The Broker INSIDE THIS ISSUE - Warning: Not taking Financial Advice can seriously damage your Wealth - Brokers Ireland
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The Broker
THE OFFICIAL MAGAZINE OF THE PROFESSIONAL INSURANCE BROKERS ASSOCIATION ISSUE 43 WINTER 2013
INSIDE THIS ISSUE
Warning: Not taking Financial Advice
can seriously damage your Wealth
Keep on Running
PIBA Excellence Awards 2013
We believe every market,
region and asset class
should be accessible for
every client. Every day.
You invest time identifying local opportunities to give your
clients every advantage. At J.P. Morgan Asset Management
we want to make sure the world is truly in your hands.
With nearly 1,300 investment professionals working across
thousands of investment opportunities, we invest in local
knowledge, globally.
For more information please contact
your usual representative or visit
www.jpmorganassetmanagement.com
Any forecasts, figures, opinions or investment techniques and strategies set out, unless otherwise stated, are J.P. Morgan Asset Management’s own as at 30 September 2012. They are considered to be accurate at the
time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. They may be subject to change without reference or notification to you. The views contained herein are
not to be taken as an advice or recommendation to buy or sell any investment and the material should not be relied upon as containing sufficient information to support an investment decision. It should be noted that
the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and
yield may not be a reliable guide to future performance. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication may be
issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited; in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Switzerland by J.P. Morgan (Suisse) SA;
in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in India by JPMorgan Asset Management India Private Limited; in Singapore
by JPMorgan Asset Management (Singapore) Limited; in Australia by JPMorgan Asset Management (Australia) Limited; in Brazil by Banco J.P. Morgan S.A.; in Canada by JPMorgan Asset Management (Canada) Inc., and in
the United States by J.P. Morgan Investment Management Inc., JPMorgan Distribution Services Inc., and J.P. Morgan Institutional Investments, Inc. member FINRA/ SIPC.
The BROKER
Chairman’s Report
Dear fellow Brokers them from banks and other tied channels and gives them
I hope the Christmas season finds you in good cheer. a real sense of professional identity.
There are signs of economic stabilisation and, dare I say it, The second major part of the project is about
growth; but like many of you I am still awaiting the ‘trickle strengthening and enhancing the Financial Broker
down effect’. community itself. You will have noticed a series of technical
Still we must look forward with hope to 2014 and or best practice documents issued over the last number of
beyond. You may have heard me say at many PIBA months (ten at the time of writing with more to come).
LIAM CARBERRY
seminars that as self-employed business people, we must This is research aimed at giving you, the Financial Broker,
PIBA Chairman
always take cognisance of change. The ‘Great Recession’ the knowledge and ability to meet the challenges that lie
has accelerated the pace of change in many industries ahead. They are a mix of advisory documents — defining
and professions and it would be foolish to believe we will best practice for advice — and business documents for
escape this. the general running of your firm. When completed, these
That’s why PIBA is investing so much time and energy will give a roadmap for all Financial Brokers to benchmark
in the Financial Broker project. On the one hand this project their business in different areas. They are not regulatory
is about branding — to create a common identity for our documents but are a real resource designed to support
profession that we can use to communicate the benefits you. The documents are located in the resource centre
we deliver to our clients (see CEO article on page 5 for the of the PIBA website and if you haven’t downloaded and
evidence that financial advice delivers life changing benefits read these, I would urge you to do so. The work you do for
to consumers). Remember, 50% of consumers don’t use clients is vital so it is important that we continuously invest
Financial Brokers and this is down to lack of awareness about in ourselves and our firms to ensure that Financial Brokers
us, lack of understanding of the profession and how it is survive and thrive into the future.
regulated, and lack of access (how to find a Financial Broker). At this Christmas time, I would like to thank our CEO
These are all very correctible problems if we have a common and staff for all their hard work and dedication during the
platform to get messages across to the general public, and year. The members of the Board (main committee) and
that is what we are seeking to do with the Financial Broker sub-committees give their time on a voluntary basis and
project. If you haven’t already done so, I would urge you all are to be commended for their contribution. I would also
(subject to the 75% fair analysis rule) to adopt the Financial like to thank the insurers and providers for their support of
Broker title in your name, headed paper, description of PIBA and its activities in 2013.
your firm, LinkedIn profile, etc. The more we all do this, the Finally, a special word of thanks goes to you, our
stronger will be our brand with the public at large. members, for your continued membership and support in
Indeed it is heartening to see more and more Brokers these still difficult times. I wish you and your families a very
adopting the Financial Broker term, and I would also like to happy and peaceful Christmas and a (more) prosperous
thank life companies and other providers who support the New Year.
term in their advertising. There is a strong belief amongst Liam Carberry
members that the term Financial Broker differentiates PIBA Chairman
Spring 2013
Winter 2012 1
Thanks for all your
support in 2013
Merry Christmas
to you and yours.
Your No.1 Supporter
Irish ife Assurance plc is regulated by the Central Bank of Ireland.
The BROKER
Editorial
Last quarter I mentioned that house prices were on the economy roughly 60% to 80% of activity consists of
rise again and that the news was less gloomy. Things have consumption. A decline in our perversely high savings
moved rapidly on! This quarter the media is buzzing with rate will be a boon to the economy. Whilst remaining
talk of a new housing bubble. House prices in Dublin are utterly non-party political about this, policy makers must
up over 15% year on year and the rest of the country is be congratulated on seeing the bigger picture. Perversely,
up over 6%. Is this a cause for concern? Of course not: I believe that the changes made will be beneficial for
look at where we came from. If you study trends in house us in that, firstly, a strengthening economy will be good
DONAL MILMO-PENNY prices over the last number of decades you will seldom for our clients. Secondly, and at a micro level, pensions
Editor
see a smooth flight path: the gains are made in fits and are now relatively more attractive given the increase in
starts and oftentimes so are the losses. I’ll take this year’s DIRT on savings. I’m not arguing for a further increase
progress as a positive: it lifts a certain constituency out of in DIRT and similar taxes: we are now surely at the upper
negative equity, allowing them to move on if they want practical limits before the money starts heading under
or need to. That’s good for the economy. This month the the mattresses.
Central Bank reported the first fall in the number of those
in mortgage arrears. The overhang in supply of housing Any further diminution in the reasons for contributing
in Dublin has long since cleared; indeed there is now to a pension would be long term public policy madness.
serious constraint on the supply side. Outside of Dublin The state needs to encourage greater private provision
the number of vacant properties in the infamous ghost to reduce the state dependence of our aging citizens.
estates is decreasing and plans are afoot to clear the Politicians need to understand that to be successful in
worst folly of that ilk. I see none of this as a cause for doing so they need to create a policy environment that
concern: it’s simply the market normalising and recovery will encourage activity leading to these ends. Much in the
taking place. If you had had the cahoonas and more way they have created a consumption bias through the
importantly the cash to speculate in property over the last last Budget, they need to create a policy environment that
number of years you could now be sitting pretty. will lead to increased coverage. Industry will deliver the
mechanisms, the structures and ultimately the outcome.
In my own practice I see a number of very positive things.
I’ve seen new money going into pensions in place of fear So, I’m sitting here at my desk this morning tapping this
and cash hoarding. I’ve seen new life insurance policies out in eager anticipation of the LIA’s annual lunch. I’m
put in force for the benefit of people’s families in place of looking forward to having a laugh, a drink and a chat
questions about cancellations to save cash. And business with some of the friends I have made in this business.
is again up. This reeks of substantive recovery. It’s the last Friday of November and the holiday season
is looming large so I would like to take this opportunity
The Budget, whilst as ever imperfect, has looked to to wish you and yours a very happy Christmas and all the
create a bias toward consumption. In a typical developed very best for the year ahead.
Spring 2013
Winter 2012 3
The BROKER
WA R N I N G
in g F in a n c ia l Advice
Not tak d a mage
can s e r io u s ly
your Wealth
There is a growing body of evidence from around the world key results of the study showed:
about the positive impact financial advice has on the lives • Financial advice had a strong impact on the savings rate
of consumers. of individuals (estimated to be $1,725 more per year per
advised client between 2005 and 2008).
Canada
• Advised clients were at least four times more likely to
CIRANO Study, July 2012: Econometric Models on the
hold insurance products (life, TPD, income protection).
Value of Advice of a Financial Advisor
This was a formal econometric study involving over 3,500 Quoting 2007 research, the report states that financial
DIARMUID KELLY data subjects. Econometrics allows the study to isolate out advice is associated with:
Chief Executive socio-economic, demographic and other factors impacting • More appropriate asset selection
PIBA on wealth and focus on the impact of financial advice.
• Greater peace of mind
The study surveyed the academic literature on the
value of advice. This found that individuals had cognitive • Greater control of finances
heuristics and biases when it comes to investments • Improving the prospect of a more comfortable
(procrastination, over confidence, anchoring, loss aversion, retirement
mental accounting, herding). It found that financial advice • Helping avoid bad investments
brings greater goal setting rationality and discipline to
• Making it easier to follow a budget
the investment decision-making process, noting also that
planning is a strong predictor of wealth. • Creating and aiding the ability to save.
The study found clear evidence of the impact of financial Quoting a 2008 study, the report says that advised clients
advice on wealth when adjusted for income, starting wealth strongly valued the professional advice received, with 80%
and other factors. This impact was greater the longer the agreeing that their advisor has given them greater:
consumer had received financial advice:
• Understanding of finances
Length of time receiving financial advice Wealth increased by
• Knowledge and education about their investment
4-6 years 58% options
7-14 years 99%
• Confidence that they will achieve their lifestyle goals
15 years + 173%
• Confidence that they are prepared for retirement.
The sources of this greater wealth were higher savings rates,
better asset allocation (more non cash) and greater use of UK
tax advantaged (pension) savings. Unbiased.co.uk / Standard Life, 2012: The Value of
The advised community had greater confidence in Financial Advice Report
having sufficient funds for retirement over the non-advised A survey was conducted of 1,044 adults who had used an
community. There was also a clear positive attitude to IFA (Independent Financial Advisor) and 1,219 adults who
financial advisors from those using their services: “....once were not advised.
a person is convinced to retain the services of a financial The survey found that financial advice increased
advisor, there is a strong probability that he or she will be consumer understanding of the need for more complex
happy with that situation on numerous accounts.” products and increased the uptake of products that may be
overlooked such as life insurance.
Australia
Despite having similar incomes, advised clients
KPMG Econtech Study, January 2011: Value Proposition compared to their non advised counterparts:
of Financial Advisory Networks – Update and Extension
Regression (econometric) analysis was performed on data • Had greater coverage of life, pension and investment
subjects supplied by the networks. Controlling for other products
factors such as wealth, age, employment and income, the • Had double the amount in their pension funds
4 Issue 43
The BROKER
• Put 33% more into their pensions • Were more than twice as likely to have a pension
• Saved for longer and contributed more to their savings • Were more financially protected
plans, leading to investment values twice the value of • Were more financially confident and more confident
non advised consumers. about their financial future.
The survey also found that advised clients had a greater Percentage of people holding financial products
understanding of their personal finances and more Have used Have not used
confidence in their financial product choices. a Financial Broker a Financial Broker
Looking at the coverage of more sophisticated financial
Life assurance 57% 27%
products, the survey reported the following percentages of
Pension 56% 30%
people who had the listed products:
Critical Illness cover 25% 10%
Advised Non Advised Income protection 11% 2%
Life insurance 51% 35%
Comparing the advised and non-advised sectors, the
Private pensions 39% 21%
average pension fund size was 53% higher, but 75% higher
Investment ISAs 38% 19%
for those taking annual financial advice. This latter group
Investments 30% 16%
with annual financial advice also displayed the highest level
Critical illness cover 18% 7%
of financial confidence.
Income protection 9% 3%
Consumers are not ultra rational agents efficiently
allocating resources over time. They don’t systematically
Ireland
plan their personal finances, giving retirement years the
PIBA / Standard Life, September 2013: The Value of Advice
same priority as the here and now. The research clearly
For the first time in Ireland PIBA and Standard Life
shows the value Financial Brokers bring to their clients
commissioned empirical evidence on the value of Financial
through higher savings rates, more tax efficient savings
Broker advice. 1,001 adults were surveyed by Research Plus.
(pensions), more allocation to non cash investments and
The results were broadly consistent with international
greater financial protection. What’s more your consumers
studies.
are financially more confident and highly value your
Consumers who had taken professional financial advice:
services. We just have to get more consumers to sample
• Had nearly double the savings and investments of those your services!
who didn’t Happy Christmas to all PIBA members.
Industry Round-Up [1]
CFP® Certification Ceremony
FPSB Ireland held its third certification ceremony
on Friday the 18th of October 2013. The
ceremony was incorporated into FPSB Ireland’s
annual Financial Planning Conference in
Citywest Hotel, Dublin.
Certificates were presented to 78 new
CFP professionals by Bill Hannan, Chairman
of FPSB Ireland. This brings the number of
CFP professionals in Ireland to 226, with
numbers growing at around 75 per annum. The
international community of CFP professionals is
fast approaching 150,000, with representation
in 24 countries worldwide.
The conference featured high-profile
international speakers Deena Katz and Harold
Evensky, who shared their experiences and ideas
on developing a successful financial planning
business.
RIGHT
Photos of some members
who received their certificates on the day
Winter 2013 5
The BROKER
Industry Round-Up [2]
Standard Life wins PIBA Investment seeing you again next year with Nicolas; and hopefully them continue their excellent work over the next three
Excellence Award 2013 some sunnier weather too! years through our support.”
Standard Life won the 2013 award for Investment Mick Quinn, President of Lansdowne Football Club,
Excellence at the recent PIBA Annual Excellence New Portfolio Funds Area Launched added, “Zurich’s sponsorship of the club has been,
Awards. on the Friends First Investment and will continue to be, an incredible boost for all of
Speaking on winning this award Brendan Barr, Centre our players, and in helping us to encourage the next
Head of Marketing, Standard Life said: “Investment Friends First have recently launched a new dedicated generation to take up the sport. Following 24 years
Excellence has been a key area of focus in our business area for the Magnet and Compass Portfolios on the of sponsorship, we are so pleased that Zurich has
over the last couple of years. This is a great win for us Investment Centre. This resource provides a range of committed to renewing its support of the club and are
and an endorsement of the strength of our investment information across all eight funds in the portfolios, with excited to further build on this relationship over the
manager — Standard Life Investments. We would like access to up-to-date material on assets, performance coming years.”
to take this opportunity to thank all the PIBA members and markets.
who completed this survey and helped us to win this You will find all the information you need for SSgA appoints Head of
award.” your clients on the different portfolios and funds Intermediaries for Ireland
See pages 18 & 19 for photos of Nigel Dunne, CEO of within each, along with links to the Online Fund State Street Global Advisors (SSgA), the asset
Standard Life Ireland and members of the Standard Life Factsheets, which feature daily pricing. In addition, management business of State Street Corporation,
Marketing, Sales and Product Development teams accepting new comprehensive Quarterly Fund Snapshots can be recently announced the appointment of Graham Fox
the Investment Excellence Award from PIBA.
downloaded, which include commentaries and asset to Head of Intermediaries for Ireland.
manager and fund split details; as well as market and Graham joins SSgA
A morning spin with Standard Life strategy performance information. from Irish Life Group, where
and Nicolas Roche The new resource is accessible via the Investment he was Head of Broker
On a very rainy and stormy day in October over 25 Centre or directly from our websites’ homepages at Investment Sales for more
Financial Brokers braved the elements for an early www.friendsfirst.ie and www.brokerfirst.ie. than thirteen years, working
morning spin with one of Ireland’s top sports stars, within their institutional
Nicolas Roche. Zurich Insurance renews longest and retail divisions. In
Nicolas is mentor to The Nicolas Roche Performance running rugby sponsorship with his new role as Head of
Team sponsored by Standard Life, which is made up Lansdowne FC Intermediaries, Graham will be responsible for
of eight of Ireland’s elite junior riders. They’ve enjoyed Zurich Insurance recently reaffirmed its commitment to managing and developing SSgA’s relationships with its
fantastic success over the year, with over 25 wins and Lansdowne Football Club by renewing its sponsorship domestic intermediary client base in Ireland, focusing
riders representing Ireland at European and World of the club for a further three years. Now entering particularly on SSgA’s strategic partnership with New
Championship events. its 24th year, the sponsorship is one of the longest Ireland Assurance. He will also be responsible for
Nicolas took to the roads of Wicklow with a brave running in Irish rugby. developing new relationships with intermediaries
Broker peloton for a leisurely spin! (Although some Maurice Cullen, Chief Marketing Officer, Zurich operating in Ireland.
may have taken a considerably hilly detour!) Nicolas Insurance, said, “After almost a quarter of a century of Commenting on the new appointment, Peter
was in great form, chatting about how he has worked sponsorship, we are delighted to be able to announce Wood, head of SSgA, Ireland said, “Graham’s
hard to reach the level of performance he has achieved our continued support of Lansdowne FC who were appointment reflects SSgA’s ongoing commitment
this season and his role with the performance team. last year crowned AIL champions. Lansdowne has to its intermediary client base and underscores our
Despite the extreme weather there was a great played an integral role in developing some of Ireland’s objective to grow our presence and offering within the
buzz all morning. Standard Life are looking forward to leading rugby stars, and we look forward to seeing intermediary channel.”
ABOVE L-R: Donal Milmo-Penny (SMP Financial Ltd), Gary Morrissey
(Invesco), Nicolas Roche, Jacob Baldwin and James Finucane (Invesco)
RIGHT Young Lansdowne FC players Tom Cullen and Tom Darrah with
Zurich’s Chief Marketing Officer Maurice Cullen at the official ABOVE Friends First Portfolio Funds Area
sponsorship announcement
6 Issue 43
36
The BROKER
[3]
Zurich Life nationwide Broker Friends Supports Cougars Friends First seeks to be a socially responsible
seminars Friends First is passionate about supporting the business in everything we do, both commercially
Recently, Zurich Life held nationwide Broker local community and is delighted to sponsor the and in how we impact on Irish society as a whole
seminars to launch significant new developments newly formed Dublin Cougars — a new senior and within our local communities. To demonstrate
to the Prisma platform. The seminars were men’s Division 2 basketball team based in the how we deliver on our social responsibility aims,
extremely successful, with over 700 Brokers in Loughlinstown/Cherrywood area. we have developed a programme of community
attendance. The nationwide seminar speakers focused activities under the
included Anthony Brennan, Brendan Johnston, heading of ‘Friends in the
Richard Temperley and Ronan O’Neill from Zurich Community’, which uses our
Life, along with Pete Lunn, an economist, author resources to support our local
and former BBC journalist. Pete gave a very community, including local
interesting and interactive talk on behavioural charities, community projects
economics, which according to Brokers’ feedback and schools, both financially
was thoroughly enjoyable and informative. and through expert assistance.
A key development to the Prisma platform
is the new Client Dashboard, available online at LEFT
Zurich Life’s Broker Centre. This gives you a single Pictured with the team is Brian
overview of your client’s total holding of policies O’Neill, Strategic Marketing Director,
Friends First
with Zurich Life, extended across retirement,
investment, savings and protection products.
NEW PATHWAY FUNDS
Also launched at the events were the new risk
targeted Pathway Multi-Asset Funds. These funds Standard Life raise €30,000 for The in support of one of their colleagues, whose son
target long-term growth, with asset mixes that can Laura Brennan Charitable Trust benefits from the work of the trust. They’ve raised
deliver volatility and returns appropriate to your The 2013 charity partner voted for by Standard Life €30,000 so far through lots of fun activities like
client’s chosen risk profile. Pathway has five funds, employees is the Laura Brennan Charitable Trust. bake sales, charity runs and cycles, adventure
which are designed to match the ESMA* risk ratings Established in 2008 by Pat and Nuala Brennan, races, fancy dress and a very creative ‘Ton of Cash’
2 through to 6, and they enable your client’s risk the trust’s purpose is to raise much needed funds campaign: they’re aiming to collect a physical ton
profile to be matched to one of the five funds. to support children up to the age of 18 years who of cash with your unwanted coins!
* (ESMA) European Securities and Markets Authority suffer from serious, life-threatening or life-limiting Nigel Dunne, CEO of Standard Life Ireland said
illnesses. It also seeks to ensure that remaining “This is a great achievement so far for our staff,
family members, brothers and sisters are not especially as we are an office of approximately
forgotten throughout the duration of such 200 people. These funds are going to a fantastic
BELOW LEFT
illnesses. Pat and Nuala set up this worthy charity organisation which is making a huge difference
Anthony Brennan, CEO; David O’Dowd, Commercial
in memory of their daughter Laura, who passed in many people’s lives”.
Director; Elaine Fitzpatrick, Broker Marketing Manager (all
Zurich Life); Diarmuid Kelly (CEO, PIBA) away following a sudden illness. She was just 16 Standard Life are supporting The Laura
BELOW RIGHT
years old and a beautiful, intelligent, talented and Brennan Charitable Trust until March 2014. You
Nigel Dunne, CEO of Standard Life Ireland, presents Anna, caring young lady. can contact them at (01) 639 7300 if you have
Nuala and Pat Brennan with a cheque for €30,000 Standard Life employees chose this charity unwanted coins!
Spring 2013
Winter 2012 7
Innovative Trustworthy Empathy
Travelling towards a
brighter future together.
As a company that distributes solely through financial advisers and brokers, Friends First has been at
the forefront in assisting those of you who are committed to developing and improving your financial
advisory business. “Friends for Life” reflects not only how our brand has evolved but also our products,
supporting services and approach to doing business. We are doing business in a different way and
supporting you in transforming and developing your business. We believe that the wide range of our
support for brokers is a clear demonstration of Friends First’s strong commitment to working and
supporting you in developing value in your business.
> Education > > Communications
Products & Services
& Technical Support & Supports
• “The Future of Financial Services” • New spread commission options • Regular Keeping In Touch broker
symposiums across pension & protection products newsletter
• Nationwide broker “Business • Introduction of 14 new funds on the • Improved Online Service Centre and
Transformation” workshops pensions & investments platform introduction of Customer newsletter
• New Foresight, Broker Transformation • 5 new ready-made portfolios within • New Protection Centre for brokers
programme the Magnet and new Compass range
• Pensions & Investment product along with new portfolio area online • Enhanced Investment Centre for
training brokers and consumers
• Simplification and alignment of
• Fund Manager presentations protection, pension and funds • Continuous additions to CPD
literature and sales information to programme on www.brokerfirst.ie
• Clive Slattery seminars make it easier to use for you and your
• Jim Power Economic Outlook clients • Over 30 articles published in the media
on industry and product issues
• Protection sales training • Online developments including
additional Online CPD and Fund
• Suite of CPD training modules Factsheets
• Ongoing consumer research across
our product range to provide
opportunities for sales and service
enhancements
Quite simply we are
Friends for life.
For more information on any of the above
please contact your Friends First Account Manager.
www.brokerfirst.ie Friends First Life Assurance Company Limited is regulated by the Central Bank of Ireland.The BROKER
Friends First
Creating the Future for Brokers
Introduction The four modules are as follows:
Friends First distributes solely through financial advisers 1. Building an Effective Business Strategy and Plan.
and Brokers and has been at the forefront in assisting 2. Producing an Effective Client Proposition and Segmentation
those Brokers who are committed to developing and Strategy.
improving their financial advisory business.
3. Developing a Sustainable Income Model and Value
Over the last number of years we have been offering
Proposition.
tangible support to Financial Brokers by outlining the basic
steps required to change and improve a financial advisory 4. Creating a Robust Client Focused Marketing Plan.
JOHN CORR business. Coupled with this through various events, we have Each module is delivered by myself and an independent
Commercial Transition brought together the expertise and international experience facilitator. In addition, subject matter experts deliver
Director of a number of leading industry practitioners, who provided material for each module. This is done in a highly
Friends First practical insights into how to manage the change process participative manner.
to become a successful financial advisory business. Each module is delivered at a one-day workshop at four
While working with those committed to change we separate locations countrywide. Participants are tasked with
have listened to their feedback and what they need by completing preparatory work before and further work after
way of practical assistance to help them to transform each module. The programme will be delivered over a six-
their advisory business. Based on their feedback, we have month period enabling participants to fully assimilate and
developed the Foresight Programme, a unique Broker implement the material from each module.
business transition programme.
The Benefits of Foresight
What is Foresight? 1. Clarity: Through a three-year business plan, imple-
• The Foresight Programme is a practical management ment best practice in managing a small business to
and development programme designed for life Brokers maximise commercial opportunities.
to provide them with the capability to complete a 2. Competence: Tools, processes and techniques that
transformation (full/partial) of their business to a are available to you to help complete the change.
financial advisory model focused on developing a
3. Confidence: Know that you are focusing on the
significant proportion of recurring income from advice
correct priorities, maximising your time and resources.
and product sales.
4. Control: Make the decision to take better control of
• It is specifically for business owners, or directors of
your business, what it’s about, where it’s going and
financial advisory businesses and life Brokerages who
how it’s going to get there.
have demonstrated a strong interest in completing this
type of business transformation. The programme is delivered through a professional
learning environment that is extremely practical and
What are the objectives of Foresight? completely relevant to the financial advisory business.
The content is topical and focused on best practice
• The objective is to provide participants with the tools
business management, making it engaging for all
and processes to implement a three-year transformation
participants. We challenge you to stand back from your
for their business.
business and assess its strengths and gaps.
• By completing this they can attract and retain the Module 1 has just been completed and we are fast
right clients, achieve greater security over their approaching Module 2. Feedback from participants has
income and develop enhanced and long-term value in been very positive.
their business. The Foresight Programme is a unique and market
• Those Financial Brokers who complete the programme leading programme. It is one of the most important Broker
will receive a detailed blueprint on how to change developments and supports that Friends First is bringing
their business to one that will deliver what they and to the market in 2013 and 2014, and it represents a
their clients want. significant investment in our sole distribution channel
over this period.
What is in the programme and how is it delivered? I have thoroughly enjoyed working with the
Over the last year in my role as Commercial Transition participating Financial Brokers on the programme to
Director I have been developing the programme which date and look forward to helping them transition their
comprises four separate modules focused on the critical businesses to be relevant and sustainable over the longer
parts of a Financial Broker’s business. term and into the future.
Winter 2013 9The BROKER
To Index or not to Index,
That is the Question
The size of the industry dedicated to managing money control or reduce business risk. The fund management
is huge. Millions of people are employed in an industry industry’s bad name is thoroughly deserved.
trying to exploit market inefficiencies that many people As an investor your starting point should be to own
argue don’t exist. more of the assets that you expect will deliver the best
Necessarily, proponents of active management returns. As an investor in passive funds tracking market-cap
believe that financial markets are inefficient. That’s not weighted indices, stocks that have appreciated are ‘buys’
to say that the market isn’t sometimes efficient: in fact and become a bigger weight in the index, and stocks that
it’s possible that parts of the market are mostly efficient. have depreciated are ‘sells’ and become smaller weights.
GARY CONNOLLY The Efficient Markets Hypothesis remains dominant in Let’s consider this in practice. If you invest passively in the
Principal terms of its influence on financial market theory, but its index you will end up owning twice as much in an asset
iCubed principles have been rounded upon and heavily criticised whose price has recently doubled in value. To a proponent
in the last few years. My own view is that markets are of value investing, this is a perversion of investment
not efficient in the EMH sense. Therefore I do believe strategy. It exposes you to permanency of a trend, rather
that active management has a part to play in portfolio than anticipation of future change. At the risk of using
management. some hindsight bias, would you have invested 40% of your
However, there is a problem with simple inductive assets in Japan in 1989, 30% in ‘TMT’ in 2000, or 25% of
reasoning. My dog has four legs. My cat has four your portfolio in financials in mid-2007?
legs. Ergo my dog is a cat. The simple rejection of A similar, arguably more perverse consequence exists
market efficiency does not make the case for active with respect to passive tracking on bond indices. The reason
management. The debate about active and passive fund is simple. If you buy debt in proportion to who has issued
management is a popular one. The standard case put the most debt, you will end up with the greatest exposure
forward by proponents of passive management can be to the riskiest and most indebted issuers. A passive investor
summarised as follows: in European Government bonds is allocating over 20% to
Italian debt currently. Is this desirable?
• Passive guarantees you index performance less fees,
So what is the appropriate investment conclusion to
which for the most part are significantly lower than
all of this? Passive investment of market capitalisation
active fees.
weighted indices is a naive form of money management.
• Active managers have shown a collective inability to The use of passive investment vehicles that track indices
outperform consistently, so why bother trying to pick the constructed using value criteria rather than indices that
skilful managers? assign weights by reference to market capitalisation
These issues are regularly debated, so there is no merit makes a lot more sense.
in my expanding on them here. It’s difficult to argue with Having surveyed extensive academic evidence on the
these points. subject of the relationship between investment approach
You can believe that markets are inefficient all you and returns there is a compelling amount of evidence that
like, but these inefficiencies are constantly changing, value investing delivers superior returns.
with some being arbitraged away only to be replaced by In recognition of the persistence of the value premium
new inefficiencies. Much of what passes for brilliance in and the genuine potential for active managers that are
investing is actually a combination of luck and the ebb focused on the appropriate risks of adding value, you
and flow of style. Trying to separate the lucky managers should consider investing in value funds.
from the genuinely skilful is extremely difficult. The conclusion that markets are not efficient has many
But it would be misguided to conclude that passive more potentially important investment implications,
management is the answer. This is again a very simplistic which are unfortunately beyond the scope of this short
form of inductive reasoning. missive. But if you are to take anything away, the next
A statistic often cited by efficient marketers as objective time you are in the business section of a bookshop,
proof confirming market efficiency is that around 80% of ignore the books on investment theory and buy a book on
active managers don’t outperform. This statistic is only behavioural finance.
shocking in so far as it surprises so many people. Genuinely
active managers are to the fund management profession
what clean riders are to professional cycling: in a significant Gary Connolly is principal of iCubed, an investment training,
minority. Of course so many fail at the job, the majority research and consulting firm working with financial advisers.
aren’t even trying. Most ‘actively’ managed portfolios are www.icubed.ie.
engineered to look like their benchmarks, in an effort to He can be contacted at gary@icubed.ie.
10 Issue 43❅ ❄
Wishing you a
peaceful Christmas and
❆ ❄
prosperous 2014.
❄
❆ ❄
From everyone at New Ireland.
New Ireland Assurance Company plc is regulated by the Central Bank of Ireland. A member of Bank of Ireland Group.The BROKER
Engage your Clients for Strong
Long-term Relationships
The world of marketing for Financial Brokers is evolving in
response to changing consumer needs. Traditional marketing
methods such as advertising, public relations, seminars, and
direct marketing are no longer enough on their own. Yes they
still have a place, but Financial Brokers today also need to focus
on engaging their clients to build durable, valuable relationships developing a consistent stream of quality content for their
that will help them retain their clients forever. repeating marketing activities. This arises with websites,
The days of just selling are over! As Larry Weber, author of newsletters, blogs and other social media activities. Also, fresh
EAMONN TWOMEY Marketing to the Social Web said, content is a core requirement for a successful Search Engine
StepChange Optimisation (SEO) strategy. We’ve all seen the first issue of
“As you’ve noticed people don’t want to be sold to.
What people do want is news and information about a newsletter that is really very impressive but that is just not
the things they care about.” followed up by future editions. Often this is as a result of the
author struggling for ideas for content for the subsequent
And so we’ve seen the growth of inbound (or content) marketing,
issues.
which is based on the idea of earning the attention of prospects
I suggest that you capture the titles and key points of your
and customers, rather than simply selling to them. The aim is no
first five or six editions before you start the activity at all. This will
longer to talk ‘at’ your customers. Now it’s important to engage
help you to avoid ‘writer’s block’ when you sit down to pen the
customers, primarily by producing ‘content’ (often online) that
future editions of your communication.
customers value. And the good news is that Financial Brokers are
Finally, put effort into ensuring the quality of your writing. Put
in the perfect position to really leverage the opportunities offered
the effort into writing engaging content, but equally make sure
by inbound marketing. And the other bit of good news is that it
your grammar and spelling are 100% accurate. Otherwise, get
doesn’t cost the earth. In fact, according to Guy Kawasaki, the
someone to do it for you.
former Chief Evangelist at Apple (how’s that for an exotic title!),
“If you have more money than brains, you should focus Use the analytics available to you
on outbound marketing. If you’ve more brains than One of the biggest advantages of the online marketing tools
money, you should focus on inbound marketing.” that are generally used for consumer engagement is the
So, the thing to be learnt from these quotes for Financial Brokers tremendous analytics that are available to you. Gone are the
is that the days of solely running in sales mode are now over. Your days of Mr. Wannamaker: “I know I’m getting value from half of
marketing efforts also need to look to engage your prospects, my marketing budget, I’m just not sure which half.”
existing customers and other contacts to earn you their ear as Now you can gain clarity of the success or otherwise of your
someone to be listened to. If they view you as a financial expert, activities. You can see how many people are engaging with your
they are then more likely to consult you as their own financial content, the type of content that they particularly value and
advice needs emerge. what their particular ‘hot topics’ are. You can see who ‘likes’ your
content and who comments on it and indeed shares it with their
Build your network (and your data) relentlessly own network.
Your network consists of your clients and potential clients. These Google Analytics and indeed the information available
are the people that you want to engage, both groups in equal within the social media platforms provide you with invaluable
measure. Building routes to stay in touch with them is critical information.
to your success. Every opportunity needs to be taken to widen With email marketing, you get even richer information as you
this circle, using social media tools to widen your net, as well get all of the above benefits, but at an individual subscriber level.
as leveraging all the offline connections that you build. As you So you can see for each of your contacts what the hot topics for
expand your circle of contacts, you need to build your contact them are.
data: this will primarily consist of email addresses and social The world of marketing for Financial Brokers is changing.
media connections. Selling still sits at the heart of what you do. However now if you
Remember that your data is the enabler of your marketing want to increase the sales opportunities, engaging your clients
efforts. Without relevant data, you are restricted in the activities and prospects needs to become a core marketing activity.
that you can carry out, and unable to measure the success of
activities.
StepChange assists Financial Brokers in the development
Build a structured approach to content and delivery of their business strategy, growth and marketing
Another challenge that many Financial Brokers (who have plans.
bought into the merits of inbound marketing) face is www.stepchange.ie
12 Issue 43The BROKER
Solvency II for Financial Brokers
What are the key issues facing you as a Financial Broker today? increasing the universe of assets that can be held (though the
Solvency II may not be high on your list. I would guess that local ‘Prudent Person Principle’ may limit any such increase).
regulatory changes are more pressing than wider European changes. • Solvency II rewards diversification of risk. This might result in
IMD II, PRIPs and MIFID II may grab your attention but Solvency II is the consolidation of insurers. It may also encourage some
less likely to get a look in. Part of the reason for this may be Solvency insurers to broaden their product range, or allow insurers with
II’s (self-inflicted) credibility problems. The process has dragged on for broader product ranges to offer cheaper prices. For example,
so long, with so many missed deadlines, that it has become harder for a term assurance may be cheaper (or more profitable) from
people to maintain interest in it unless they are directly affected. a company selling a range of products compared with one
KEVIN MANNING This has now changed. After years of lobbying, negotiating and specialising in protection products.
Senior Consultant compromising we finally have agreement on all the substantive issues
• It is likely that insurers will revisit their reinsurance
of Solvency II, and will have a 1st of January 2016 implementation
Milliman arrangements in the light of Solvency II, with potential
date. Moreover, interim measures mean that some aspects of the
implications for retail products.
Solvency II regime will come into effect on the 1st of January 2014.
• Currently lapses hurt insurers economically, but the impact
Overview of Solvency II from a solvency point of view is lower. Under Solvency II lapses
All of this won’t mean much to you if Solvency II just affects the will also hurt insurers from a solvency point of view. Financial
accountants and actuaries. What, if anything, will it mean for Financial Brokers may think insurers are obsessed with persistency now,
Brokers? To answer this we need to step back from the detail to look at but wait until Solvency II comes in!
what Solvency II is trying to achieve. • Solvency II gives a more consistent pan-European framework.
Under Solvency II the capital that insurers must hold should be Over time this may lead to more insurers selling cross-border
linked closely to the level of risk they face. Insurers should benefit from into Ireland through branches or freedom of services. We
good risk management practices, and there should be transparent may have fewer Irish insurers operating here and more pan-
disclosures that allow third parties (like Financial Brokers) to European insurers.
understand and compare the risks that insurers face and their capacity • Each insurer will have a distribution policy and will start to look
to withstand those risks. The big picture is that this should lead to more closely at the distributors they work with. With a focus
better run insurers, greater awareness of risk, better risk mitigation and on managing risk, they may start to develop standards that
less chance of insurers failing. distributors must meet if they are to work with the company.
Implications for Financial Brokers What are the risks for insurers of doing business with you?
How good are your own systems and controls?
Arguably each of the three pillars of Solvency II (see diagram)
will have implications for Financial Brokers. It is difficult in a • Solvency II is likely to have a direct impact on Brokers
short article to give a full flavour of these implications, but here (particularly general insurance Brokers) who are involved more
are some of the key areas of interest: closely in claims-handling or underwriting roles for insurers
and may fall under detailed outsourcing requirements.
• Solvency II is better at recognising risk. Riskier products (from
an insurer’s perspective) will require higher capital. This may • There will be considerably more information available to
reduce the availability of some products, or increase their cost Financial Brokers (and others). It will give greater insight
(particularly products with investment guarantees). Solvency into the relative riskiness of different insurers and will be
II may therefore have implications for the availability and considerably more comparable than current information. This
cost of products with investment guarantees provided by the is an opportunity and a challenge. Are you ready to analyse
insurer, including with-profits products. this information and advise your clients appropriately?
• We expect to see further product innovation for low-risk Key message
customers, such as funds that manage volatility or provide In my view, the key message to take from Solvency II is that it should
greater downside protection without necessarily providing strengthen the industry as a whole. It should lead to better-run
hard guarantees. insurers — more aware of risk and better able to withstand risks.
• Under Solvency II the limits on assets that can be held in unit- Ultimately it should be good news for any of us with an interest in a
linked funds will be less prescriptive than at present, potentially strong and viable insurance industry.
MEASUREMENT OF ASSETS SUPERVISORY REVIEW PROCESS MARKET DISCIPLINE
LIABILITIES AND CAPITAL
• Eligible capital • Governance framework • Public disclosure
• Technical provisions • Internal control • Supervisory reporting
• Capital requirements • Risk management
• Asset & liability valuation • ORSA
PILLAR 1 PILLAR 2 PILLAR 3
SOLVENCY II FOLLOWS A THREE-PILLAR STRUCTURE
Pillar 1 focuses on numbers, Pillar 2 focuses on governance and processes and Pillar 3 focuses on transparency
Winter 2013 13NOW ENROLLING January Start
INFO Visit: www.ncirl.ie
Call: 1850 221 721
If you have to meet MCC, meet NCI.
If you thought there was only one option in retail financial services education, think again. National College
of Ireland offers two new programmes designed to meet the Central Bank Minimum Competency Code and a
Certificate in Personal Insolvency Practice. Our new programmes combine the highest academic standards with
real-world experience and international accreditation. Whether you’re a prospective student or an institutional
buyer, our Certificate and Diploma in Personal Financial Planning simply give you more.
• Designed to meet the Central Bank Minimum • Includes Law and Regulation, Life Assurance,
Competency Code. Savings and Investment, Retirement Benefits,
• Internationally recognised designation, Personal Loans, Applied Financial Planning and more.
Financial Planner PFP®, from the Institute of • Certificate course for those needing to meet MCC
Canadian Bankers*. requirements. Holders of existing MCC compliant
• Programmes at Level 8 on the National qualifications can now upgrade their qualification
Framework of Qualifications. to a level 8 Diploma.
• Third-level education provider, with over • We are also offering a Certificate in Personal
six decades of academic excellence. Insolvency Practice. Graduates of this programme
may submit an application for authorisation as a
• Personal, face-to-face learning in classrooms, Personal Insolvency Practitioner.
combined with tutor mentoring and the latest
in e-learning.
Make a better choice:
• Certificate in Personal Diploma in Personal Certificate in Personal
Financial Planning Financial Planning Insolvency Practice
NCI CERTIFICATE & RETIREMENT
PERSONAL TAXATION LIFE
REAL WORLD LEARNING
DEBT
GENERAL
BENEFITSLEARNING
REAL WORLD
ASSURANCE
PERSONAL DEBT RESTRUCTURING
CERTIFICATE
DIPLOMA
NOW YOU HAVE A CHOICE
PFP ®
&
A BETTER
IN PERSONAL
INSOLVENCY
MEDIATION
NEGOTIATION
PRACTICE IN PERSONAL
DIPLOMA
IN PERSONAL
FINANCIAL PLANNING
FINANCIAL RESTRUCTURE CHOICE
APPLIED
FINANCIAL PLANNING LOANS PLANNING SAVINGS & INVESTMENTS
National College of Ireland, Mayor Street, IFSC, Dublin 1
* Graduates of the Certificate and Diploma may apply for the PFP designation with The Institute of Canadian Bankers.The BROKER
Keep on Running
Everyone loves a good rally, and the steady rise in asset prices mask underlying opportunities — just because an index looks
since the middle of this year has been very satisfying. However, expensive it does not mean that there are no longer deals to be
recent client conversations suggest that investors are becoming had at the sector or company level.
increasingly concerned that equities cannot sustain this Central bank policies have driven rates to record lows and
momentum. Many markets have rallied strongly this year and starved investors of income, forcing many into higher yielding
reached new highs, or at least post-recession highs. However, equities. The result has been that the more defensive sectors,
this doesn’t mean that investors have missed the equity boat which typically pay a higher dividend, are now beginning to
and markets cannot continue to move higher. The upward look relatively expensive. However, this also means that the
KEVIN COUGHLAN momentum in equity markets so far has been supported by the lower-dividend-paying cyclical sectors have become relatively
Head of Ireland view that economic growth is becoming sufficient to underpin attractive. Cyclical stocks have performed better this year as
J.P. Morgan corporate earnings, but not yet strong enough for central banks the global economic backdrop has improved, and are likely to
Asset Management to move away from highly accommodative monetary policy. continue to do so as economic momentum builds, particularly in
US earnings continue to beat expectations, with the S&P developed markets. As in many areas of investing, the devil is in
500 on track for another quarter of record profits at the time of the detail and each of the cyclical sectors will perform differently
writing. Better than expected profits are being driven by margin depending on where we are in the economic cycle.
expansion as companies cut costs, but in the long term this is an For example, consumer discretionary and financial stocks
unsustainable practice, as there is only so much fat that can be have responded well to the early stages of the economic
cut from the bottom line. Eventually, US labour costs will rise and recovery, and have had the strongest performance of the cyclical
higher interest rates will squeeze margins. In Europe, meanwhile, sectors in the MSCI Europe Index so far this year. Households
although fewer companies release quarterly results, earnings will defer spending on non-essential items when the economic
look to have improved on the last quarter thus far, but the results prospects look weak, but when the outlook improves, the
are still mixed and revenues weak. However, companies globally renewed appetite for big-ticket goods such as cars means
should soon begin to benefit from stronger demand, which that the consumer discretionary sector outperforms. Similarly,
should translate into high revenues as the global economy financials usually benefit from increased demand for borrowing.
becomes more synchronised and growth from developed Energy and materials sectors may also do well at an early
markets, in particular, begins to strengthen. stage in the economic cycle, but recently this has not been
In the meantime, there are concerns that valuations may the case. The mining sector, in particular, has been hampered
be getting ahead of corporate fundamentals and that markets by an imbalance in supply and demand that will take time to
are beginning to look expensive. It is true that the forward correct. Looking ahead, the level of pent-up demand among
price-to-earnings (P/E) multiple on the S&P 500 is near its consumers means that the consumer discretionary sector will
long-term average, but UK and European equity indices remain be likely to continue to perform strongly. Longer term, as the
relatively cheap on a forward P/E basis: not only compared to economic landscape improves, companies will begin to re-tool in
their history, but also compared to the US. Furthermore, markets anticipation of increasing demand, which should benefit sectors
don’t necessarily sell off as soon as equities look fairly valued, but such as technology.
can continue to move well past their long-run averages. Using There is still plenty of opportunity in equities, even as markets
valuation metrics for indices at an aggregate level can also move towards multi-year highs. However, given that valuations
are no longer as cheap as they once were, the challenge is
knowing where to look and how to take advantage of those
MSCI Europe Index: year to date performance
sectors that look relatively more attractive and that will benefit
50 Cyclicals Defensives
from stronger economic growth. Finally, the more stable growth
%
picture should also support company earnings by boosting
40
revenues, reducing the reliance on margin expansion. Investors
may take some comfort that the end for equities is not nigh.
30
20 Kevin Coughlan, CAIA, is Head of Ireland business at J.P. Morgan
Asset Management and a client advisor to institutional and fund
10
clients. Kevin has 16 years’ industry experience. Before joining J.P.
Morgan in 2010, he worked with institutional clients at Dexia Asset
Management and Bank of Ireland Asset Management. Before that,
0
he was a business development manager at Montgomery Oppenheim
and an investment marketing manager at Standard Life Investments.
Kevin holds a Bachelor of Commerce from the University College Cork,
Source: MSCI, FactSet, J.P. Morgan Asset Management. Total returns through 29 October 2013. a Postgraduate Diploma in Legal Studies from Dublin Institute of
Technology and is a CAIA Charter Holder.
Winter 2013 15You can also read
