[Weekly Wrap] Fees and resignations
The news in the financial services industry during this short week included the long-awaited unveiling of the FMA's fee structure and the resignation of a prominent player in the financial adviser space.
Friday, June 8th 2012, 9:29AM
by Niko Kloeten
The news in the financial services industry during this short week included the long-awaited unveiling of the FMA's fee structure and the resignation of a prominent player in the financial adviser space.
The new regime will see AFAs pay $400 a year in levies to fund the FMA, while RFAs will pay $350. The announcement has met a fairly positive response from adviser groups, who have managed to lobby the price down from an initial proposal of $1800 a year for AFAs.
Loading such high costs onto AFAs, who have already gone to considerable expense to become authorised, would have been grossly unfair. Now the funding mix is more balanced, with large institutions paying a much bigger proportion of the total cost.
If everyone is equally unhappy about how much they have to pay then the Ministry of Economic Development has probably got it about right. However, one boutique manager has highlighted a big difference in the amount small fund managers have to pay per dollar of funds under management compared to the big boys.
There is some merit in arguing for the fee to be a proportion of funds under management, rather than the tiered, capped system the MED has gone with. However, given the rather precise amount the MED was looking to raise for the FMA ($16.4 million), the current system would have allowed it to get a more accurate estimate. For instance, it's not hard to figure out how many banks will be paying the $350,000 fee for those with assets over $50 billion.
The other big news of the week was the resignation of Institute of Financial Advisers chief executive Peter Lee. Lee has been chief executive for the past two years during what has been the biggest period of change in the history of financial advice in New Zealand.
By all accounts Lee has done a good job in the role, and the IFA remains at the forefront of discussion about issues affecting advisers, particularly regarding regulation. Lee's move to OnePath once again demonstrates that those with sufficient skills and industry knowledge can seamlessly transfer between the private sector, regulators and industry bodies, to the benefit of all these organisations.
The big event of the week was the second annual Perfecting Investment Portfolios seminar, and one of the speakers looked at whether New Zealand shares are over-priced compared to their Aussie counterparts. This is a bit of a change-around because for a few years it has Australian shares with "full" valuations.
The interesting thing about events like PIP is that they throw up many different viewpoints, with speakers often contradicting each other on issues such as commodities, shares and asset allocation, but with perfectly valid reasoning for their respective arguments. The fact these smart people disagree on so many things shows why investing is hard, even for those who do it for a living and have done so for many years!
In other investment news, we also had new commentaries from Tyndall and Harbour, and a prediction China's changing economy will favour New Zealand over Australia.
Meanwhile, in regulatory news, RFAs who have kept their KiwiSaver books have been warned to tread carefully. This is a contentious issue, as there probably aren't enough AFAs to provide advice to all the RFAs' KiwiSaver members, particularly given the lack of money in it for them. This is why Fidelity Life's new initiative to provide a KiwiSaver advice "hub" may be copied by a number of other providers.
In deposit news, the company formerly known as Geneva Finance is to issue a new prospectus and has been placed on negative credit watch by Standard & Poor's.
And finally, in mortgage news, Westpac has divulged the secret to its success in growing its share in the mortgage market: giving its front-line staff the power to make their own decisions.
In People news we have more changes at the IFA - other than Lee's resignation; a new CEO at UDC Finance and another senior appointment at Partners Life. In Jobline we have this new listing
$80,000 RETAINER, + RENEWALS, + COMMISSION Insurance Broker Auckland & Christchurch
Niko Kloeten can be contacted at niko@goodreturns.co.nz
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