt.nz/news-and-resources/media-releases/expectations-green-investment-products/