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MARCH 2020 Adviser groups: Our comprehensive guide Health apps Former surgeon Global diversification uncovered turned adviser in KiwiSaver
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CONTENTS
ADVISER GROUPS
Susan Edmunds’ easy-to follow guide to
what’s on offer with membership of each of
the main adviser groups.
14
HEALTH INSURANCE APPS
22 The underwriting process just got quicker
and easier. Daniel Dunkley gives us the
low-down.
UP FRONT FEATURES
04 EDITORIAL 10 GRTV
Groups face questions about future. Fisher Funds’ Sam Dickie on
their recent awards and performance
05 KIWISAVER achievements.
The benefits of global diversification in
KiwiSaver with Michael Lang. 12 PROFILE
Compliance Refinery’s Steve Burgess
wants to help advisers flourish.
20 NIKKO AM
Portfolio manager Stuart Williams with
his 2020 outlook.
06 NEWS 08 PEOPLE
Generate hack; Faafoi ASSET rounds up the
26
reassures advisers; main people stories
Kloogh in court. from the past month.
REGULARS
ADVISER
PROFILE
28 INVESTMENT COMMENTARY Former surgeon
Is the good financial weather behind us?
Ice Zhang and
30 PRACTICE MANAGEMENT her journey into
advice.
Russell Hutchinson on the unsustainable
IP product.
32 MORNINGSTAR DATA
03
UPFRONT
From the editor
Groups face
questions
about future This provides a real benefit for their adviser
HEAD OFFICE
1448A Hinemoa Street, Rotorua
PO Box 2011, Rotorua
P: 07 349 1920
members, who may find the process of full F: 07 349 1926
licensing in particular too onerous. E: philip@tarawera.co.nz
But it puts a lot more pressure on groups,
too. They will find themselves significantly PUBLISHER
Philip Macalister
more liable for the actions of their adviser
members – and depending on the size of the EDITOR
group, ensuring every member is following Susan Edmunds
the required processes could be a significant
SUBEDITOR
undertaking. Dawn Adams
Spreading the cost of that across all the
adviser members in a way that everyone CONTRIBUTORS
deems fair will be another challenge. Michael Lang, Russell Hutchinson, David
van Schaardenburg, Stuart Williams,
To succeed, groups will need to be able Daniel Dunkley
to show a value proposition that advisers
agree makes sense for their businesses. The DESIGN
groups could have a key role to play in the new Amy Bennie
regime, helping to improve adviser businesses ADVERTISING SALES
and helping them grow and succeed – or, if Amanda Ellery
they don’t adapt, they could quickly become P: 027 420 2083
anachronistic relics from a past the industry is E: amanda@tarawera.co.nz
trying to shake off. SUBSCRIPTIONS
We’ve talked to the groups about what they’re Jill Lewis
up to this issue. The answers were interesting, P: 07 349 1920
although it’s clear there are still questions to be E: jill.lewis@tarawera.co.nz
answered before the new world begins in the ASSET is published by Tarawera
middle of the year. Publishing Ltd (TPL). TPL also publishes
online money management magazine
The next couple of years Good Returns
GoodReturns.co.nz
will be an interesting time for and TMM – The Mortgage Mag
dealer groups. All contents of ASSET Magazine are
copyright Tarawera Publishing Ltd.
The new regime for financial advisers will Any reproduction without prior written
bring in significant changes for them and how permission is strictly prohibited.
Susan Edmunds
they fit into the rest of the industry.
Editor ISSN 1175-9585
It seems likely that the overrides that have
supported many groups will dry up as insurers
respond to Government directives not to pay
volume-based incentives.
What product providers will be willing to pay MOVED OFFICES?
groups to provide for their advisers – and how Make sure you
much – is not yet clear. don't miss an issue
Some groups will find the answer in taking by changing your address.
out a licence for their financial advisers to
operate within, so they do not have to go Go to
through the process of licensing for their own tarawera.co.nz/coa
businesses.
04 WWW.GOODRETURNS.CO.NZ
SPONSORED CONTENT KIWISAVER
By Michael Lang
Is your KiwiSaver
manager diversified?
Michael Lang looks at KiwiSaver asset allocation and discusses the
benefits of diversification.
Over the last decade New increases clients’ prospective returns, or for Australasian shares of around 30% where the
the same level of return reduces their risk. SuperLife Growth Fund, NZ Funds LifeCycle
Zealand shares outperformed – age 0-54 and ANZ Growth Fund sit, to a
global shares by 120%. New WHAT IS THE OPTIMAL maximum of 55% where the Milford Active
ALLOCATION TO Growth Fund is positioned. Funds outside
Zealand shares now trade AUSTRALASIAN SHARES? this range are, on this analysis, sub-optimally
at a premium to their global One way to work out a portfolio’s optimal positioned, most notably the Kiwi Wealth
Australasian share exposure, is to look at Growth Fund – although the Juno Growth
counterparts. volatility (or variance) instead of return. New Fund, Mercer Growth Fund and Booster
Whether your KiwiSaver manager favours Zealand shares will always have a tax-based Asset Class Growth Fund also sit outside
local shares over international ones has been return advantage but this does not always the optimal range. Nevertheless, they may
an important determinant of historic relative manifest itself in superior returns – for have performed well historically. How funds
performance, and if history is any guide, it is example, from 1994 to 1999 international perform in the future will, to a large degree, be
likely to continue to be so. Despite this there shares returned around twice as much as determined by their asset allocation.
is a paucity of research on local managers’ New Zealand shares.
Using minimum-variance to optimise asset Disclaimer: Michael Lang is Chief Executive of
asset allocation.
allocation gives a range of technically superior NZ Funds and his comments are of a general nature. New
allocations – all of which are broadly equal – Zealand Funds Management Limited is the issuer of the
WHY DO MANAGERS FAVOUR NZ Funds KiwiSaver Scheme. A copy of the latest Product
LOCAL SHARES? and shows what is not optimal. The optimal
Disclosure Statement is available on request or by visiting
The basic problem is something called range extends from a minimum allocation to the NZ Funds website at www.nzfunds.co.nz.
home bias. Investors and managers the world
over prefer companies that are listed on their
home exchange. These companies follow Global diversification reduces risk for similar long-term returns1
local laws and regulations, report and are Risk (p.a)2
reported on locally, and raise capital and hold Australasian only Global only
12.6%
AGMs locally. They are therefore easier to
follow than their international counterparts. 12.4%
In some countries a home bias is more 12.2%
than the warm fuzzies. In New Zealand
for instance, the tax regime provides 12.0%
advantages for local investment. For 11.8%
example, Australasian shares are not taxed
on capital gains and New Zealand shares 11.6%
enjoy the benefit of imputation credits, 11.4%
removing the potential for double taxation
on company distributions. Outperformance 11.2%
during the most recent decade has not hurt 11.0%
allocations either. 100:0 75:25 60:40 55:45 50:50 45:55 40:60 35:65 30:70 25:75 20:80 10:90 0:100
WHY OWN Share exposure NZ+Aus Global Share exposure NZ+Aus Global
INTERNATIONAL SHARES? Milford Active Growth Fund 57.6% 42.4% Russell LifePoints® Growth Fund 33.5% 66.5%
Despite this, there are compelling reasons Summer Growth Selection 54.6% 45.4% SuperLife Growth Fund 30.7% 69.3%
to be globally diversified. It rarely makes Nikko AM Growth Fund 47.3% 52.7% NZ Funds LifeCycle - age 0 - 54 29.7% 70.3%
sense to put all your retirement eggs in one ASB Growth Fund 46.4% 53.6% ANZ Growth Fund 29.2% 70.8%
basket. When the New Zealand economy Fisher Funds Growth Fund 44.6% 55.4% Booster High Growth Fund 28.8% 71.2%
faces a regional downturn, as occurred Fisher Funds Two Growth Fund 44.0% 56.0% NZ Funds Growth Strategy 28.5% 71.5%
during the Asian crisis of 1997, it is useful Westpac Growth Fund 41.5% 58.5% QuayStreet Growth Fund 26.4% 73.6%
to be able to draw down on a portfolio of Generate Growth Fund 39.2% 60.8% Generate Focused Growth Fund 25.0% 75.0%
strongly performing global shares. Simplicity Growth Fund 38.0% 62.0% Booster Asset Class Growth Fund 21.8% 78.2%
Whether managers use risk-parity, BNZ Growth Fund 34.4% 65.6% Mercer Growth Fund 19.3% 80.7%
minimum-variance, mean-variance, or the Lifestages High Growth Fund 34.1% 65.9% Juno Growth Fund 16.1% 83.9%
more sophisticated Bayes-Stein or Black- AMP Growth Fund 33.6% 66.4% Kiwi Wealth Growth Fund 2.5% 97.5%
Litterman, the conclusion is broadly the same
– the right allocation to international shares Source: FMA Sept 2019 Fund Updates. 1. Australasian share exposure including listed property. It is assumed listed property
is 50% Australasian, 50% international. Asset allocations at 30 Sept 2019. 2. Risk measured by standard deviation.
05
NEWS
FAAFOI REASSURES
ADVISERS
Commerce Minister Kris Faafoi the FSLAA this year along with some tweaks
to the CCCFA. The other big issue was to get
has promised the financial proposed new conduct legislation through
services sector there will Parliament by the end of the year. The CoFI
bill is expected to have its first reading in
be no more big Parliament later this week.
announcements this year. The conduct regulations were about
bringing banks and insurers up to the same
He acknowledged, at the Get in Shape standards that financial advisers already
Advice Summit, that he had heard "loud and have to adhere to.
clear" that a lot of change had been forced on Faafoi says if he is the Minister of
the sector. Commerce after the election later this year
Kris Faafoi Faafoi says he wants to "finish and tidy up" he plans to focus on financial literacy.
Generate Morningstar: Don’t expect
data another 2019
hacked
Investors are still being rewarded for Over 10 years, default funds returned an
taking risk – but there may not be another average 5.7% a year, conservative 6.1%,
year like 2019 for some time, Morningstar’s moderate 6.5%, balanced 8.1% and growth
director of manager research for Asia- 9.8%. For the year, average annual returns
KiwiSaver provider Generate Pacific Tim Murphy says. ranged from 23.3% in aggressive funds to
says its members' personal The research house has put out its 8.5% for conservative.
latest KiwiSaver survey, which showed
data has been accessed by some of the top performers in the three
“I think it certainly highlights again a
reminder for KiwiSaver members who have
unauthorised third-parties. months were AMP’s KiwiSaver Default
not taken the chance to actively choose
fund, up 0.7%; Generate’s Conservative
The access happened between that the default options are not necessarily
fund, up 2.1%; AMP ASB Balanced, up 2.9%;
December 29, 2019 and January 27, the best place for long-term savings. We’re
Generate KiwiSaver Growth, up 5.2%; and
2020. seeing that now, a far lower return over the
Generate Focused Growth, up 6.6%.
It does not affect members’ Murphy said it had been a good quarter long term.”
investments, which are held by Public for the markets, with the NZX50 up 5.2% He said investors should not get used to
Trust in a separate system. and 30.4% for the year. Australian shares double-digit returns on an ongoing basis
This affects approximately 26,000 were up 23.4% over the 12 months. and should not expect 2020 to be as strong
of the 90,000 members that have He said that default funds were the worst- as 2019.
joined Generate over the past seven performing group in the survey, which “I’m confident 2019 will go down as one
years. Generate has contacted all of highlighted the need for people to make an of the strongest years return- wise for the
its members individually to confirm active fund choice. investment market.”
whether or not their own personal
Kloogh in court
information is among the data that was
inappropriately accessed.
Chief executive Henry Tongue said the
company had taken immediate action
to secure the online application system,
Former financial adviser Barry by person in special relationship and obtaining
by deception.
and is taking further steps to enhance Kloogh, who allegedly ran some He had approximately 2,000 active clients
online security.
"Unfortunately, malicious attacks of type of Ponzi scheme, has in May 2019.
The Financial Markets Authority referred
this nature are becoming more common appeared in court for the first time. the matter to the SFO and assisted the
both in New Zealand and globally, and
The Serious Fraud Office (SFO) alleges he agency in its investigation.
constant vigilance is required. We
defrauded investors of at least $15.7 million. Kloogh’s offices were raided by the SFO
have engaged external cyber security
Kloogh faces representative charges in May.
specialists to advise on our immediate
response to this situation, as well as to of false accounting, false statement by He did not enter a plea and was remanded
conduct a broader audit and testing of all promoters, theft by person in special to reappear on March 12.
of our systems." relationship and obtaining by deception. He Part of Kloogh’s bail conditions include not
also faces individual charges of forgery, theft having any contact with investors.
06 WWW.GOODRETURNS.CO.NZ
Regulation
InvestNow acquires ‘driving vertical
AMP Capital’s integration’
Fisher Funds chief executive
retail business
Bruce McLachlan says new
regulation is creating an
environment in which it is
easier for product providers,
AMP Capital, which has predominantly It has selected InvestNow as the such as fund managers, to
been a wholesale fund manager, investment platform to support direct
has moved its small retail channel investors in AMP Capital’s fund range.
have their advisers in-house.
to InvestNow. Previously retail investors could access Fisher Funds has been growing its
AMP Capital's funds through financial advice team, now at about 15.
advisers and AMP Financial Services. Milford Asset Management is expanding
AMP Capital had $30 million in retail its private wealth offering, planning offices
funds under management and, it is around the country. Pie Funds is also
believed, around 500 investors. building up its wealth team.
InvestNow already has an established McLachlan said there was now less
working relationship with AMP Capital, delineation between fund managers,
offering the full range of retail investment wealth managers, product managers and
funds on its platform. investment advice.
InvestNow was founded by former “The new world of regulation means
AMP Capital head of sales and marketing product manufacturers have increased
Anthony Edmonds. obligation to ensure clients get the right
Bevan Graham, AMP Capital New outcome. It’s easier to manage a client
Zealand managing director and chief outcome when you have got your own
economist said: “This is a great outcome employees selling the product.”
for our retail investors. As a well-regarded But he said clients were also finding
provider with over 19,000 customers, their need for advice was largely unmet in
InvestNow is able to offer a comprehensive the marketplace at present. The market
investment platform and online services for managed funds was still small relative
for our clients, and is well placed to to where it could or should be, he said.
continue to meet the needs of To grow demand, providers would need
direct investors in AMP Capital to invest in the client end and help to
funds on a platform that is build their understanding of the product,
continuously evolving." he said, and how it could be of value
The transition to InvestNow’s to consumers.
platform will take effect from “It’s a natural extension of the growing
Bevan Graham
March 31, 2020. market as well as regulation.”
Let’s work together.
If you’re an Authorised Financial Adviser, as well as industry awards. Which makes
Milford has a new facility that lets you work it an ideal choice for your clients.
with us. It means you can access the Milford If you’d like to know more, please
KiwiSaver Plan on behalf of your clients. get in touch on 0800 662 975 or
As you may know, our KiwiSaver Plan comes wholesale@milfordasset.com
with an impressive track record of returns, A wealth of expertise.
Past performance is not a guarantee of future returns. Please read the Milford Product Disclosure Statement at milfordasset.com.
07
PEOPLE
NZ Funds appoints
adviser-focused principal
NZ Funds has appointed a new principal
Mercer appoints board chair
with responsibility for its advisers. Mercer New Zealand has appointed a when it comes to delivering the best
Rebecca Cottrell will take the role. new chair and non-executive director. investment outcomes for our customers
She will have oversight of the more than 350 It has given Kristen Kohere-Soutar the and clients.
advisers who work with NZ Funds through its chair, after Ross Butler's retirement. “We’re indebted to his unwavering
adviser platform. Chief executive Martin Lewington said commitment to ensuring we hold ourselves
She was previously general counsel and Kohere-Soutar would oversee the business to the highest standard when it comes
corporate secretary to Australian-based Clean continuing to deliver strong outcomes to acting in the best interests of New
Energy Finance Corp, the world’s largest green for stakeholders. Zealanders. We wish him all the best in his
energy development bank. Prior to that, she "In the two-and-a-half years since endeavours,” he said.
was a partner of Goldman Sachs Australia and Kristen joined our board as an independent Kohere-Soutar said Mercer had a strong
New Zealand, and before that, general counsel non-executive director, we have benefited strategy in place to reach its objectives, and
and company secretary to NZX Limited. greatly from her insights and expertise. the board and leadership team was well
NZ Funds said she had a strong "Kristen has held previous directorships equipped to achieve continued success.
understanding of how to build world-class with Foundation North and Whai “As the needs of customers and clients
financial infrastructure for multiple users, Rawa Funds Limited, leadership roles change, we must be nimble and agile
whether they were clients of Goldman with Kiwibank and NZTE, and has iwi enough to adapt. We’re seeing climate
Sachs, members of the NZX or independent affiliations to Ngāti Porou, Ngāi Tahu issues and sustainability as major
financial advisers. and Rongowhakaata. Her experience themes becoming more important to
At NZ Funds she will be tasked with in governance, corporate strategy, New Zealanders. We are proud to
overseeing the continued roll out of stakeholder management and be committed to responsible
their independent financial adviser leadership with iwi among a investing, leveraging Mercer’s local
business platform. number of other areas has and global investment research
"I am excited to be returning to New complemented the skill-set of and management for the benefit
Zealand, to oversee the development and other directors,” Lewington said. of all New Zealand investors,
implementation of what we believe is the “With Kristen at the helm,
including foundations and iwi
leading business platform for financial I have every confidence that
post-settlement entities."
advisers in New Zealand," she said. Mercer will continue to create
"With its financial planning software, Lewington also announced
better lives for New Zealanders.”
technical infrastructure, and adviser/client- the addition of Paula Jackson
He also thanked Butler for his
centric business system, NZ Funds is ideally to Mercer’s New Zealand
service. “Ross’ leadership
positioned to work with large networks of board, effective February 1.
over the past seven
independent financial advisers which is the She serves as a
years as a member
entire focus of the business." director and trustee of
of the board and
She joins other Goldman Sachs alumni at several organisations,
chair has been
NZ Funds, including John Cobb, former Co- including Airways New
invaluable. In this
CEO of Goldman Sachs JBWere, Stephan Clark Zealand and Quotable
time we’ve made
who previously held senior roles in legal and some significant Value New Zealand
compliance and David Haslam, a senior trader achievements
Kristen Kohere-Soutar Limited.
for UBS and Goldman Sachs. All four now hold
senior roles or directorships at NZ Funds.
NZ Funds' FUM rose 30% over the past year
and core profitability 50%.
Familiar face returns to underwriter role at Partners
Chief executive Michael Lang said that Partners Life has appointed a new, which is second to none, and his agreement
was driven by an increase but not unfamiliar, face to fill the role of to step back into the Chief Underwriter role is
in advisers partnering chief underwriter. further evidence of this commitment.
After a number of years in the role of chief "Of course, a lot has changed over the nine
with NZ Funds, a
technical underwriter Clayton Gardner has years since Partners Life began. Clayton
reduction in client
agreed to step back into the chief underwriter is very confident that the fantastic senior
fees and new wealth
role for Partners Life. underwriting team that we have developed
management
"I am personally delighted that Clayton will over those years, alongside our revolutionary
solutions offered for
once again be the public face of underwriting MUM software, will facilitate his plans to make
advisers and their
at Partners Life, and I am sure the many Partners Life the modern template for how
clients.
advisers who have had the pleasure of risk underwriting should/can be delivered.
dealing with Clayton over the years will be Gardner is excited about the opportunity
equally delighted," managing director Naomi to reconnect with Partners' advisers in the
Ballantyne says. way that the chief underwriter role will afford
"As one of Partners Life’s founding him and he is very much looking forward to
employees, Clayton has demonstrated a touching base with you all over the months
Rebecca Cottrell loyalty and commitment to the company ahead, she said.
08 WWW.GOODRETURNS.CO.NZ
Fisher Funds adds
Plus4 adds another adviser experienced faces
Plus4 has added another insurance benefits of belonging to a national Fisher Funds has made appointments to flesh
adviser in the South Island. insurance adviser and broking group. out its top team.
Dunedin adviser Tom West has joined Plus4’s group general manager Peter BNZ’s manager of wealth strategy and
the group. He has 10 years’ experience in Standish said: “Tom is an experienced product Sharon Mackay will take up the role of
the financial services sector. and highly regarded financial services head of third-party distribution.
He established his own company, professional who has established a She was with BNZ since 2011 and was
Tom West Risk Advisers, six years successful practice in Dunedin. Given that previously head of product and marketing at
ago, providing financial risk solutions Plus4 is a cooperative, the only specialist BT Financial.
incorporating the use of life insurance; insurance and financial broking firm who The fund manager has also hired
income and mortgage protection; is a member of the NZ Cooperatives Nilesh Mistry to fill the chief operating officer
disability, trauma and health Association, we are very selective role, which was vacated by Vedran Babic.
insurance; and advice to about whom we ask to join our He has been vice president, head of Asia-
businesses on key person and group. Our members need to Pacific, Japan and China for World Wide
not only have the necessary Technology
group insurance plans. He also
since 2015.
provides advice for his self- experience and expertise but
Before
employed clients about how also share our values. We
that, he
best to structure their ACC are pleased to welcome Tom
spent a
cover so that it complements to Plus4.”
decade with
and works alongside Plus4 now has 50 advisers JP Morgan
their insurances. working from 17 locations Chase &
He said he had joined between Whangarei and Co.
Plus4 Insurance Invercargill. Group
Solutions to members have
provide his no affiliations
clients to any specific
with the insurance
collective Tom West provider.
Nilesh Mistry
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09
GRTV
Who to watch
this year
Fisher Funds’ senior portfolio manager Sam Dickie speaks to
Susan Edmunds about their recent strong investment performance
and 2020 investment approach.
GRTV: WELCOME TO GOOD RETURNS TV.
I'M SUSAN EDMUNDS FILLING IN FOR
PHILIP MACALISTER. TODAY, I HAVE WITH
ME SAM DICKIE, A SENIOR PORTFOLIO
MANAGER AT FISHER FUNDS. THANKS
FOR BEING HERE.
Dickie: Good afternoon.
GRTV: CONGRATULATIONS ON YOUR FUND
MANAGER OF THE YEAR AWARD WITH THE
RECENT GOOD RETURNS AWARDS.
Dickie: Thank you, and thank you very
much Good Returns.
GRTV: WAS IT A SURPRISE?
Dickie: It's always a surprise to get
recognised, but we appreciate it, and it's a
testament to the team and how well it's been
built out over the last few years.
GRTV: OBVIOUSLY, THE MARKETS
HAVE BEEN ON YOUR SIDE FOR A
WHILE, I GUESS. DO YOU THINK THAT
WILL CONTINUE?
Dickie: That's a very good question.
Whenever someone asks me: "Is a correction
imminent?" I always say, "I'm absolutely
certain there will be a correction. I've just got conviction portfolio, and that compares to GRTV: YEAH. I CAN SEE THAT. DO YOU
no idea when or how deep it will be". I think some of our more passive competitors who THINK THAT CORONAVIRUS IS MUCH OF A
if we take a step back to the start of 2019, might have 30, 50 or 90 stocks, so we're CONCERN AT THE MOMENT?
no one expected the New Zealand stock sticking with the same stable from last year. Dickie: The only thing I can tell you for
market to be up 30%, and we certainly didn't GRTV: SO YOU'RE STILL DEFINITELY certain about the coronavirus is no one I've
expect that our fund would be up 42%, so as COMMITTED TO ACTIVE MANAGEMENT AS spoken to knows for certain the outcome of
we roll into this year, there are risks on the THE WAY TO GET THE BEST RETURNS. this thing. History does give us some guide.
horizon as there are every year, but we take Dickie: 100% committed, yes. We look back at SARS, SARS only infected
them one by one, and it doesn't look anything I mean, if we think about our flagship fund 8,500 people, and so far the coronavirus, as
insurmountable right now. and one of our oldest funds, New Zealand of a couple of hours ago, had infected about
GRTV: OKAY. WHERE DO YOU THINK THE Growth Fund, which Carmel set up 21 years 41,000 people, so it is more infectious. The
OPPORTUNITIES MIGHT BE THIS YEAR? ago, if you'd invested $100,000 in that 21 SARS mortality rate was around 10%, and so
Dickie: I think we'll be sticking to our tried years ago, that'd be worth over a million far, if we look at the data we're using, which
and true playbook. We are a super active dollars today. Now, if you'd gone with a is the World Health Organization data, the
fund manager. To give you a quick idea, passive fund manager and just invested mortality rate of the coronavirus is only 2%,
there's 109,000 companies listed globally, in the market, that'd be worth $600,000, so that's a good news thing, and it doesn't
and we handpick 90 of those. In a New which is not to be sneezed at, but that extra seem to be spreading significantly outside
Zealand context, the New Zealand fund that $400,000 of active return is what we think China, and the Hubei province where it
I run, we only have 15 companies in our high our clients really value. originated from.
010 WWW.GOODRETURNS.CO.NZGRTV: WILL IT CHANGE YOUR THINKING deep-dive proprietary research, which we amount of the time, and that becomes quite
AT ALL THIS YEAR DO YOU THINK? really pride ourselves on. If we take Xero, jarring for new recruits and other people we
Dickie: I think coronavirus is one of many for example, that we didn't invest in two talk to because a lot of the people we get
risks that get thrown at us pretty regularly. years ago or three years ago, we do what have got investment banking backgrounds
We're watching it super closely. In fact, in every normal financial analyst does, and we or are very good students or actuaries, for
the last 24 hours, I've spoken to about 15 painstakingly build our Excel models and we example. As you know, Susan, those sorts of
of the companies I have invested in both spend a lot of time with senior management, people are never wrong, so it's quite jarring
in New Zealand and globally to see what but we take it one step further or two steps to realise that it's fine to say, "I don't know".
they're seeing. We do take a long-term view, further, and we spend a lot of time with the What that does is builds a real trusting and
we always have taken a very long-term next layer of management. transparent culture. When you're dealing
view, so unless this looks like it's going to Recently, I was at Xerocon in San Diego with something as uncertain as the equity
be a full-blown pandemic, I don't think that'll in June of last year. And I spent a lot of markets, that's really, really critical.
impact the long-term view we have in a lot of time, over two days, with different layers The final company I mentioned was
these companies. of management. Then we also spent a lot Mainfreight. When I joined two and a half
GRTV: ALL RIGHT. YOUR PERFORMANCE of time with Xero's competitors and with years ago, it was pretty obvious to me what
AT FISHER FUNDS HAS BEEN REALLY Xero's customers, so it allows us to think the economic moat was around, Auckland
STRONG LATELY. HAS ANYTHING more like a business owner than a typical Airport, for example. They're not going to
CHANGED THERE? WHAT'S HAPPENED? financial analyst. build another Auckland Airport anytime
Dickie: I mean, there's three things that GRTV: IS THAT A DIFFERENT APPROACH soon despite what Air New Zealand tells
have not really changed at all. We're still THAN YOU MIGHT'VE HAD, SAY, FIVE you. But when I looked at Mainfreight, it
a specialist fund manager, so all we do is YEARS AGO, DO YOU THINK? wasn't obvious to me what the moat was
manage clients' money, and that compares to Dickie: Me, personally, I wasn't at Fisher straightaway, but as I spent more and more
some of the other competitors in the market Funds five years ago. I mean, it's been similar time with Don and Tim and other layers of
who might be banks or insurance companies to the approach I've always had, and I've management within the business, it became
so that they wear many hats. We only wear always been focused on looking at wide clear to me that the real moat around
the one hat. That's what we are focused on. economic moats around a business, looking Mainfreight's business was its culture.
The second thing is we're still a really active at management, the quality of management, What I mean by that is on the notice board
fund manager, like I said. We pride ourselves looking for, as Charlie Munger would say, of every lunch room globally, they have the
on that globally handpicked 90 companies. "Intelligent fanatics". That's what we really weekly P&L, so it engenders that sort of
The third thing that hasn't changed is we like, people who are feverish and passionate healthy competition.
They pay out 10% of their profits to all
are super focused on beating the market. about their businesses, always looking for
of their team members so that the team
That's what we come to work for every day. long runways of growth and always looking
members feel like they're really enfranchised.
Maybe what has changed, or what we've for pricing power, but I just think maybe
What that does is it makes these guys go
got more of an emphasis on now is building there's more of a focus on that now at
the extra mile for Mainfreight. It makes them
out the team. We've now got 21 investment Fisher Funds.
have better customer service so they can
professionals in the team, and we think GRTV: THAT MAKES SENSE. YOU'RE NOT
charge premium prices. If you have a large
that's the biggest investment team in New WORRIED ABOUT VALUATIONS BEING
position in a company like that, and you really
Zealand. What's key there, we've got about TOO STRETCHED?
admire a company like that, it makes sense
330 years of experience, maybe slightly Dickie: I think we're always worried about
that some of that culture emphasis rubs off
skewed towards a couple of the more senior valuations. It's one element of our investment
on you.
members of the team, but the point there is process, our steep process that Carmel
GRTV: THANK YOU. THAT'S VERY
a lot of the analysts and portfolio managers set up 21 years ago. Headline multiples are
INTERESTING, AND THANK YOU FOR
have got significant offshore experience, stretched. We all know that. I'm sure a lot of
BEING HERE TODAY.
and that's really critical for two reasons. One your listeners will think that as well. I guess Dickie: Thank you very much, Susan.
is to compare and contrast stocks across the only point I'd make there is you've got Thanks for having me.
geographies, and the second one is to deal to look at equity valuations in the context
with the perceived or real, almost weekly of the prevailing level of interest rates, and
crises that are thrown at us these days. when you compare bond yield earnings, yield
GRTV: DOES IT MAKE MUCH OF A gaps, or whatever you want to do to compare
DIFFERENCE NOT HAVING CARMEL equity valuations to interest rates, valuations
FISHER RIGHT THERE WITH YOU? are not super elevated.
Dickie: Carmel's still on the board of the GRTV: WOULD THERE BE ANY COMPANIES
listed investment company, so Kingfish, IN PARTICULAR THAT YOU'RE KEEPING AN
Barramundi and Marlin, and she's still just EYE ON THIS YEAR?
a phone call away. She's been great since Dickie: Yeah, I mean, our favourite
I've arrived two and a half, three years ago. I companies are our largest companies in the
think in Fisher Funds 2.0 post-Carmel, a lot of portfolio, so a2, Fisher & Paykel Healthcare,
Carmel's influences are still there, but we're Xero, Infratil, Ryman, Summerset and
really focused on two or three things. Mainfreight. Mainfreight actually brings me To watch the full interview,
One is building out the team. The other back to the culture point I mentioned before. download an audio podcast or
thing is culture, which everyone talks about, When we think about culture, we like to think to read the full transcript, visit
but I've worked at investment banks and of ourselves as having a high performance
hedge funds in London, Hong Kong, Australia
and New Zealand, and I've never seen such
culture, but a real humble and learning-based
culture. Why that's important is the best fund
goodreturns.co.nz/grtv
a big focus on culture. The third thing is our managers in the world are wrong a surprising
011PROFILE
By Susan Edmunds
Compliance
business
takes off
Changes are coming for advisers but Steven
Burgess wants to help them flourish.
Steven Burgess chose the right the business.” other opportunities.
He said it was now working on an advisory Burgess said there were a lot of “exciting,
time to open the doors of his board for Compliance Refinery to help grow really forward-looking” businesses in the
independent compliance firm, the business further. market that would be dynamic financial
The idea for the firm arose while Burgess advice providers in 10 years’ time, aiming to
Compliance Refinery. was working at AMP as a regulatory and harness the power of technology to deliver
He started taking on his first clients in adviser compliance specialist. He had solutions to clients.
mid-2018, and has since expanded the previously worked at KPMG, where he was But he said there was still a dichotomy – a
business quickly as financial services firms seconded to the FMA, and as a regional lot of advisers still wanted things to be like
of all sizes grapple with increasing regulatory compliance supervisor and compliance they used to be, still buried in paperwork
requirements. He now has a team of three officer in Canada. Burgess said he had and struggling to keep up. Burgess said his
people with plans to hire more staff. moved as far through the ranks at AMP as experience in Canada was that many of the
For financial adviser businesses and he wanted to and was interested in pursuing “old guard” who could not cope with the
advisers, it offers things such as a regulatory pace of change ended up clearing out. “Best
health check, compliance oversight, advisory
board services, education and a plan to take
Support staff practice ratchets up and they can’t follow.”
He said it was an exciting time to be in
businesses through licensing. Burgess said drive most of the the industry and there was a lot of positive
change happening. But the work of starting
he tried to offer a personalised service and
a long-term relationship – not a box-ticking, business. If you don’t the business had been harder than he
anticipated. “I work more hours than I used to
audit-and-forget approach to compliance.
Burgess said the business had been “really know their skill set but I do it much more passionately.”
and their approach
busy” as advisers were faced with increasing Burgess did not expect it to be difficult for
numbers of decisions that they had to make. advisers to obtain a transitional licence. But
It was now dealing with individual advice
businesses, product providers, digital-
you are not going he said many were starting to realise it was
more work than they anticipated to institute
focused organisations and dealer groups. to be able to impart the processes to document procedures.
There were also going to be ramifications for
“We’ve got good breadth across the industry
… it seems to have been a good time to start change. dealer groups, he said.
Some advisers were still hoping that
012
012 WWW.GOODRETURNS.CO.NZ
WWW.GOODRETURNS.CO.NZhad had the best compliance systems, which Consultation had only happened with
As with anything allowed tasks to be automated, freeing up
advisers’ energy to spend with their clients.
financial advisers and product providers, he
said. “I don’t know there’s as much of a client
when you look Burgess said when he went into a business,
he focused on spending as much time with
lens as there should be.”
at technology or the support staff as with the directors.
New Zealand’s sector could benefit
from better use of digital tools, he said.
compliance you need “Support staff drive most of the business.
If you don’t know their skill set and their
Compliance Refinery has been working
with roboadvice providers but they were
economies of scale approach you are not going to be able to
impart change.”
doing more offshore than they were in New
to make it work. If we Burgess was pleased with the regulation
Zealand, he said. “There’s not a huge pickup
in digital advice but it’s going to grow every
being introduced for the sector but said there
can help them take could have been more focus put on clients. day as younger, more tech-savvy consumers
start to access advice and financial services.”
care of this while they A lot of legislation focused on products and
advice he said but clients were then left on He said Compliance Refinery expected
focus on running their own once the advice was given. “I would
have liked it to focus more on actual clients.”
more growth from here, including hiring in
Auckland and elsewhere.
the business, that
works well.
someone would come and “do it for them”
he said. Those who had been AFAs for some
time were more proactive about getting on
with it and adjusting to the new requirements.
He said people could not afford to sit back
and do nothing. If people were planning to be
part of another organisation’s FAP licence
but that group had done nothing about
moving towards a licence, they would need to
take action or find another option.
Burgess said the opportunities for his
business now would come in finding a way
to create economies of scale for smaller
businesses to help them keep up with a
servicing level that was likely to be required
to be higher and higher in the future. “As with
anything when you look at technology or
compliance you need economies of scale
to make it work. If we can help them take
care of this while they focus on running the
business, that works well.”
He said while the FMA had made it clear
that those who wanted to be a one-person
advice firm could do it, his experience was
that it did not remain practical over time. In
Canada, that had led to a lot of consolidation
in the market, he said. “I think some that are
quite savvy will be able to do it but others will
probably struggle more than they think.”
He said there would be benefits for his
business and for clients if it was able to
create efficiencies. “That’s one of the things
we’re working on, to scale that up so the
smaller businesses can take advantage just
as well as the much bigger groups.”
Burgess said one of the advisers he worked
with in Canada had $750 million under
management. “I know groups of advisers
here that don’t have that. Even though
some groups think they’re scaled they’re not
actually scaled.”
He said the most prosperous
businesses he had dealt
with in his career
013LEAD
By Susan Edmunds
Groups
unveiled
Susan Edmunds has produced a comprehensive guide on
adviser groups and what benefits and services they will
offer member advisers.
Big changes lie ahead for the wanted to go under someone else’s licence support them through that.
or take out a licence on their own account. By 2022 the group would be ready to
financial advice sector. But one The almost unanimous verdict was that absorb its members into its licence in time
segment of the adviser space they wanted to have their own licences for for full licensing.
their individual businesses, he said. At NZFSG, advisers would have the option
likely to be particularly affected is It was primarily a matter of wanting to of working within the group’s licence if they
that of adviser groups. retain control, he said. That had been a wanted to, or take their own.
key attribute of the Plus4 group that had Head of growth Bruce Patten said
While the structures of the existing attracted its members. “We have never been advisers who opted for the group licence
organisations vary, all will face significant overly prescriptive in the way they work or could use the advice processes the group
changes as they face the prospect of less operate. The only prerequisite has been that was developing to meet compliance
income, if they currently rely on overrides, they operate in a compliant manner.” requirements. That would mean they
and have to decide just how much If the group was to crack down could focus on business growth
responsibility they’re willing to take for their on members with new rules and – rather than being diverted into
members under the new licensing regime. obligations for them to become developing their own processes to
Some have reported significant growth in part of a new FAP it could lead to meet regulatory requirements.
recent months – Insurance Link has had 28 many leaving, he said. Patten said it was still unclear to
new advisers join in the last year, Foxplan 14, At Newpark, Melanie Purdey many advisers what it would cost
Newpark 140 and new group Wealthpoint has said the business was applying them to run a licensed business.
had 150 transfer from The Association. for a transitional licence, but He pointed to a release
A key question for the groups as they the intention was to use that from Strategi in which it
contemplate the future is whether they period of two years to suggested establishing
will apply for a licence – and whom they work out what being a small financial advice
will permit to operate under it. Transitional a licensed entity provider might cost
licencing is now open for financial advice would mean for the $10,000, then another
providers (FAPs) and full licensing will take business. In that $10,000 a year.
effect in two years’ time. time, members But he said it was
Plus4 group general manager Peter would probably have likely 95% of NZFSG
Standish said his organisation travelled the their own individual members would opt
length of the country talking to advisers licences, too, and to be part of the group
the group would Melanie Purdey
about their options and asking whether they licence. The Australian
014 WWW.GOODRETURNS.CO.NZexperience had shown advisers who started regulated environment.” structures they will pass to advisers and what
off on individual licences then moved to the Insurance Link wanted to be the service compliance and monitoring support they will
safety of the group. provider, he said. provide, if any.
Insurance Link was taking the same The Answers co-op said member “In contrast, Wealthpoint confirmed its
approach, offering members a choice. businesses that chose to be a FAP regulatory strategy and support proposition
“Through the consistency of approach we will be able to use its “business grant in mid-2019 and has already built many of
are able to achieve through our Advice Link programme” that was designed to help with the tools, systems and processes to support
the application. incoming regulatory change. This will ensure
CRM system, we can provide advisers with
At Wealthpoint, chief executive Simon Wealthpoint advisers are well equipped to
consistency of advice processes. Oversight
Manning said the group’s purpose was to transition to the new regulatory regime with
of adviser applications and streamlined
enable its member network by providing an minimal disruption.
audit processes will be saving advisers time “industry-leading business framework so “Our adviser offering also supports
and money.” members can operate sustainable quality business growth by delivering a new adviser
Managing director Josh Bronkhorst said businesses as part of a strong adviser group”. recruitment and support programme
about 80% of advisers had indicated they He said the offering was fully funded and initiatives with key distribution
wanted to come under the umbrella of by Wealthpoint and included FAP licence partners to develop new business lines in
the main licence. “I think for advisers who coverage with the option for self-licensing, member businesses.”
have elected to operate under our branded within a comprehensive compliance Foxplan said it would be the financial
option, for them it’s a lot easier. They want framework including professional standards, advice provider for its adviser members so
the continuation of what we’ve templates, tools and quality assurance they could “continue to do what they love
been doing.” audit functions. doing in front of clients and we give them the
The group had always had a Manning said advisers would want the autonomy to do it better, across a wide range
focus on business growth and comfort of knowing they were in a safe of products and services”.
place where they were compliant and were AdviceFirst was taking a similar approach
professional development,
receiving good guidance. because its advisers are employees. “We
he said. “Advisers want to be
“We see a lot of uncertainty from provide extensive support and career
able to get out and focus
other advisers in the market about progression opportunities. We are also an
on what they enjoy – what regulatory pathway they experienced acquirer of registers.”
getting in front of should adopt. Many other The Lifetime brand also has advisers
clients, not getting adviser groups have not working for its business, focusing on growing
bogged down in acted decisively to indicate that entity and balance sheet, not their own
the day-to-day Josh whether they will hold a advice practices.
operations of Bronkhorst FAP licence, who they At the other end of the spectrum, The
working in a will cover, what cost Adviser Platform, “business in a box” tools will
DEVELOP AND
GROW YOUR BUSINESS
WITH PLUS4 Founded in 2006 on four core principles to create value for:
+ Plus4 Adviser Members
+ Customers of our Members
+ Suppliers and insurance partners
+ The wider Plus4 group of shareholders
Our industry is going through a period of change and
Plus4 Adviser members benefit from the strong culture of
professionalism, collegiality and mutual support to help
negotiate this change.
CHOOSING THE BEST OF THE BEST FOR YOU
THE BEST FOR YOU LOCAL BUT NATIONAL ADVOCACY RELATIONSHIPS
NURTURING ADVISERS THROUGH LICENSING INTERESTED I FINDING OUT MORE ABOUT THE PLUS4 GROUP?
Contact us today: P: 0800 001 921 | E: hq@plus4.co.nz
015LEAD
By Susan Edmunds
be offered to help advisers through licensing, opportunities including online, face-to-face a framework in place to get the structure
to help them grow their businesses efficiently and national conference options. running and then would have to absorb the
and cost-effectively. Foxplan said it would provide daily training ongoing responsibility of meeting licence
“Our platform is designed to give advisers for advisers to get them up to competency conditions and ensuring adviser members
a turn-key licensing solution, so they can levels for all products and services that were, too.
continue to run an independent business it offered Bronkhorst agreed the increased oversight
with confidence, and not be bogged down “Once completed we allow them to plug of advisers who were members of its
by regulation. and play into the Foxplan system – as long FAP would be significant. It would involve
“By providing trained admin staff to take as they swim between the flags, they will be oversight from a head office level, and
care of the bulk of the operational workload, able to operate, offer advice and get paid for audits would be more time-consuming, with
we are freeing up advisers to focus solely on it across a wider range of products than what additional reporting, he said.
servicing their book and growing their client they currently can offer. We then complete Purdey said the way groups operate would
base. Advisers can be strategic with how monthly reviews, and quarterly business have to change. There would be increased
they use their internal support team, without planning sessions depending on the size and pressure on them to meet obligations to
having to employ additional people. We give nature of the adviser’s business.” providers and to work to achieve good
advisers a platform to scale their business The Adviser Platform said it had built its customer outcomes, educating clients and
with confidence and efficiency. CRM from the ground, which gave it flexibility advisers on what that looked like in practice.
“The key to an adviser’s growth over the and security. Support services would have to evolve
next 24 months is time. More time to service “Having a large in-house team of from the odd training day to full compliance
existing clients and also help new clients. developers means we are able to continually coaching and support for advisers, she said
Based on feedback from advisers, we can enhance and refine the system. This is and that would need to be more robust than it
give them at least 10-15 hours a week back critical with the changing requirements in the had been in the past.
via our services. With this time, they can help industry over the next few years.” Anyone who suggested it was not a big
at least 25 more clients a year. For many Newpark had had to work on its CRM to transition was lying to themselves, she said.
advisers, this is as much as 50% increase on ensure it was more aligned with advisers’ But much of the information being given
what they are currently doing. new obligations, Purdey said, and catering out was delivered in very formal legal and
“Our question for advisers is, ‘If you had for advisers who wanted to be able to spend academic language and not easy to absorb,
the resources to run your business and less time on administration and more she said.
maintain a licence with confidence, would on clients. It would pay for or subsidise “It’s being delivered by people who deal
you rather hold your own, or pay to work with compliance oversight and CRM on a sliding with regulation not the people at the coalface
someone else?’” scale for three years and offered group every day.”
The groups have had to develop their buying discounts. She said advisers were under a large
offerings beyond the existence of a licence, Insurance Link would have a full-time amount of stress and their emotional
too. compliance and professional development wellbeing needed to be catered for.
Manning said Wealthpoint would offer a support person. Standish said he was optimistic about the
technology solution – including centralised “Through taking on the compliance new regime because it was customer-centric.
commission management and hosted related activities in the new regime we Plus4 had always been outward-facing, he
Xplan database; an adviser can give advisers back the time they said. “My only concern is that a lot of these
establishment, training and would be spending on these activities; people are suffering from change fatigue.”
professional development valuable time they can spend on revenue That might mean they needed more
programme; access to a generating activities.” assistance and support to minimise business
broad range of suppliers Standish said the collective strength of the interruption, he said. ”I can deal with losing
across all key product Plus4 group would allow it to deliver support members from the group, it’s far more
categories; professional services under the new regime in a cost- difficult to lose them from the industry.”
indemnity cover and other effective manner.
group insurance benefits; “We will continue to seek product provider HOW MANY ADVISERS
and professional support towards greater economies. While HAVE JOINED IN THE PAST
development and there is room for membership growth we will 12 MONTHS?
networking remain selective in our acceptance of new The Adviser Platform: ...................... 54
The Answers: ............... 3 (businesses)
member’s applications.”
Insurance Link: .................................. 28
But all this comes at a cost.
Foxplan: ................................................ 14
Standish said Plus4 had decided to go with
Newpark: ........................................... 140
a service company model, offering a range
AdviceFirst: ........................................... 3
of services to members to support their
Lifetime: ................................................. 5
individual licences.
Plus4: ...................................................... 3
But he said a significant change coming
was that as part of the range of services
being increased significantly, the co- HOW MANY ADVISERS
operative would no longer give profits back HAVE LEFT?
to members. The Adviser Platform: ......................... 5
That gave the group greater financial The Answers: ....................... 1 (adviser)
muscle to put into support services, he said. Insurance Link: ..................................... 3
There would be more need for auditing, he Foxplan: .................................................. 2
said, and the group would either have its own Newpark: .................................................8
compliance person or would partner with a (to other groups) 42 (deregistered)
contractor but either way it would come at AdviceFirst: ........................................... 4
a cost. Lifetime: .............................................. 22
Manning said Wealthpoint had had to put Plus4: .............................................. None
Simon
ManningYou can also read
