It’s been a frantic year, full of ups and downs, and surprises.
Key people have moved from one firm to another, there’s been mergers, confusion, and when it comes to the regulator’s expectations of the wider financial services industry – clarity.
Here we look at some of the key stories published by RiskInfoNZ during the past 12 months…
January
Before Covid-19 brought New Zealand to its knees, The Adviser Platform’s Ryan Edwards predicted that advisers had a shock coming on 29 June, the date the new financial regime was to start. In the event, as we all know, it was moved to 15 March 2021.
In our January 21 story, Edwards said that while those managing a well-run adviser business probably have little to worry about “…there is a large segment of the market that is good at providing advice, but their back-office systems – from a regulatory perspective – have been lacking when it comes to compliance, data management and record keeping”.
Also in January, Katrina Shanks, the CEO of Financial Advice NZ, reacted to a claim by the Consumer organisation that advisers remunerated by commission will do what’s best for them and not the client.
Shanks said the current commissions model has been reviewed by the Minister of Consumer Affairs, officials, and the sector “…and have all agreed it’s a viable model”.
Shanks also said Consumer had based its comments on an outdated report.
February
Partner’s Life’s announcement of price increases for the self-employed was our most-read story in February.
In a message to advisers, the insurer said its self-employed market segment, which includes sole traders, small business owners and contractors, is disproportionately and adversely impacting the firm’s disability claims experience.
Among the changes it made were raising trauma and mortgage repayment premiums by 12 per cent and life cover went up by 1.05 per cent.
Brendon Neal, CEO of Kepa, started banging the drum over the low number of advisers applying to the FMA for a transitional licence in February. At the time, the deadline to apply was 29 June.
FMA spokesperson Andrew Park responded by saying the regulator was comfortable with the number of applicants and that there was no target number for it to meet.
March
By March the Covid-19 situation was starting to bite, and in response the then Minister of Commerce and Consumer Affairs, Kris Faafoi, agreed to delay the start of the new financial advice regulatory regime from 29 June to early 2021 – and as well know, the date was moved to 15 March.
“It’s important the financial sector focuses as much as possible on supporting its customers as well as its own staff and their families,” said MBIE’s Sharon Corbett in a statement.
According to The Future for Advice report, trends in demography and wealth pointed to a large and growing demand for advice. The report revealed that of the Kiwis looking for financial advice, 34 per cent wanted help with insurance.
“The future looks positive for advisers,” said the report’s authors – Deloitte – adding that older and wealthier people will seek out advisers and that more of them will be women.
April
April was the month insurers pulled out the stops to help clients and advisers alike. The country was in lockdown, and life as we knew it was changing fast. The vast majority of us started working from home and many families began re-evaluating their finances.
Insurers offered numerous ways to help clients keep more money in their pockets with premium payment holidays while at the same time helping the adviser community – some offering to increase remuneration payments.
As tensions started to rise the FMA issued a general warning to advisers not to mislead clients after one adviser published a story in a Chinese language newspaper telling readers to buy health insurance to cover Covid-19 medical bills (emergency treatment and testing for Covid-19 is free in New Zealand) and another adviser sent an email to clients saying they should move their KiwiSaver investment into low risk funds.
“All advisers, in particular registered financial advisers, need to remember their fair-dealing obligations under the Financial Markets Conduct Act,” said the FMA’s Director of Regulation, Liam Mason.
May
In May Nadine Tereora resigned as CEO of Fidelity Life, only to pop up at Partners Life as its Chief operating Officer in June.
Partner’s Life founder and MD Naomi Ballantyne said Tereora will support her as she focuses on the company’s strategy, reputation, and shareholder engagement “…while continuing to help shape the future of the industry”.
The issue of adviser commission claw-backs was raised with the then Minister of Commerce and Consumer Affairs Kris Faafoi during a webinar hosted by Financial Advice NZ in May.
The organisation’s Katrina Shanks expressed concern that clients would cancel policies to save money – due to the economic impact of Covid-19 – and that insurance companies could claw-back payments in the months after government wage subsidies ended.
“The revenue streams of financial advisers have a lag, unlike nearly everybody else,” said Shanks. “And the issue is that government relief packages will come to an end just when financial advisers need them – more than ever. This is the area that I am most concerned about.”
June
According to a survey of 2,000 Kiwis by the Financial Services Council (FSC), of those with life insurance (38 per cent) just half say they have enough cover.
While just under a quarter of those surveyed (23 per cent) used to have life insurance, almost 39 per cent have never had any life cover. That means more than 60 per cent of the adult population is without any life insurance at all.
Richard Klipin, CEO of the FSC, said the research found a strong link between money and wellbeing – with money worries causing stress for most New Zealanders.
The Reserve Bank finally approved the sale of AMP Life to Resolution Life New Zealand, on condition a trust was created to protect policyholders.
In a media statement, the Reserve Bank’s Deputy Governor and General Manager for Financial Stability Geoff Bascand, says it has been reviewing the sale and consulting with the two companies for 18 months to ensure any transfer of business met the bank’s requirements.
July
In July the FMA released details of its three-tier financial adviser class system, calling the levels A, B and C. This caused concern among some industry leaders who figured consumers might value someone with a ‘A’ licence higher than a ‘B’ or ‘C’ licence.
Lawyers at Dentons Kensington Swan said: “You cannot stop the uninformed looking at a provider with a class C licence, and query what they have done wrong, or what inadequacies they have in their systems, that prevented them from obtaining a class A licence. There’s no logic to it, but that’s human nature.”
The FMA addressed the situation, renaming A, B and C as 1, 2 and 3 in November.
Having left her CEO position at Newpark Group in March, Melanie Purdey joined AIA in July as its Head of Aligned Advice – a newly-created role at the firm.
Purdey is an authorised financial adviser with experience in the financial services industry in New Zealand and Canada and reports to the firm’s Sam Tremethick, the insurer’s Chief Partnership Insurance Officer.
August
Partners Life announced it had waived premiums valued at $5 million to help more than 4,800 of its clients with premium holidays.
The firm announced in August that more than 70 per cent of premium holiday customers restarted their payments before their maximum six-month holiday period expired.
Also in August we reported that a Dunedin adviser was ordered to return more than $370,000 to Asteron Life after the Court of Appeal agreed he was not entitled to claim all the benefits paid to him by the insurer.
The Court of Appeal judgment said Peter Taylor had not acted in good faith saying: “He is not able to resist repayment of money he has dishonestly secured because he says he has spent money on a holiday house, two luxury cars, and holidays to the Pacific. For that reason the defence is not available.”
September
Moving from a commission structure for financial advisers to a user-pays model “…could significantly reduce access to insurance advice for customers”, said an independent report from Deloitte on New Zealand’s life insurance sector.
Authors of the report suggested that changing the way advisers are remunerated could exacerbate the underinsurance issue in the country.
Asteron Life announced that the SME market should be on the radar of financial advisers because 20 per cent of small business owners who buy life insurance direct would likely use a financial adviser if they met one.
The firm’s SME Insurance Index 2020 revealed that cultivating referrals and strong word of mouth is the best path to attract new customers, with half of its survey’s respondents saying they would ask a friend, colleague, or family member for a recommendation of an adviser.
October
The big news in October was the merger of Kepa and NZ Financial Services Group.
Announced on 1 October, the formal agreement was completed by the end of the month creating a group of 1,600 members. The combined companies issue $30 million of life insurance premiums and settle more than $17 billion of mortgages a year.
Fidelity Life appointed a new CEO in Melissa Cantell, replacing Nadine Tereora who is now with Partners Life.
Cantell joined Fidelity Life from IAG NZ where she was Chief Operating Officer, and prior to that was its Executive General Manager Transformation.
November
Financial advisers were told in November that the FMA would not make Professional Indemnity insurance compulsory.
“Professional indemnity insurance cover remains an important decision for each financial advice provider to consider, taking into account their own particular circumstances,” said the regulator.
In another merger SHARE and Newpark Group got together, and Southern Cross started offering online GP consultations with ProCare, an offering quickly matched by nib and Tend.
December
In a move some in the financial advice industry called ‘disappointing’ the dominant provider of professional indemnity insurance in New Zealand – NZI – announced it would restrict its PI policy to FAPs with three or more advisers.
“Being without PI insurance is not something I’d recommend,” says Steven Burgess of the Compliance Refinery. “While advisers can be diligent and careful, that doesn’t stop the energetic litigious client trying their luck, and defending those types of claims can quickly run into six figures.”
We also discovered that less than 20 per cent of the adult population seek independent financial advice according to a report by the FSC.
The organisation’s CEO, Richard Klipin, says its Money & You survey delivers a “stark message” to the financial services community about making sure New Zealanders have access to advice.