IFA - PAA Breakfast Roundtable on Robo-Advice

Thanks to the speakers at the breakfast session this morning on robo-advice. Paul Baldwin, Derek Grantham, Royden Shotter, Barry Read, Binu Paul, and Stuart Auld, and moderator Peter Lee.

Barry Read's and Binu Paul's comments about the actual use of robo-advice systems by customers were in sharp contrast to the expectations of use by some of the other speakers. 

There was some confusion in definition. Some people plainly meant different things when they talked about 'advice' and more clarity came when someone - probably Barry - talked about the difference between full financial plans (rare, later candidates for robo) and the definition of financial advice in the FAA today. 

Lots of talk about the appeal of robos being cost-based which was thoughtfully disrupted by Derek Grantham quoting from some research (qualitative, from a focus group) about Millennials talking about making fund selection decisions. 

Royden Shotter commented that although there is a lot of variation in individuals and circumstances it is worth remembering that there isn't a lot of variation in strategies. Likewise good to note Binu Paul quoting Bill Gates comment that we tend to overestimate change in the three-year timeframe and underestimate it in the ten year timeframe. 

 


Karen Schaeffer Boosts Practical Financial Advice

Karen Schaeffer's address at the financial adviser conference boosted the cause of practical financial advice. This is the answer to the question 'what do I do?' not 'which fund should I invest in?' or 'which insurance product should I buy?' That focus dovetailed nicely with the joint IFA and PAA focus on advice, rather than product. It reflected well on the stated intention of the judges for recognition awards. In discussing the talk afterwards with other delegates I was struck by several things. 

The first was that Schaeffer's business was considered highly niche. In one sense it was, being focused on government employees, many of whom are actually either from overseas, or US citizens destined to work overseas. But in another sense it wasn't: she gave pragmatic, common sense advice, to resolve financial choices that many people face. Her work was focused on those choices, not on product or fund selection. This is the type of financial advice we need more of, according to the kind of work done by, for example, the Commission for Financial Capability.

The second was that some members, typically investment planners, tended to comment on the fee-only nature of her business. Noting that it could only occur because the niche in which Schaeffer operates delivers people to her on a regular basis. Another way to look at that is as an admission of failure. If you are passionate about financial advice you will have to get good at selling the concept of financial advice. I make no apology for including the word 'selling'. My personal definition of good sales is 'helping someone make a choice beneficial to them'. 

The third was that some members, typically my insurance adviser friends, tended to comment admiringly on both the choice to deliver high-level advice fearlessly and without putting it in writing. This must be placed in context - for product selection or fund selection clients I believe clients were referred to others. Those probably document all that. For delegates that liked this approach I think they were thinking along these lines: saying to a client 'you really need to save more' or 'you must pay down more debt' are such good general encouragements that they do not need to document them all.

The address was well delivered, worthwhile, and clearly stimulated a lot of discussion. 


Congratulations to the IFA and PAA on the recent Adviser Conference

Congratulations to the IFA and PAA on the recent Adviser Conference. I enjoyed the conference sessions that I attended (and will blog separately on the presentation by Karen Schaeffer, a financial adviser from Washington, DC) and found the conference as a whole to be well-run and widely liked by the attendees I spoke to. The venue was excellent as well. 


Together Towards Tomorrow

The joint IFA PAA conference has been great so far and I am looking forward to Friday. Here was a quick shot from Oliver Hartwich's talk on the future for New Zealand. Twin themes of educational performance and house prices were both tied back to political organisation and the relative weakness of our over-large councils. 

2016-07-28 09.55.25

Do pop over and visit the IDS stand which Quotemonster is sharing. We are demonstrating the new needs analysis functionality (now available for subscribers to the research service). Alan, Kelly, and I will be at the stand all day Friday. Look forward to seeing you there. But if you aren't at the conference and you would like a demonstration please email me and I shall let you know when we will be nearby and we can demonstrate it to you. 


The IFA and PAA

I spoke with Rod Severn this morning about the plans that the PAA and IFA now have to create a new representative body.

I think this is a good idea, partly, because New Zealand is a bit small for 18 different organisations to cover the interests of consumers, product providers and advisers. I think the interests of providing advice are sufficiently different from those others that I expect some division will remain. But that still leaves eight. To save space I shall use only their initials, in no particular order they are: SIA, IFA, PAA, SIFA, AAA, NZFAA, INFINZ, and IBANZ. Even between them, by some measures, they do not come close to having as members a majority of people that offer financial advice (using the broadest definition of that) because they don’t include most of the roughly 25,000 people that work in QFEs.
 
A new association bringing together the members of two of the largest would be a good start in building a bigger brand that may bring more members, more professionalism, and more consumer trust. More shared resources might allow for all sorts of things: more specialist resources to devote to different advice processes – the unique challenges presented by giving effective insurance advice is my area of interest, of course. As a member (associate) of the PAA I want to see how that can be enabled.
 
It is not given that this will happen. Members must decide to make it happen. Rod told me that the next steps in taking these proposals to members of both organisations are as follows:
 
Reports from the Chairs of both organisations, Bruce Cortesi and Michael Dowling
Meetings in 12 centres around New Zealand to allow discussion
A special general meeting in July

Here is a YouTube video released by IFA and PAA about their recent announcement.