Research on lack of women in financial advice

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. 


Goodreturns article wrong to be pessimistic on COFI-driven change

Goodreturns has a piece by-lined BusinessDesk which is pessimistic about the outcomes for introducing the Conduct of Financial Institutions reforms. I found the attitude of the article intensely disappointing. Not because there aren't problems, when there plainly are problems. Not for the numbers that were right, or the numbers that were wrong - some are hard facts and some are conjecture, and we are all entitled to share a point of view. Not for the failure to be even handed, although it wasn't: the author is particularly critical of advisers, but the Hayne commission tended to find the biggest problems in direct and vertically integrated channels. 

The main reason I am particularly disappointed is that it fails the standard the industry is being held to: it fails to address what a good customer outcome really is, and consider what the right pathway is to that. Instead it focuses on a few proxy numbers. Minister Faafoi does better because they have a vision of increasing confidence and clarity for consumers. MBIE does better because they consider efficiency as a whole and suitability throughout the product life-cycle as important factors. The industry does better because, contrary to the assertion in the article, they do look at more numbers than just new business. Lots of advisers, managers, owners, and leaders care a great deal about customer outcomes. Only one was quoted, but I could quote hundreds more. There are many differing views among them, interesting views that are actually shaping the future. 

There are progressive parts of the sector that embrace change, and there are others that prefer a risk avoidance strategy. A customer-focused view of industry problems needs to consider the fundamental challenges of writing complex business with a multi-decade time-frame. Those include: complexity, information asymmetry, data availability, equity between customers, and customer engagement. 

Contrary to the viewpoint in the article I think COFI has had a substantial effect already. An enormous amount of work by industry groups has been done to try and understand, guide, and change what goes on inside businesses, channels, and the conversations with customers however they engage, to address the real difficulties listed above - much of it has been work in progress and pre-dates COFI and the conduct review, such as the FSC Code of practice. I track every product change, every pricing change, at least a dozen products that had been unchanged for years have been updated and pricing revised. At least one product line has essentially been abandoned by the industry as a whole.  That might be good - but being un-replaced there is a lot of unmet insurance need. Other changes are not solely conduct driven, but are related, like the acquisitions of bank insurers by specialists and the opening of new channels. There has been more change in the industry in 2019 than anyone thought possible in, say, 2017. 2020 looks like being even busier. Contrary to the pessimism displayed by the BusinessDesk piece few pieces of law or regulatory change can claim such success.

Conduct future contrasts

Insitutions have been given their own version of the contrast between the clarity (but inflexibility) of a prescriptive regime compared to the flexibility  (but lack of clarity) of a priniciples-based approach in Rob Everett's speech to the FSC conference on Wednesday. Philip Macalister has good coverage of this, including the quote from Everett, CEO of the FMA, at this link. .

I invite you to make a further contrast with the case of Southern Response Earthquake Services Limited versus Dodds. You can read the details at this link. Papa draws attention to the desire to work with clear rules, rather than a broad duty, with this time, the government being on the rules-based side of the argument.

My personal preference is for a principles-based regime, provided it stays that way, and regulators and insurers stick to principles - and don't gradually develop a shadow rule book which means we end up with the worst of both worlds. 

Who is selling junk insurance?

Insurance products called "harmful", "worthless" and "extremely poor value for money" by Australian regulators are being sold in New Zealand according to this report by Nikki Mandow, posted on Newsroom. Mostly, these are policies are general insurance offered by finance companies, and a few banks, on credit card and vehicle finance debt. Although the article also mentions home loans, most bank cover for homeloans is much better than this - I know, we research the mortgage cover a lot. None of that would fall into the low claims rates and high claim disputes of the junk insurance examples given in the article. 

A recent report by ASIC states that some of the consumer credit insurance policies are more likely to harm consumers than protect them. In the UK customers received substantial compensation after investigations into protection insurance sold. ASIC is likely to take action to recover more than A$100 million back for customers for the same reason. Click here to read more. 

My piece on goodreturns which covers this can be found here: link

Why is this interesting? I think it draws consumer attention to the discussion about quality of cover. That is a useful shift for two reasons. The value of financial risk transfer is something that I take for granted - not everyone does - so I like that. The value of any given policy, if its a battle about how good that is, or how suitable that is, is a great conversation to have with a client, and likely to lead to them choosing better cover, and to improve the industry over time. 


AMP Life sale hits issues - updated

Release from AMP, 15 July 2019:

AMP Limited today advises that the transaction for the sale of AMP Life to Resolution Life is highly unlikely to proceed on the current terms.

This is due to the challenges in meeting the condition precedent for Reserve Bank of New Zealand (RBNZ) approval.

The failure to meet this condition precedent is exceptionally disappointing as the sale of AMP Life is a foundational element of AMP’s strategy.

Capital position and interim dividend expectations

While the 1H 19 accounts are yet to be finalised, AMP expects to report a Level 3 eligible capital surplus above minimum regulatory requirements and in line with Board limits for target capital surplus.

Given the uncertainty around the AMP Life transaction, the AMP Board expects to continue its prudent approach to capital management and anticipates that an interim dividend will not be paid for 1H 19.

Click here to read the full press release: Download 15 July - AMP Life sale and interim dividend update

The release is comprehensive and well worth a read. Probably AMP and Resolution made what was a reasonable assumption at the time that the exemptions AMP enjoyed would be extended to Resolution. The tougher line being held by RB is also logical, given the increased scrutiny being placed on the sector and recent events. I expect that some sort of accommodation, perhaps to share the costs of the requirements of the RB, can be struck with Resolution Life. The whole situation speaks loudly of regulators and being more prepared to exercise their supervisory powers. 

Susan Edmunds story on this, at 

Tamsyn Parker has a story on this too, at 

Behaviour change

My latest piece in the insurance section of goodreturns highlighted the challenges of helping consumers resolve conflicts in their priorities. Philip Macalister just dropped me a line to share his latest Goodreturns TV piece, an interview with Tim Noonan of Russell Investments. Noonan was talking about the need to help customers make behaviour changes too - particularly around spending - which is the big overarching priority challenge in financial planning: consumption now versus later. It is exactly the same issue for many clients when contemplating the purchase of insurance. The reduction in the regulatory boundary between giving insurance advice, investment advice, and giving financial planning advice is one of the best features of the regime. It contains an opportunity for better conversations to be had. Do check out the interview with Noonan, which contains much of interest even if you are not an investment adviser.