Covid 19 Survival guide for advisers - Trustees Executors' increasing brand awareness SHARE's FAP plans - Good Returns
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Trustees Executors'
increasing brand
awareness
SHARE's FAP plans
APRIL 2020 | WWW.GOODRETURNS.CO.NZ
Covid 19
Survival guide for advisers
Life insurer
of the year
ANZIIF
ANZIIF Life Insurance Company ANZIIF
Life Insurance Company
of the Year Life Insurance Company
2019
of the Year of the Year
2017 2018
We’re proud to be ANZIIF’s New Zealand Life Insurance
Company of the Year for a record-breaking third time in
a row. And we couldn’t have done it without you.
So, thanks. Thanks for helping us protect our
customers’ way of life, and for all your ongoing support.
Let’s do it again next year.
Learn more at advisers.fidelitylife.co.nz
Trustees Executors' future
advice plans
SHARE's FAP plans
CONTENTS
APRIL 2020 | WWW.GOODRETURNS.CO.NZ
COVID-19:
18
HOW TO GET THROUGH
Susan Edmunds brings you expert opinions
on reassuring clients; how well-placed the
industry is to withstand this event; embracing
technology for remote working and more.
UP FRONTCovid 19 FEATURES
Survival guide for advisers
04 EDITORIAL 06 OPINION
Good things come out of bad. KiwiSaver fossil fuel ban motivation
with Claire Matthews.
05 KIWISAVER
The debt of gratitude owed to Sir Michael
Cullen.
12 PROFILE
Ryan Bessemer and his ambitious
plans for Trustees Executors.
14 GRTV
Aleksey Mironenko talks EM and
Premia's Asia-focused ETF's.
16 GROUPS SPECIAL
REPORT PART TWO
08 NEWS 10 PEOPLE The finish line is in sight for groups in
the new licensing regime.
Virus delays new ASSET rounds up the
regime; Partners'
commission changes;
main people stories
from the past month.
22 NIKKO AM ARTICLE
Newpark's U-turn. Fergus McDonald with a focus on fixed
income during the current climate.
REGULARS 24 INSURANCE ADVISERS
Daniel Dunkley's virtual interview with
28 INVESTMENT COMMENTARY advisers on business during lockdown.
David van Schaardenburg is turning the
heatmap on KiwiSaver funds.
30 PRACTICE MANAGEMENT
Navigating and adapting through the
Covid-19 insurance world. 26
32 MORNINGSTAR DATA
ADVISER
PROFILE
Susanna Stuart
on her 30 years
as an adviser.
03
UPFRONT
From the publisher
Good things
Trustees Executors' future
advice plans
SHARE's FAP plans
APRIL 2020 | WWW.GOODRETURNS.CO.NZ
come out
of bad HEAD OFFICE
1448A Hinemoa Street, Rotorua
Covid 19
Survival guide for advisers
Getting this issue of ASSET to flexibility it provides, plus it’s likely to help PO Box 2011, Rotorua
them reduce expenses. P: 07 349 1920
you has been a challenge as we F: 07 349 1926
E: philip@tarawera.co.nz
headed into the Covid-19 level SHAKING UP DEALER GROUPS
While all this has been going on there has PUBLISHER
four lockdown. Philip Macalister
also been significant happenings in the life
This month we have looked at the insurance sector. Partners Life has, again, EDITOR
pandemic and what advisers can do to help rattled the cage, and changed the way it is Susan Edmunds
clients. paying commissions.
The financial services sector has been Stopping override commissions to dealer SUBEDITOR
Dawn Adams
given “essential business” status, however groups is to be applauded. Likewise, moving
advisers, while deemed important, didn’t that sum of money from dealer groups to CONTRIBUTORS
quite meet the threshold as an essential advisers (via their financial advice provider), Michael Lang, Claire Matthews, Fergus
service (interestingly news media did). and paying it on customer outcomes is McDonald, David van Schaardenburg,
Russell Hutchinson
While not officially essential I would argue exactly what the regulator has asked for.
it is vital that advisers are working and The genesis of the dealer group model is DESIGN
looking after their clients. steeped in commission history. In the early Amy Bennie
Getting information out to them; days they were established to aggregate Samantha Garnier
answering questions and helping put clients commissions. This aggregation led to bigger ADVERTISING SALES
at ease is a high priority. pay-outs from insurers. Amanda Ellery
Being a glass half full sort of guy I am With the advent of the new FAP model P: 027 420 2083
expecting some good things will come out dealer groups were always going to have to E: amanda@tarawera.co.nz
of this crisis; one of those is the value placed revisit their business models. Some have SUBSCRIPTIONS
on good financial advice. been doing this; others appear to have had Jill Lewis
KiwiSaver is a major area of concern as their head in the sand. P: 07 349 1920
thousands if not tens of thousands Some seem to think Partners' move is E: jill.lewis@tarawera.co.nz
of members switch to conservative sudden, yet it has flagged its concerns ASSET is published by Tarawera
funds. many times in the past. Publishing Ltd (TPL). TPL also publishes
Hopefully, the Ministry of Business, The challenge has been laid down to online money management magazine
Innovation and Employment are other life insurers. Will they take it up? Good Returns
GoodReturns.co.nz
watching to see how default providers and TMM – The Mortgage Mag
have operated in this tumultuous
time and will take this into All contents of ASSET Magazine are
consideration when they copyright Tarawera Publishing Ltd.
Any reproduction without prior written
issue default licences next permission is strictly prohibited.
year.
In my mind this event ISSN 1175-9585
will trigger changes
This magazine has been designed using
in how we operate in resources from Freepik.com
the future. One of the
biggest will be the use Philip Macalister
of technology like video Publisher MOVED OFFICES?
conferencing. Another
will be remote working. Make sure you
My guess is that don't miss an issue
corporates will learn by changing your address.
what is possible and Go to
start to embrace the tarawera.co.nz/coa
04 WWW.GOODRETURNS.CO.NZ
SPONSORED CONTENT KIWISAVER
By Michael Lang
Our $100 billion
debt of gratitude
Sir Michael Cullen: The man who helped New Zealanders make better financial decisions.
Every now and then someone
comes along who, in their lifetime,
puts in place changes which
touch not only everyone in their
generation, but generations to
come. Sir Michael Cullen is one
such person.
In 1898, the government of Richard Seddon
introduced a means-tested “old age pension”.
This pension was available for people 65
and over and was worth around one-third of
the average wage. This pension, like most of
the later changes, was funded out of current
taxation rather than through a separate
investment fund. Subsequently, the age of
eligibility declined to 60 and the pension as a
percentage of the average wage increased.
However, those who were fortunate enough
to be employed by a responsible employer and share market booms and subsequent entity (PIE) tax regime, which restored
– like my father whose employer was the busts, and the gradual decline of the equality of capital gains tax between
Auckland Hospital Board – could contribute superannuation industry. No one was investing individuals and professionally
a portion of their salary to a superannuation interested in offering professionally managed managed portfolios; the creation of the New
fund which paid either a lump sum, or an retirement funds because of the 33% tax rate. Zealand Superannuation Fund – now a world
annuity for the rest of their life based on a Those with property or share management class sovereign fund manager; and KiwiSaver
percentage of their final salary. skills got wealthy, while regular savers through which New Zealanders have already
Life in New Zealand was good. But over the got penalised. At the same time the age
amassed $57 billion.³ Despite poor historical
course of a generation things were to reverse. of eligibility for NZ Super rose to 65 and
decisions, one person managed to put New
Many financial commentators cite the high the payment fell to 33% below a “no frills”
lifestyle. Zealanders back on track.
inflation of the 1970s, the debt taken on to
In 1992 – a year after Australia introduced We all have a role to play in continuing to
pay for “think big” projects and the decision
compulsory superannuation contributions build on Cullen’s legacy by ensuring that
to remove the tax deduction for private
superannuation payments, as the cause of for all its citizens – New Zealand formed New Zealanders continue to make the best
our nation’s reversal in fortune. But it was the Todd Taskforce to question whether possible financial decisions. The upcoming
only the first in a series of extraordinarily poor compulsory retirement savings should selection of default KiwiSaver managers will
financial decisions that led to our current also be adopted by New Zealand. Headed be a significant step on the journey toward
predicament. by Auckland accountant Jeff Todd, they becoming a more financially prosperous
Over the course of several decades, concluded that a compulsory superannuation nation. It is sad to hear that Sir Michael Cullen
successive New Zealand governing parties option would be “an over-reaction to averting is unwell. Our thoughts go out to him and his
decided that individuals who were able to a future fiscal problem”.¹ It is arguably one of family.
directly manage investments in property or the worst financial decisions New Zealand
the shares of listed or unlisted companies ever made. As a consequence, the average Source: FMA 2019 Annual KiwiSaver Report, New
Zealand Superannuation Fund 2019 Annual Report.
should pay no capital gains tax. Meanwhile Australian citizen now has around $145,000²
1. Todd Taskforce 1992. 2. Australian Bureau of
those individuals who relied on others to in superannuation savings. New Zealand’s Statistics, 2017-2018 balances. 3. FMA 2019 Annual
manage their money were forced to pay average KiwiSaver balance has just hit KiwiSaver Report.
full corporate tax rates of around 33%, $19,500.³
irrespective of which personal tax bracket In the 2000s, Michael Cullen (now Sir Disclaimer: Michael Lang is Chief Executive
they were in. Michael) changed all of this with three of NZ Funds and his comments are of a
This contributed to the eighties property farsighted decisions: the portfolio investment general nature.
05
OPINION
By Claire Matthews
KiwiSaver
funds fossil
fuel ban:
political or
ethical?
New Zealanders should not have to worry about whether
their retirement savings are causing the climate crisis.
New Zealand’s announcement fossil fuel investments applies to new default to choose.
providers appointed next year. As of January this year, there were
of a fossil fuel ban for default But it will have broader impacts because three million people enrolled in KiwiSaver,
KiwiSaver funds from mid- about 600,000 current default members – New Zealand’s national workplace-based
about 23% of New Zealand’s workforce – and retirement savings scheme. 1.3 million
2021 has left many questions their investments will be moved across of those people joined the scheme
unanswered – including whether to the new funds. through automatic enrolment and
were initially placed in default
it is appropriate for governments HOW TO DEFINE FOSSIL funds – but despite the intended
to make ethical investment FUEL INVESTMENTS temporary nature of these funds,
Detailed rules have not been nearly 600,000 KiwiSaver members
choices on behalf of hundreds of released yet, but the wording remained. This represents an
thousands of people, who already suggests a narrow definition of increase of 2% over a year earlier,
investments that will be excluded, according to figures from the
have that option. limited specifically to fossil Inland Revenue Department.
Climate change minister James Shaw fuel production. At the end of
described the decision as “putting people and At this stage, similar December 2019, $65.7
the planet first”. schemes internationally, billion was invested
KiwiSaver is a voluntary retirement such as the US 401(k) in KiwiSaver.
savings scheme for people in employment, plan or the UK’s NEST Assuming that the
to which the Government makes an annual scheme, do not have average balance
contribution. People who join KiwiSaver rules but offer is the same
ethical funds for Claire for KiwiSaver
without actively choosing a fund are
their members Matthews members in
allocated to default funds, and the ban on
06 WWW.GOODRETURNS.CO.NZ
default and non- fossil fuel ban on financial
default funds, this
would put the funds
performance from the
default funds. The Government
managed in default
funds at $13 billion.
ETHICAL has not provided a
CHOICES VERSUS
The first question
is simply how fossil
POLITICAL MOVES convincing argument
fuel production is defined. It
When announcing the
fossil fuel ban this week, for why it should
obviously includes oil companies,
but does it also cover the distribution
the Government argued
that the ban could benefit
be making ethical
and sale of fuel, which would capture
transport companies and entities such as
KiwiSaver members, pointing to the New
Zealand Superannuation Fund’s adoption
investment decisions
fuel distributor Z Energy? Does it include
the financing of fossil fuel extraction and
of a climate change investment strategy
in 2017 without negative impacts on
for KiwiSaver
production, which could impact the big
Australian banks?
financial performance. members.
But this is not an accurate comparison.
The final definition will have a substantial The superannuation fund’s strategy is tool that allows individuals to select
impact on what investments are actually a broader targeted divestment of high- investment options matching their values
excluded under the ban. risk companies. and interests. Sorted also offers information
It is difficult to assess the impact on the about ethical KiwiSaver funds.
ETHICAL INVESTMENT KiwiSaver funds’ financial performance The Government has not provided a
A related question is why the ban without the detail of the ban. A bigger convincing argument for why it should be
should be limited to the production of question is why the Government should making ethical investment decisions for
fossil fuels. With fossil fuels described exercise any form of ethical judgment on KiwiSaver members. Like all KiwiSaver
as a leading cause of the climate crisis, behalf of default members? The default members, default members have the ability
it would seem appropriate to also target schemes were designed as a temporary to move to a non-default fund that offers
users of fossil fuels, such as airlines and holding fund until members make an active a responsible investing approach. The
car manufacturers. choice about their preferred fund. decision to restrict the ban to fossil fuels
A complicating factor is that fossil fuel Members with particular ethical views and the lack of detail suggests it is a political
activities may be only a part of a company’s have always had the option of moving action, rather than a fully considered ethical
operations. At what level does the extent to another fund that better aligns with policy.
of fossil fuel business require that the their values and interests. Mindful Money
company be included in the ban? reports there are currently six providers Claire Matthews received funding from
Another question is why fossil fuels have offering 19 KiwiSaver funds that have the Ministry of Business, Innovation and
been singled out. If the Government is going a fossil free policy. It also identifies Employment for a report on KiwiSaver
to get involved in making ethical judgments funds that are weapons free, sin free withdrawal provisions in 2019. Claire
for KiwiSaver members, why restrict it to or offer higher environment, social and Matthews is a fellow of Finsia, a certified
only some types of ethical concerns? What governance standards.
member of the Institute of Finance
about the other “sin stocks”, such as alcohol For those interested in exploring
Professionals NZ, a research associate of
and tobacco? investment options that align with their
ethical position, the Responsible Investment the Westpac Massey Fin-Ed Centre and a
Association Australasia offers an interactive member of the Institute of Directors.
A complicating
factor is that fossil Amount of KiwiSaver Funds Invested in Areas of Concern
fuel activities may $1,621M Animal
Testing
Palm Oil $11M
be only a part
0.2%
34%
GMOs
of a company’s Human Rights & $150M
$772M Environmental
3%
Violations
operations. 16%
Weapons
Where does
your money
Tobacco
0.4%
$17M
$166M go?
4%
Alcohol $489M
A true ethics-based approach would 10%
require default providers to sign up to the $1,262M Fossil Fuels
27% Gambling $254M
United Nations’ principles for responsible 5%
investment or to seek certification under
the Responsible Investment Association
Australasia programme. These sectors represent 7.2% of total KiwiSaver funds.
The Government announcement included
other changes, such as a move from This data has been compiled by Mindful Money from the portfolios that each KiwiSaver fund has filed with
conservative to balanced funds, to improve the Disclose Register to September 30, 2019 and Mindful Money analysis of funds within these portfolios.
long-term returns for default members. But
there is uncertainty about the impact of the
07
NEWS
Covid-19 Partners Life changes
delays commission model
new Partners Life is set to pay override
commissions to advisers, not dealer groups.
These payments, and fixed dollar
commissions are too high and can
incentivise poor adviser conduct.
“We want to demonstrate that commission
regime
marketing support, will stop on July 1. can incentivise good adviser conduct.”
Instead the life company will pay overrides Adviser Jon-Paul Hale said dealer groups
to FAPs and payment will be made based would have to start charging their members a
on customer outcomes including: initial fee if they were to survive.
advice and replacement advice process; Another, Tony Walker, said: "The old world
The Government is working cancellation advice; non-disclosure and (and possibly new) where dealer groups
on delaying the start of the misstatements; service activity; and tended to supply aggregation of product and
customer advice complaints. possibly a few additional services did not
new licensing regime for “We are redirecting all previous over-riders take responsibility for the advice. They were
financial advisers. It will now and fixed dollar support payments into FAP supported by providers for productivity.
over-riders (FAPOs) which will be payable "The new world is very different and I
not begin until at least March. to FAPs.” believe that providers will support FAPs who
The new code of conduct will take These overrides will be based on the demonstrate that they are acting as such,
effect at the same time. bonus commissions earned by the advisers ensuring compliance by offering a decent
All advisers had previously been within the FAP. “This financially aligns the raft of what is required of a FAP to their
aiming for a deadline of June 29 to interests of advisers and their FAPs with members ... Whilst some 'dealer groups' have
apply for a transitional licence. customer outcomes.” indicated that they will become FAPs I am
Financial Advice New Zealand chief Partners Life managing director Naomi not convinced that all will have the ability to
executive Katrina Shanks said the Ballantyne said the changes were about who fulfil their obligations in a manner I believe
“extraordinary circumstances” of the received the money, rather than the quantum will be required. In my opinion a FAP should
Covid-19 pandemic and the requirement the company pays out. be very careful on who is permitted to be a
for advisers to work through how they “It is the same amount of money in the member within it. The old world of packing
were going to operate after June would system,” she said. “The difference is whose the numbers to increase volumes and margin
put “enormous pressure” on them when hand it goes to.” is gone. For providers to have the confidence
they needed to focus on their clients. In the past money had gone to dealer that their products are being advised on
“It is vital financial advisers are able groups but hadn’t been used in the way it correctly they will need that level of comfort
to focus on providing professional was intended, she said. Under this model the to be displayed by the FAP in question. Small
services to their clients and supporting adviser would make the decision of how to FAPs can easily do that but I am not sure
them through the implications of spend the money to grow their business. how cost efficient that will be. Large FAPs will
volatile markets, insurance support Ballantyne said the changes are being struggle unless they have solid procedures
and advocacy, and mortgage advice made in response to pressure from and support in place. Dealer groups simply
without the distractions the licensing the regulator. offering a few added benefits will not cut
process entails,” she said. “The regulator thinks that upfront the mustard."
Financial services ‘essential’, advisers not
Financial services have custodians; among others. to operate over the coming weeks and
“We encourage industry to advise also reassure them they can continue to
been confirmed as among the customers and investors how it intends access their funds. Firms are best placed to
“essential services” that will be identify the services essential to maintain
allowed to continue to operate operations and financial stability,” the FMA
said in an update.
when New Zealand is at level four Financial advice is not among the
in its response to Covid-19. "essential" services and advisers will not be
able to open their offices.
The Financial Markets Authority
said it expected that the “essential” "Our expectation is that most advisers
financial services allowed to continue should be able to work from home, with no
would include banks; NZX and broking need to staff offices. This means advisers
services; payment and settlement system can continue to provide support to clients
providers; funds management; insurance without compromising the Government’s
services; administrators; supervisors and social distancing objectives."
08 WWW.GOODRETURNS.CO.NZ
Newpark changes Insurers put
freeze on
its mind redundancy
Newpark Financial Services has done a group would be in catch-up mode. cover
U-turn and decided to become a financial "We still want advisers to become their Cigna, Partners Life and Fidelity Life
advice provider. Previously the group said it own FAPs, and we will continue to help them have stopped selling redundancy cover.
would not be a FAP and encouraged its 450 do so. There is now a need to review this All would honour policies for qualifying
members to establish their own FAPs. strategy and be flexible and look to offer claims for customers who already had
The decision followed Partners Life's a FAP to advisers sometime in the future. the policies in place.
announcement on override commissions. The flexibility of this is advisers can choose Partners Life Managing director Naomi
Newpark's new chairman Bernie McCrea to still be in their own FAP but others will Ballantyne said, while it would honour
said it was a change in strategy. If the group want to, over time, come together under claims on those policies that already
relied on override commission “the lights will a structure that meets the needs and had redundancy benefits in place, it
get turned off”. objectives of advisers, regulators and our did not want to encourage people to
But many members have already applied business partners.” start buying the cover in large numbers
for their own licence and McCrea said the Meanwhile, chief executive Melanie because they were fearful.
Purdey has resigned. Purdey, who joined the Ballantyne said the impact of
dealer group in April last year is the second coronavirus was a non-quantifiable risk
chief executive to resign from the group that could not be priced in so sales had
within 18 months. been stopped for now.
"I have been privileged to have learned Because it was quite an expensive
so much from my tenure at Newpark, and option, there were not large numbers of
most especially from the relationships customers with the cover, she said.
we have started to build. The support
and feedback from advisers has been
humbling. I am pleased to know I
have made a difference for so many,"
Purdey said.
"It has become clear to me that
the vision the board and I share for
Newpark as to the quantum of change
required in the areas of conduct and
culture moving into the regulated
future is disparate to that of the
shareholder/s and meaningful
influencers at Newpark."
Bernie McCrea Naomi Ballantyne
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.
09
PEOPLE
Newpark appoints Nikko
new leader regains
familiar
Newpark head of home loans no plans to step back into the business,"
he said.
Andrew Scott has taken over Scott's main priority is to ensure that
as acting general manager advisers in the group are getting prepared
face
to get their transitional licence. "The
following the departure licence for the home loans company
of former chief executive was granted on March 13, but given the
length of time it took for the FMA to
Melanie Purdey. process I have concerns that
not all advisers will be set
Scott said he was Nikko Asset Management has
by the due date. The next
in the role for "the
step will be educational appointed two research analysts
foreseeable future".
to keep them within
Founder and major the eight duties and in its New Zealand equities team.
shareholder Darren obligations side lines
Gannon "is not in Owen Batchelor and Tim O’Loan will
as a newly minted
the office and has join the Auckland-based company in
FAP." early April.
Batchelor joins Nikko AM with over
seven years’ experience in equity research,
most recently as vice-president, equity
research at Jarden, a leading investment
and advisory group. Prior to that he was
equity research analyst at Woodward
Partners, a boutique corporate adviser and
research house.
O’Loan is returning to Nikko after a stint
at BNZ as a senior investment analyst.
Prior to that he held the position of fixed
income analyst at Nikko AM for over six
years and has also held positions at NZ
Superannuation Fund and ING Wholesale
and Institutional Investments.
“It will be great to return to Nikko AM
and be part of a highly experienced and
skilled team. I’m looking forward to the
opportunities and developments it will
bring,” O'Loan said.
Andrew Scott Owen Batchelor
010 WWW.GOODRETURNS.CO.NZAndrew Gunn Kepa fills
standards role
takes new role Strategi facilitator Sue Grant
has joined Kepa to assist
with the development of
Financial Advice New Advice New Zealand. He will become its professional standards
Zealand’s learning and
strategic partnership manager with IFSO. framework. The role is to set,
Gunn said he had been approached by
development manager the IFSO scheme and knew Karen Stevens educate and maintain standards
is moving to a new role
through his work with the associations. of professional practice for
IFSO wanted to hire someone with
at the Insurance and knowledge and understanding of the new financial advice.
financial advice regime, he said. Grant brings a wealth of knowledge and
Financial Services It was a senior position with expertise across financial services.
Ombudsman Scheme. the scheme, which was Grant will contract to Kepa to assist with
attractive, he said. the development and implementation of
Andrew Gunn has been “It’s not that I’m unhappy professional standards as a FAP licensee in
involved with financial with my role here so it the areas of lending, personal insurances,
adviser associations for was a difficult decision business insurances, investments and
seven years, first with the to leave but it’s an KiwiSaver. Together with Kepa’s policy
IFA and then Financial opportunity to step up.” manuals, these will provide the basis
of the FAP licensee expectations and
control environment.
Kepa chief executive Brendon Neal
said: “With Sue’s expertise, we will
receive assurance that the Kepa learning
and development material achieves
the standards required by the Code
of Professional Conduct for Financial
Advice Services and are thrilled that Sue
has joined us at this critical point to give
Andrew Gunn Kepa and our advisers even more expert
support.”
Asteron makes
changes to support
advisers
Asteron Life has announced professional standards.
He will lead Asteron's support for FAPs
two changes to their and financial advisers to help create strong,
leadership team to help resilient adviser businesses that can seize
the new opportunities emerging.
support advisers with the Crush Huston has been appointed
industry changes. as Asteron's new regional manager for
Northern. Huston has been with Asteron
Kevin Turnock
has been Life for almost three years and was
appointed to the previously a relationship manager for ACC,
newly created holding various roles for over 15 years.
role of national Huston is looking forward to continuing
manager to develop relationship partnerships with
Crush Huston advice and Asteron's advisers.
If you're looking to recruit go to www.goodreturns.co.nz/jobs FIND YOUR IDEAL CANDIDATE
011PROFILE
By Susan Edmunds
Building trust
in Trustees
Executors
Ryan Bessemer is ambitious in his plans for the
future for the trust company – and wants to
shake up the provision of advice.
Trustees Executors chief In Australia, there were more big players in efficiencies so we can concentrate on client
the financial services market, while in New management and needs."
executive Ryan Bessemer is Zealand the big four banks were dominant. Between $5 million and $6 million had been
hoping better use of technology "Similar dynamics but a bit different," invested into the business in the past couple
Bessemer said. of years, he said.
will lead to a more financially He said the industry was more open in In 2018, Sterling Grace bought out the
literate and educated future for New Zealand. "I find that the industry and minority shareholders in Trustees Executors
the people in the industry are available to for $4.9 million, valuing the company at $94.4
New Zealanders. talk to. The regulators, the Reserve Bank, million. Sterling Grace bought the business,
Bessemer has been with the trust company all the ministers are available to talk to ... it which was at that point called Tower Trust, in
for two years, having been head-hunted for was different in Australia, you didn't have the 2003 for $25 million.
the role from a position as chief operating access to people to talk about what's going Bessemer said John Grace, owner of
officer at Equity Trustees in Australia. to happen." Sterling Grace, was supportive of the
He had completed a leadership Many of the things happening in financial investment happening in the business.
development qualification at Harvard and had services in New Zealand had already His daughter, Victoria Grace, has been
an eye out for the next challenge. happened in Australia, Bessemer said, so he added to the company board as a digital
"It was a good opportunity and I was going had an idea of how things would play out. technology specialist.
to be looking for a CEO role." "My major focus is always going to be what Bessemer said he had a good working
Trustees Executors offers investment do the customers want?" relationship with Grace. “Not long after I
administration services, including custody Trustees Executors looks after $1.6 billion started I gave him a five-year strategy and we
and registry, corporate trustee services and in private money and has about $140 billion are working to that. He cares deeply about
a private wealth business. Private wealth is in supervisor and custodian rights. It is the what happens to the business.”
about a third of the business by revenue. registry for about 25% of all KiwiSaver money. Grace had substantial family ties to New
Bessemer said he was already familiar Bessemer said the business had spent Zealand, he said, and wanted to keep the
with the New Zealand trustee market before the past two years investing heavily in investment and legacy in this country.
he arrived in the country, because Equity automated processes and systems and Trustees Executors is developing a new
Trustees had attempted a hostile takeover of its target operating model for the fund service that would provide better online
Trust Co, which owns Guardian Trust. management business, working on its capability for investors and advisers.
"I think New Zealand's financial services service delivery model. Bessemer said it was something the
industry is just as mature as Australia's, just "We're really looking at how the process company was working on with fintech and
smaller," Bessemer said. works and breaking down how we can make investors. Advisers and clients would be
it more effective, building in those operational able to use it to buy and sell and also receive
012
012 WWW.GOODRETURNS.CO.NZ
WWW.GOODRETURNS.CO.NZinformation on risk, he said. The product not just a New Zealand issue but created an
would be released in about the third quarter
of this year.
opportunity for roboadvice.
“One of the major issues for financial
We need to
He said he could see a role for the
company not only in helping fund managers
services is legacy technology. That’s what
scuppers a lot of consumers getting the right
access cheaper ways
with advice, custody and supervision but with information. The systems of banks, fund of getting financial
the distribution of product. “And making sure
advice and literacy
managers and insurers are all tied into old
that mum and dad investors are getting the technology that’s not readily adaptable to the
appropriate information on the product they
are buying. That’s really important to me.
world of the cloud.”
There also needed to be more transparency online ... There should
The financial literacy piece is a must-have
in my mind, explaining things in a way that’s
around fee structures, he said. Sometimes
when customers bought into a fund that
be better tools
easily understandable.”
Bessemer said he was concerned with
was a fund of funds they did not realise they
were paying a brokerage cost, custody cost,
built around that
the constraints on getting advice and registry cost and supervision cost to layers sort of thing.
information to New Zealanders. of funds two or three deep, he said, then
He said there was a risk that with too much advisory cost on top of that. the disclosure of those fees. Any fee is
alignment between product and advice, “I just don’t think there’s enough clarity in acceptable if you’re properly disclosing it
consumers ended up not getting the right terms of disclosure of all the fees within the and earning it. If you’ve got good returns and
advice offering. They faced a choice between funds, I think we need to look at improving you’re doing a good job you should not be
conflicted advice from product providers or a afraid of advertising fees. Lots of great fund
process that many people could not afford. management clients are offering really good
"We need to access cheaper ways of outcomes in the funds they operate, they
getting financial advice and literacy online deserve the fee. But in some areas of the
... look at the market going into a crisis, industry if you look at more passive funds
already people are talking about what managers who are following indexes, not
they are currently invested in – it could adding a lot of value, they’re charging almost
be growth investors switching back to the same fees.”
a conservative option. They're doing Bessemer said his short-term focus,
that without seeking the appropriate beyond navigating out of the Covid-19
financial advice for their own needs. disruption, was to build New Zealanders’
There should be better tools built awareness of the Trustees Executors' brand.
around that sort of thing. The 139-year-old company is the country’s
"When you're buying a product oldest continually registered company. “I’m
you have to go straight to the person proud to be the custodian of the brand.”
creating the product and buy from them He said Trustees Executors should become
or through a financial adviser." a trusted household name. As it was, many
Many online platforms were "antiquated" people did not even know what a trust
he said and lacked information such company did, he said. “It’s about getting
as risk profiling. "They don't give the recognition that we are doing it properly, not
consumer the information they need just doing it.”
to make a decision. At Trustees
Executors, we don't produce a
product. We don't want to
be conflicted."
He said it was
Ryan Bessemer
013GRTV
Investing's difficult
at the moment top
manager says
Susan Edmunds speaks with Aleksey Mironenko partner and chief
distribution officer at Hong Kong-based Premia Partners about what
their Asia-focused ETF investment solutions have to offer.
GRTV: WELCOME TO GOOD RETURNS
TV. I'M SUSAN EDMUNDS. I'M STANDING
IN FOR PHILIP MACALISTER TODAY. I
HAVE WITH ME ALEKSEY MIRONENKO,
WHO'S CHIEF DISTRIBUTION OFFICER OF
PREMIA PARTNERS. WELCOME.
Mironenko: Thank you, Susan.
GRTV: YOU HAVE A FOCUS ON ASIA, IS
THAT RIGHT?
Mironenko: That's right, yeah.
GRTV: CAN YOU TELL ME A BIT
MORE ABOUT WHY YOU LOOK AT
THAT REGION?
Mironenko: Sure. So we're based in
Hong Kong, and we set up Premia three
years ago because we thought that the
asset management industry wasn't doing
enough to focus on the growth markets
of the world. So there's plenty of choices
for US, Europe, New Zealand, Australia Mironenko: To be honest, we're in the yet investors just go: "Well, it's EM it's one
investments, but when it comes to China, early stages of exploring New Zealand, so bucket. I don't need to worry about it."
when it comes to Southeast Asia, India, the I'm learning myself. But the sense I have We think you need to be much more
growth economies on the planet, there is is that the average New Zealander puts granular and much more selective, not
much less choice, much more expensive money into New Zealand equities and necessarily through an active fund but
choices for fund management. property, Australia equities, and maybe US. through exposures that are targeted to
But arguably, that's where you want to If they do anything else, it might be a small where the growth is in EM, because that's
be putting your money over the long term. allocation to EM, broadly. ultimately the goal. You don't want to buy
If you're trying to save for the next 20-30 But EM is a very big and complex slow-growing EM. That's twice the risk and
years, you want to invest in places that thing. There's Argentina, which is having the same return. If you're going to take the
are growing 5% a year, not 2% a year, but default issues. There's Eastern Europe extra risk of going into EM, you should be
it's much harder to do that. So we left our with constant threat of war with Russia. rewarded for it with more growth.
previous firms, BlackRock, Vanguard, State There is the Middle East. So you get the GRTV: OKAY, SO AT THE MOMENT YOU
Street, and we created Premia Partners in good and the bad, but you can be much SEE MORE OPPORTUNITY FOR GROWTH
Hong Kong to try to make some products more granular. THERE THAN PERHAPS THE MORE
that are low cost and allow easy access to The US is a very well researched market, MAXED-OUT MARKETS OF THE WORLD?
these markets. so investors know what they're getting, Mironenko: Yeah, I mean, it's a hard
GRTV: IS THAT SOMETHING THAT but there's a very, very big difference thing to say because over the last 10 years,
NEW ZEALANDERS DON'T HAVE A LOT between a Taiwanese semiconductor nothing has beaten the US, really. But if you
OF ACCESS TO AT THE MOMENT, DO company and a Brazilian oil conglomerate. think about where we are today, the US is
YOU THINK? It's two completely different things and at a forward PE, priced equity, of 19. Asia is
014 WWW.GOODRETURNS.CO.NZat 13. It's much cheaper. You're paying less and it seems to be working in terms of a
for more growth. We like that equation. That slowdown and limited infections outside of
gap, 19 versus 13, that's the biggest in 10 We're trying to that region.
years that we've had. GRTV: OKAY, THAT MAKES SENSE. SO
Now, the problem is, a lot of people have get not just the HOW WOULD YOU SEE YOUR FUNDS
been saying this for awhile, "EM's going to
outperform, EM's going to outperform", and good and the bad, FITTING IN WITH THE REST OF A NEW
ZEALAND INVESTOR'S PORTFOLIO, SAY?
it hasn't.
There's a structural problem. EM is full
we're trying to target Mironenko: Excellent question. So if
you think about what a portfolio should
of bloated, state-owned, old economy
type of companies. Most of us, when we
specific structural accomplish, one, it should generate good
return, and two, it should be diversified so
think about EM, we think about low-cost growth themes. that those returns don't only happen at the
export manufacturers. We think about same time. So you have some good with
oil companies. Well, these are the things bad and vice versa, right?
These are all things you can do now in an
that are doing worse and worse. As So if you look at US versus New Zealand,
index. You get a much better result than,
we transition to sustainable energy, oil which are two standard allocations for
say, buying the standard default market
companies – which are a lot of EM firms – a New Zealand investor, the correlation
cap benchmark for China, which, yes, it'll
are doing worse. is about 0.4, pretty good diversification.
have a few famous stocks like Alibaba and
But if you look at the structural story What's interesting about Asia ex Japan is
Baidu and Tencent, but it will also have a
in EM, EM consumers are embracing that the correlation with US is 0.6-0.7. With
lot of old economy state-owned banks.
technology much faster than developed New Zealand it's actually a bit lower 0.4-0.5.
It will have the oil companies. It will have
market consumers. China is greying much But we don't invest in Asia because,
the coal companies. It will have Chinese
faster than any other country in history. again, we're trying to get not just the
tobacco companies.
There are these interesting growth stories good and the bad, we're trying to target
GRTV: HOW WORRIED ARE YOU ABOUT
that are performing incredibly well, but specific structural growth themes. So our
CORONAVIRUS IN YOUR INVESTMENTS
most investors are under-invested in them China new economy has a 0.3 correlation
AT THE MOMENT?
because they own Facebook, Amazon, with New Zealand and with the US, so
Mironenko: I did not fly from Hong Kong
Alibaba, Tencent. They don't own Chinese it's very complementary to both those
yesterday, I flew from Japan. But look, we
pharmaceutical companies. They don't own existing allocations.
actually published a piece on this a couple
the largest tech conglomerates in Korea. Our Southeast Asia exposure, which is
of weeks ago. Every virus outbreak that
They might own Samsung, but they don't something that very few investors globally
we've had in the last 20 years, if you look at
own the local companies that are serving touch, everybody knows China, India, but
the six month return of whatever market it
local consumers. they ignore Southeast Asia because each
happened in, it's been positive.
GRTV: IS THAT JUST A LACK OF individual country is small, but together,
So there is no question that there is a Q1
KNOWLEDGE ON OUR PART, THAT WE 700 million people, 5% GDP growth. The
economic slow down, and not just in China.
DON'T KNOW THAT MARKET SO WELL? correlations are even lower, 0.2 versus
It's going to have effect globally. Foxconn,
Mironenko: Not just New Zealand. Even which is Apple's main supplier, restarted New Zealand.
in Asia, we have a lot of clients who don't one week late after the Chinese holiday Those all seem like things that make
invest in some of this, because if you look and they are currently at less than 30% sense, even intuitively, without doing further
at the standard benchmarks, EM is 10% of capacity. So even Apple is going to have analysis, and that's why we're excited about
the All Country World Index from MSCI. So a problem. spending time in New Zealand, and talking
for a lot of investors, it's more important to But it's a short-term problem. Markets to investors, and explaining what we do.
get their US allocation right, or their home don't care about human suffering, GRTV: GREAT. WELL, THANK YOU VERY
buyers New Zealand allocation right, than unfortunately, they only care about MUCH FOR BEING HERE. IT'S BEEN
to get really granular in EM. forward projections, and the reality is REALLY INTERESTING.
GRTV: ARE YOU TAKING AN that in situations like this, governments Mironenko: Thanks for having me.
ACTIVE APPROACH? step in, they provide credit lines, they
Mironenko: So we kind of sit in the middle extend deadlines, and there will be pent up
of the world. So sometimes people say demand. So Foxconn will run right now at
smart beta or quantitative investing. Our 30% capacity, and in three months they'll be
premise is very simple. We can make an running at 120% capacity to make up for it.
ETF, so still very low cost relative to active GRTV: I SEE.
fund management, but instead of simply Mironenko: So we expect, clearly, a Q1
buying a market cap benchmark for MSCI dip in earnings of Chinese companies, if not
Asia for example, we will say, "No, we want global companies, and in GDP numbers,
to own China's tomorrow". So we want to without question.
make an index that targets quality growth Q2 will be less bad. Q3 will probably be
companies in China's new economy. great, and maybe earlier, maybe later. We're
We can say we don't want banks. We not scientists, so that's for someone else to To watch the full interview,
don't want energy companies. We don't judge, but it's very clear that this virus, while
having a very fast transmission, seems
download an audio podcast or
want manual labour manufacturers.
We want tech, consumer, healthcare, to have a much lower mortality rate than to read the full transcript, visit
education, environment industries. We want some of the past epidemics we've had.
companies that are low debt, high profit, China, rightly, wrongly, has sacrificed a goodreturns.co.nz/grtv
high growth. province to save the country and the world,
015DEALER GROUP UPDATE
By Susan Edmunds
Adviser
groups head
towards
finish line
Independence, flexibility and professionalism key for
adviser groups in new regime. Part two of our group
special looks at what is happening in the group space.
Adviser groups are readying are true.” were professional and experienced and
The adviser group was established in 2008. tended to operate across more than
to run down the final stretch In the past year, it has had nine advisers join one strand of insurance, investment or
towards the start of the financial and 12 leave. mortgage advice.
Dench said it offered a centralised service Under the new licensing regime, SHARE will
advice regime. model, an opportunity to own an equal hold one transitional licence for all members
stake in the company through the co- to operate within. “This structure coupled
ASSET has been checking in with them to
operative structure and a chance to grow with the centralised services is designed
determine what they will offer their members
the business or plan for succession through to make it easy for advisers to focus their
in the new licensing environment. flexible ownership. “All SHARE advisers run efforts on clients.”
Share’s chief executive Tony Dench says independent businesses with complete There would be economies in holding
advisers who wanted independence – but flexibility. We can and do buy books but there one rather than numerous licences, with
also to have a stake in the group in which is no obligation for advisers joining Share to efficiencies maximised and compliance
they operate – might be a good fit for an do so.” costs minimised, he said. SHARE has
organisation such as his. Share, formerly known as The Highland a compliance and training manager,
“Sometimes advisers who understand Group, is owned by adviser shareholders, commercial finance manager and operations
only from a distance think there is a loss of managed by its chief executive and governed manager on its staff.
ownership or independence [when advisers by its elected board. Dench said the group was in good shape
join SHARE],” he said. “Neither of those things Dench said SHARE’s adviser members when he joined two years ago but had
016 WWW.GOODRETURNS.CO.NZ“lifted its game even further” since, focusing their own licence but access Kepa’s
on getting systems and processes in
place to deliver a better business into the
They have a heap advice hub, offering things such as advice
audits, compliance checks, training, CPD,
licensing environment.
Advisers were set to operate under one full
of work in front templates and tools, sales and marketing
help, technology options, HR services
licence when the time came, too. of them. Looking and conferences.
Dench said there were benefits to advisers It was reported last year that mySolutions
in being part of a bigger organisation. They after clients, getting wanted its members to have their own FAP
would need to find one that was a good fit for
the culture of their businesses, too. ready for the new licences. They said that would give them
more control over their CRM and compliance
It would transfer more of the paperwork
and administration to a support office
regime and working under the new regime.
Chief executive Kevin Smee said they
function which would allow advisers to spend
more time with their clients.
through the would be able to “steer their own ship and be
in control of their own destiny”. It would hold
Dench said SHARE’s advisers did not need impeding economic training and webinars for advisers around
to improve the standard of their advice to hit the country.
the new licensing criteria, but some needed situation. "Falling under someone else’s group FAP
to do more to document their procedures and is going to cause extra stresses that I don’t
processes. They needed to make sure the
records they kept were not just a document
Tony Dench, SHARE need at this time as all members under an
aggregators' FAP can be unfortunately tarred
in the background, he said, but a living part of by one rogue adviser in their group. It’s a
assistance under the new regime.
the business. shame that other mortgage aggregators
The first is to become an
Dench said while numbers had appear to be bowing
authorised body under Kepa’s
dropped, SHARE’s financial position was down to the
financial advice provider
growing strongly. banks," Keith
licence. That would
It focused on sensible and sustainable Kerr said at the
give them access to a
growth, recruiting advisers who would fit with time.
compliance framework,
the SHARE culture and brand. Due diligence
financial management,
and reference checks are performed on any
HR services, advice
advisers entering the group which gave it
audits, training,
confidence about taking responsibility for
compliance checks,
them under a licence.
CPD, technology and
Dench said he welcomed the new regime
other support
for financial advice. “I have been enthusiastic
services.
about the changes since I came into the CEO
The second
role at SHARE. Those advisers that do a good
was to obtain
job for clients will continue to do a good job
under the new regime.”
There was some short-term pain for some
advisers, he said. “They have a heap of
work in front of them. Looking after clients,
getting ready for the new regime and working
through the impeding economic situation.
But my experience of them is that they are
committed and passionate people and will
keep moving forward.”
Dench said groups would have to make
their offering to the market clearer. “SHARE
has had to be clear from the outset what its
value proposition is because it charges a fee.
We have to demonstrate value to advisers
again and again because we send an invoice
every month. For some groups, their value Tony Dench
proposition is changing a lot. I expect they
will adapt and amend their business
practice and carry on.”
SHARE would continue to
expand its service and offering
to advisers and clients to grow
the business.
Kepa and mySolutions
chose not to answer
questions about their plans.
Kepa members have
two options for accessing
017LEAD by Susan Edmunds
Covid-19:
How to get through
Financial services are getting a shake-up
from the black swan event no one saw coming.
Here’s what you need to know.
Just over a month ago, people in the Advisers are at the forefront of the
financial services sector were still crisis, not only as small businesses
talking about coronavirus as a navigating their way through
minor ailment that was an economy in
of little concern to hibernation but
people in New holding the hands
Zealand. of worried
investors who
But by mid- have been
March the spooked by
country was a dramatic
shutting fall in
its borders, markets
preparing as history’s
for a level longest bull
four lockdown market quickly
and pumping became a bear.
billions back
into the economy
through quantitative So what do you need
easing, wage subsidies, to do to get through this
increased benefits and support unprecedented period of economic
for business. disruption?
2
018 WWW.GOODRETURNS.CO.NZASSET | WWW.GOODRETURNS.CO.NZ
to your long-term
strategy, if you are
FOR CLIENTS
worried about your
finances and need
protection, look at
that now. Things
r is
ar
yH
have got a lot Mu
rra
more real. Without Richard Holden, at Milestone Financial
Services, said it was important for
taking advantage advisers to help clients avoid fear-based
decisions that would have a lasting
negative impact on their retirement
an
k
of the situation,
s
Sh
plans.
na
at r i
it’s about showing
K
“In the absence of advice you get well-
meaning friends and family and then
Research last year showed that having
professionalism
you get a knock-on effect and they all
an adviser added about 5.2% in returns have the negative outcomes of that.”
to a client’s portfolio over time – and
that effect is most crucial in times of
market stress. and how you can He said the surge in switching in
KiwiSaver funds since markets started
While investors left to their own devices
will often pull out of growth assets at the
make a difference
“ to fall was a significant concern.
Independent financial advisers needed
wrong time, crystallising their losses,
advised clients should have a good
in clients’ lives. to band together, he said, to provide
useful information to the people who
Katrina Shanks
long-term strategy in place and a calm needed it – not to sell advice but to help
adviser on hand to help them stay the people make rational decisions about
course and ride the eventual market things like where to have their KiwiSaver
up-turn. She said advisers needed to be more money, how to engage with the bank
proactive about contacting their client and how to manage their cash flow
Financial Advice New Zealand chief bases and keeping in touch than they priorities.
executive Katrina Shanks said the ever had been before. “It’s not stepping
Covid-19 outbreak was a chance for back but stepping up. Now is the time to Advisers could not take a “no news is
advisers to “step up and show their show your worth as a financial adviser.” good news” approach, he said, and had
value”, guiding people through the to take the lead in conversations with
decisions they were making and helping Murray Harris, head of distribution and clients. “It’s important that advisers
them to take the fear out of the situation. KiwiSaver at Milford Asset Management, make those calls.”
said advisers had been through
Advisers should apply professionalism downturns and cycles before. He said it was “amazing” what a phone
and be pragmatic in their approach, she call or other contact could do to settle
said, and build on their relationship with “The key thing for them is to keep people’s anxieties and get ahead of the
clients in what was likely to be a difficult clients focused on the long term.” flood of information that clients were
time for them. presented with. “We’re going through
“
He said the challenge for advisers would a global event where the proliferation
be that many of their clients were in their of handheld devices is spilling stuff out
60s and 70s and were facing increased every second.”
It’s about concerns about what the future would
hold because of that. He said if advisers could keep people
reaching out to “They’ve worked hard, saved hard, they
informed, even if they were people they
never spoke to again, that would be a
have their life savings invested. They good service to New Zealanders. The
clients and saying are worried about how long it takes the
market to get to the bottom, how long
obvious place to start was with people
who had shown a propensity to panic
what goes down before the correction, how long before
my balance is back to where it was a
in previous downturns, he said. “It’s not
just sending a message but having a
will go up, stay true
→
month ago at the peak of the market. conversation. A big thing is hearing the
No one knows the answer.” voice of your adviser.”
3
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