Liquidator highlights fraud, and more daily news

A liquidator has provided a report detailing the activities of Barry Kloogh who plead guilty to charges in MarchThe liquidator examined over 100,000 transactions as well as bank transactions dating back to 2012 to understand if stolen funds were used to make purchases on behalf of other clients. In cases like this, false profits could be clawed back. Although the investigation found that a small group of clients were not affected by Kloogh’s actions, the liquidator found that clients that had paid by cheque were given false account details.

“The liquidator reviewed more than 100,000 transactions, plus bank transactions for Kloogh’s companies accounts, going back to 2012.

 

They found “a small number” of clients were not affected by Kloogh’s fraud. Their names had been provided to investigators by Kloogh, and their accounts were released to them once the information was confirmed as being correct.

 

However, the much larger task of reviewing transactions involving defrauded clients remains. That was because funds paid by cheque had been diverted, or given false bank account details.

 

Investigators were trying to find instances where stolen funds from Impact Enterprises Ltd were used to purchase other assets in another client’s name.”

 

“The liquidator noted any “fictitious profits” – not the underlying capital investment – were liable to be clawed back for the benefit of other investors.

The liquidator is set to investigate further but has found that clients weren’t given access to the platform Kloogh had in place to provide an overview of client investments. Instead, the platform was used to track what Kloogh had stolen. Kloogh is set to be sentenced on 31 July 2020.

 

“The report also notes Kloogh’s clients were not given access to a platform designed to provide an overview of their investments.

It appeared Kloogh used the platform to keep track of ‘’what he had stolen from his clients in order to evade detection’’.

Kloogh will be sentenced on July 31.” Click here to read more

In other news: 

FANZ: Financial Advice NZ's Conference 2020, Bounce will be held around the country and virtually September 21-24

FSC webinar: Compliance with Financial Advisers Act between now and March 15 2021 webinar

FSC webinar: An update from FMA, MBIE and Code Working Group webinar

RBNZ: RBNZ announced two senior leadership appointments in the Reserve Bank’s Money Group, being a new head of Money and Cash, and head of a new Payment Services Department


Unpacking the new disclosure requirement

During Financial Advice NZ’s webinar Sharon Corbett and Rose Wang from MBIE discussed the new disclosure requirement. The regulation will be split into three sections. Adviser businesses will be expected to state on their websites the necessary information prospective clients need to choose the right financial adviser. More information will need to be provided when the nature and scope of advice is known. And lastly, more disclosure will be required once the advice is provided. Commission or incentives that advisers or FAPs are paid will be part of the information that needs to be outlined. This is expected to alert clients of potential conflicts of interest.

“The regulations have three parts: The information about a financial advice provider that needs to be on its website to ensure that consumers could choose a FAP that suits their needs, more information given when the nature and scope of advice is known, and a final tranche of disclosure when the advice is given.

As part of that, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.

If the adviser was paid a salary but their FAP received commission that would need to be disclosed if a client might think it would be a factor.”

The goal of the new disclosure regulation will be to give customers all the necessary information that they need in a more efficient way. The change focuses on the type of information disclosed as well as timing.

“Corbett said the focus was on moving away from a tick-box exercise where clients were given information they might not understand or have time to process, to one in which information was given in a clear and useful way at the right time to help clients make good decisions. She said disclosure too early was often forgotten or disregarded and disclosure given too late could risk leaving the client feeling locked in with an adviser.”  Click here to read more

In other news:

FSC: Generations Conference will be held at The Cordis Hotel, Auckland on Tuesday 8 and Wednesday 9 September 2020

FMA: FMA advised of its intention to recruit a new Director of Investment Management to lead a new team responsible for designing, delivering and communicating the FMA's approach to the Investment Management Sector

Next-level client insight service targets NZ advisers


Financial Advice weigh in on disclosure regulations, and more daily news

Financial Advice New Zealand have voiced their approval of the new disclosure regulations that were announced by MBIE on 25 June 2020. Katrina Shanks has said that new regulations mirror what Financial Advice outlined in their CoFI submission.

“Financial Advice NZ chief executive Katrina Shanks said the new rules had picked up many of the points made in the association's submission.

“The focus of the sector during this process was to ensure the right balance between good consumer outcomes and a financial advice sector which isn’t encumbered by unreasonable red tape and adverse outcomes.

“We support regulations around disclosure made to clients – including on conflicts of interest, commissions and other incentives and disciplinary issues.”

The need for disclosure being limited to adviser fees, the products they offer advice on, their conflicts of interest, commission they receive, and how clients can contact dispute resolution services is something Financial Advice is please about.

““However, we are pleased to see a change from the draft disclosure requirements that now only requires disclosure of these matters when they would likely materially influence a client’s decision. This is something we strongly recommended in our submission to ensure disclosures were meaningful and not overwhelming for consumers.

“We were concerned the draft regulations required disclosure of product fees charged by unrelated third parties (e.g. insurance premiums) so the removal of the requirement to disclose fees for ‘acting on the advice’ was a sensible move."” Click here to read more

In other news:

FSC: FSC 2020 Awards - Nominations Open

FMA: FMA takes CLSAP NZ to court over alleged anti-laundering breaches

Westpac: Westpac to launch carbon footprint tracker

BNZ: BNZ launches banking support for domestic, economic abuse survivors


AMP Life sale, and more daily news

After yesterday’s announcement of RBNZ approving the sale of AMP Life to Resolution Life, some consumers raised concerns that the conditions of the sale won’t be enough to protect the interests of customers.

“There are fears the conditions the Reserve Bank (RBNZ) has put on the proposed sale of AMP Life to Bermuda-based private equity firm, Resolution Life, don’t go far enough to protect the interests of the insurer’s 200,000 New Zealand policyholders.”

One policyholder expressed his fears that the contract terms were general and that Resolution Life wouldn’t have an incentive to uphold goodwill if they don’t write new polices. As a result, claims and bonuses would be at risk of not being paid out.  

“The RBNZ’s general manager of financial stability, Geoff Bascand, said: "Because AMP Life is a branch of an Australian business and intended to be in ‘run-off’ and not write new business, special arrangements were needed for the security of New Zealand policyholders."

However, an AMP Life policyholder with a background in investment banking, Andrew Body, was concerned that without writing new policies, Resolution Life wouldn’t be incentivised to maintain goodwill in the market. Accordingly, he worried any claims and bonuses owed to policyholders could be put at risk.

While Resolution Life will be required to honour existing policies, Body said contract terms were often “very general” and relied on “trust”.”

I do not think this is realistic. The requirement for a trust and Policyholder Advisory Committee will provide a level of additional protection for policyholders, and reflects the kinds of governance requirements around conduct soon to be implemented across the sector, when new conduct law is eventually passed. The problem for AMP policyholders is a mirror of the problem for AMP. Long-term contracts make it hard for both parties. For the insurer, the clients you end up with on your books after 20, 30, or 40 years can have quite different characteristics to those you underwrote all those years ago. The situation for policyholders is that AMP has decided it would prefer not to be in the life insurance business. Resolution Life wants to be. Even though Resolution Life will not be writing new business, their investment will fail if they experience very high levels of lapses - the substantial existing premium and the price they paid to own it are both substantial stakes in the future of the book. 

Click here to read more

In other news:

Monetary Policy easing to continue

Financial Advice NZ: Consultation: Trusted Adviser Financial Advice New Zealand

FSC: proposed standard licence conditions for financial advice provider full licences


AMP sale gets the green light, and more daily news

After spending the past 18 months reviewing the sale proposal, the Reserve Bank announced that they have approved the sale of AMP Life to Resolution Life. Customers with existing policies with AMP Life will be unaffected by the transaction.

“The Reserve Bank has approved the proposed sale of AMP Life to Resolution Life, in a revised arrangement that is subject to a number of conditions imposed to protect policyholders.

The Reserve Bank has been reviewing the proposed transaction and consulting with the parties involved over the past 18 months to ensure the deal met our requirements, Deputy Governor and General Manager for Financial Stability Geoff Bascand says.”

For the sale to go ahead a Trust was established. This is to ensure objectives are met, industry dynamics are positive and that there is insolvency protection. Additionally, the Trust is set to ensure localisation. Capital and assets will be held in New Zealand and Resolution Life New Zealand (RLNZ) will be established.

“A bespoke trust model has been established that ensures supervisory objectives are better met, future industry dynamics are generally more positive, and there is additional protection in the event of insolvency - one of the key risk considerations that we have been seeking to mitigate,” Mr Bascand says.

The Trust is required to hold capital and assets in New Zealand that help provide long-term security for policyholder benefits or investments, where relevant. The Trust will be under the management and scrutiny of relevant officers in New Zealand, who have appropriate influence and authority in respect of the New Zealand operations, for the purpose of securing equity across all policyholders.

In addition, the model will see the establishment of a new, locally incorporated insurer Resolution Life New Zealand (RLNZ). The RLNZ board will have a majority of New Zealand resident, independent directors. RLNZ will act as Trustee to the Trust and will effectively manage the assets held in the Trust.”

In other news:

Kepa: Four Adviser Resource Centre Services were available to Kepa Members for free July – September

FSC Connect webinar - Customers, complaints and claims - what have we learnt from COVID-19?

FSC webinar: Compliance with Financial Advisers Act between now and March 31 2020

FSC webinar: Preparing contracts with authorised bodies, advisers, contractors and other staff or suppliers


FSC: Generations conference

Clipboard01

Conference Countdown: 88 Days To Go
Following the announcement of New Zealand moving to Alert Level 1, the FSC Conference and Events Committee are excited to re-launch the Financial Services Council's 2020 Conference - Generations.

The conference will go ahead on 9 and 10 September 2020 at the Pullman Hotel in Auckland, and we hope that you and your team can join us and re-connect with the industry.

Join us on Monday 15 June at 4pm for an Introduction to Generations webinar. More details, and registration below.

Keep reading for details on how to register for one of just 150 Earlybird tickets, the launch of the FSC industry award nominations and an introduction to our 2020 Charity partner - Voices of Hope.

 

Clipboard02


Daily news update: FMA’s guide to customer vulnerability, and more stories

The FMA published their expectations for identifying vulnerability and handling vulnerable customers appropriately. This guideline provides further insight on the FMA’s conduct expectations for managing the specific needs of vulnerable customers. The document focuses on understanding vulnerability, staff capability, customer service and communications.

“This document provides further explanation on the FMA’s conduct expectations for serving the needs of vulnerable customers, set out in our April 2020 letter to financial services CEOs. We expect to issue more detailed guidance and feedback on vulnerability practices as we continue our engagement with industry over the coming months.” Click here to read more

In the document the FMA talks about identifying circumstances rather than 'types' of people that are vulnerable. The Human Rights Commission compiled a detailed guide to vulnerable people after the Canterbury Earthquakes. That guide also talks about situations and conditions and intersections between these. For example individually, neither poverty, nor family situation, nor work situation may make a person vulnerable. But a person who has recently lost their job, who also cares for someone who is unwell, and is experiencing financial stress, is probably vulnerable. 

In other news:

AMP: Insurer AMP among NZ businesses planning exodus from expensive city centre properties

Southern Cross: We’re here for a healthier New Zealand

FSC: FSC on licensing: "You don't have as long as you think"


Daily news update: RBNZ recommendations for Appointed Actuaries, and more stories

The Reserve Bank have released their thematic review of an Appointed Actuary role. The review was commissioned to better understand how the role works in practice. The review is presented in the form of a 55-page report that covers the role and scope of responsibility of Appointed Actuaries, regulatory requirements, insurer models, independence, conflicts of interest, expectations in a crisis, actuarial recommendations and advice, and engagement with the board, management, auditors and RBNZ. 

“The review, conducted by the Reserve Bank’s Industry Insights and Thematics team, was launched to better understand how the Appointed Actuary role works in practice for insurers, actuaries and the Reserve Bank, and to identify potential areas for improvement to make the role and regime more effective.

“The review concludes the regime and appointed actuary role are largely effective, but improvements can be made across the board – with the actuaries themselves, insurers and at the Reserve Bank. These improvements are important, and we will be working closely with the industry to support necessary changes,” Deputy Governor and General Manager for Financial Stability Geoff Bascand says.”

RBNZ outlined their expectations as well as identifying several areas that could be improved upon.

Key areas for improvement identified include:

  • Processes for appointments, absences, and reviews to continue with or replace the Appointed Actuary
  • Preparedness for the Appointed Actuary’s involvement in a crisis
  • Identifying and managing conflicts of interest
  • Clarity of delegations
  • Processes for following up recommendations in the Financial Condition Reports
  • Engagement between insurers’ boards and Appointed Actuaries
  • Engagement between the Reserve Bank and Appointed Actuaries
  • Guidance around the Reserve Bank’s expectations of the Appointed Actuary role, including explicit expectations regarding their independence and impartiality

Click here to read full report

In other news:

AIA: AIA Vitality members can donate their weekly AIA Vitality Active Benefit rewards to Trees that Count to plant native trees

RBNZ: Reserve Bank’s Expectations of Insurers and Appointed Actuaries

FSC webinar: 'Money & You - It's not about money, it's about you'


Daily news update: RBNZ fear for insurers and non-bank lenders, and news stories

Adrian Orr has highlighted that the financial system is sound enough to overcome the economic impacts of COVID-19. Although banks have coped well with the pandemic, the Reserve Bank has stated that insurers and non-bank lenders are more vulnerable.

“The Reserve Bank said in the central bank's annual report on financial stability published on Wednesday that banks had coped well with the coronavirus pandemic so far.

But under "severe enough scenarios, the viability of banks would come into question", it warned.

In the event of its worst-case lockdown scenario "initial modelling suggests that, without significant and timely mitigating actions, banks would fall below minimum capital requirements under this scenario," it said.

The Reserve Bank has also cautioned that some other financial institutions that take deposits from the public, and some life insurers, are already more vulnerable.” Click here to read

In other news:

FSC: Advisers more important than ever

COVID-19 exposing New Zealanders’ financial vulnerability

Retirement Commissioner: Collective effort from advisers needed

Take care before jumping on insurance relief, FMA warns

AIA: Fitch runs Covid-19 ruler over industry

EQC apologises for leakage of claims info


DAILY NEWS: Increased interest in digital insurance and more

Consumer behaviour is often fluid. Trends, word of mouth as well as personal experiences play a part in changing decision-making processes and purchasing habits. Similar to other purchasing behaviours, the way people are choosing to purchase insurance is changing. There is an upward trend of people relying on their own research and not seeking advice from financial advisers. Similarly, there is an increased interest in digital insurance providers.  

"Consumers of all ages are adopting a “millennial mindset,” according to Capgemini and Efma’s World Insurance Report 2020. This means that consumers are increasingly trusting their own research to source and purchase insurance products themselves. Customers of all ages are also increasingly turning to digital channels in the face of the COVID-19 pandemic, the report found.

 

“Digital adoption is no longer a function of age; for those with access to the web and social media, researching and directly procuring insurance online has become mainstream across all generations,” Capgemini said.

 

To remain relevant, insurers must shape their existing products to meet evolving customer needs and preferences, the report said."

Furthermore, it is reported that:

“The COVID-19 lockdown will further fuel this trend as consumers are forced to use digital channels for day-to-day transactions, irrespective of age or tech know-how,” Capgemini said. 

In other news:

Advisers haven't done enough to digitise their offering - expert

Air pollution dropped dramatically during lockdown

FSC webinar: Introducing the financial resilience index

FSC webinar: A global response to COVID-19

FSC: Spotlight on Insurance