Reporting in the AFR highlights the impact of Hayne on different insurance sales models. iSelect has cut staff and outsourced most administrative functions to TAL's Lifebroker. Most banks have exited, or are in the process of exiting, the insurance sector. The fact that these changes are concentrated in the no / low advice portion of the market should be of most interest to us. Similar themes have played out here, whether it was large banks selling life insurance operations (such as CBA and ANZ) or TradeMe selling Lifedirect back to Mark Solomon. Insurance assets are returning to specialist hands - those more likely to see long-term value emerging from them.
Submissions on the Financial Markets (Conduct of Institutions) Amendment Bill have been released on the Parliamentary website. Available via weblink at https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_93443/tab/submissionsandadvice?Criteria.PageNumber=1
The release of the submissions was highlighted for us in the Investment News e-mail received recently, with the specific COFI story available at https://investmentnews.co.nz/investment-news/amp-finds-cofi-hard-to-swallow-industry-calls-for-sweeteners/
Noting that there are 53 submissions, I am, of course, glad to see the quote from one of our preferred compliance consultants (Rob Dowler) who had their submission selected and included in the Investment News article.
I encourage readers to consider the article. In particular the central question of having different principles for each participant, and the limited range of initial participants. Contrast that with the suggestions for a single set of requirements for fair treatment, and extending these to a wider range of companies.
As submissions are supported by the exploration at Select Committee hearing next week it will be interesting to hear if the definitions of incentives may come in for some discussion. Regular readers will know that we consider the definition to be too vague for distributors to have long-term confidence in the approach to remuneration - discouraging investment and delaying a shift to more spread commission models preferred in Australia.
It has been announced that ASB and AIA are working together to offer current and new ASB home loan customers Compassionate Care. This benefit is free and is intended to offer customers some relief in the instance their co-borrower dies. Customers will be relieved of paying the interest portion of their mortgage for up to 12 months.
“ASB and AIA have launched Compassionate Care, a free home loan benefit for new and existing ASB home loan customers that covers the interest costs for about 12 months if one of the borrowers on the home loan dies.
It comes at no cost to the customer, and ASB and AIA say they have worked hard to ensure the process is simple and easy, with no requirement to sign up or activate the benefit.
AIA chief product and vitality officer Len Elikhis said ASB and AIA had conducted research to understand the needs of home loan customers and determined that the death of a borrower was a significant point of stress.
Not having to pay interest costs would give customers time to work out how they wanted to proceed with the loan, he said.
AIA will be tasked with adjudicating the claims.
It gave the insurer the chance to cover a large group of people, he said, and strengthened AIA’s partnership with New Zealand.” Click here to read more
This is a smart offer. It covers loads of people. As Len Elikhis points out - it is a significant concern to borrowers. It is also relatively low cost and could naturally lead to a conversation about wider cover requirements. This is also not something you have to leave to the big insurers. I know of one insurance broker who advertised free windscreen insurance for any client that bought car insurance with them. Whether the preferred car insurance paid it or not didn't matter - if it wasn't covered by the insurer they just paid it themselves. Good consumer offers like these create opportunities.
In other news:
The depth of anger at the approach to regulation in Australia is being revealed with news like this:
The Australian financial advice industry has declined by almost 18% when compared to the number of advisers in the market this time last year. The introduction on mandatory qualifications, the change in commission structure and monitoring of activity has pushed advisers out of the market.
“Five thousand and twenty-five advisers have left the industry in the last 12 months, while a meager 78 new authorised representatives joined the industry during this period, analysis of ASIC’s financial adviser register conducted by CoreData will show. The researcher pointed out that the number of new entrants to the industry is inflated considering at least half have joined timeshare schemes, an area that for the regulator.
But it’s the bloodletting of advisers from the institutionally-owned licensees that will be a feature of this year’s list and subsequent analysis.”
Here you can listen to a podcast from Australian Unity Advice’s executive general manager, Matt Brown, who discusses the impact of the government’s relief measures on advisers in the wake of the coronavirus crisis.
Research done in Australia shows that “2019 saw the industry shed a huge 4,378 advisers (15.6 percent) throughout the year.” Other key points the report highlighted are:
- Three out of five advisers are now privately (meaning individually) licensed
- ‘Micro-licensees’ (10 advisers or less) have grown to more than 21 percent of the market
- 30 percent of the entire industry has been on the move (ceased or switched) in some form or another in 2019
It looks like Australia has come around to the idea of flexibility in licensing. Click here to read more.
In their submission to a Treasury consultation, the Australian FSC is urging the reconsideration of certain professionals from being experts in claims matters as they are independent of insurers and do not hold delegated authority to make claims decisions. In its submission, the FSC also argued against additional disclosure obligations being imposed. Fascinating for claims sector watchers here in New Zealand: imagine if a physiotherapist that provides a report on a claims case (as opposed to providing services directly to a claimant) had to hold a licence to do so - in much the same manner as a financial services provider has to? How many physios do you think would seek such a licence? What do you think it would do to the cost of getting a claim file reviewed? Click here to read more. I hope the Australian FSC is able to win this point.
In this article Chris Dolman highlights the significance and impact of smoke as the bush fires continue and why we aren't currently taking it into consideration. The question is: why not? Perhaps these issues would be given greater priority if they were.
Goodreturns has a piece covering research on why there are fewer women in financial advice. They quote the percentage of female advisers as 23.5% applies only to investment advice, and can be reasonably easily verified with reference to FMA information on AFAs. I am pleased to say the in the area of insurance advice, female participation is quite a bit higher - although no easy reference source exists, the audience at Quotemonster workshops is indicative. I was struck by this comment, however:
"The study said the industry could help by normalising part-time work opportunities"
But many of the changes to the financial advice regime will make part-time work harder. In Australia advisers are telling me that the requirements of FASEA (much tougher than in New Zealand, and probably needlessly so) will make exactly the kind of part-time work the authors envisage impossible.
Continuing education is designed to enhance, improve and further an adviser’s skills, but in order to do so an adviser must take time complete their qualifications. It is evident that complying with the new regime presents a high opportunity cost for advisers. Much higher in Australia than it is in New Zealand - Click here to read more.