[Weekly wrap] FMA sticks to its guns

The big story this week in the financial services industry was the FMA releasing its much-anticipated final guidance on KiwiSaver sales and distribution -but did they get it right?

Thursday, October 18th 2012, 3:58PM

by Niko Kloeten

The guidance confirms FMA's earlier guidance that RFAs can sell KiwiSaver, albeit under limited circumstances. Advisers will have to be very careful not to slip over the line into personalised advice, which is the domain of AFAs. The issue has been hotly debated in the financial adviser industry since regulation was introduced and the FMA's guidance at least provides some clarity as to what RFAs can and can't do.

As can be expected with any such guidance, not everyone in the industry is happy about it. The Bankers' Association has come out swinging, saying it will make it harder for consumers to get information on KiwiSaver. IFA chairman Tony Vidler, on the other hand, says it will be good for consumers. What will be interesting will be seeing how companies adapt to the new guidelines and what assistance they provide to their advisers in complying.

This week was the second week of the IFA roadshow and one of the more interesting discussions it featured was around behavioural finance, which shows that investors aren't rational and financial planners need to adjust their strategies accordingly. Research in the field confirms what advisers have seen first-hand: people dislike losing money more than they like making it. If they make big gains you might get a high-five but if they lose money you could lose their business and even face legal action.

Another interesting story has been the re-emergence of Australian equities as a value proposition. Although every news story about Australia seems to focus on how much stronger their economy is than ours, our sharemarket has actually outperformed the ASX over the past couple of years. But Tower says the balance is starting to shift towards Australia with some value stocks emerging. The one caveat is Tower won't touch the resources or banking sectors due to the many risks associated with each.

Investing in Asia is a high-risk/high-reward gamble, right? Wrong, according to one fund manager who says in some respects Asian markets are less risky than their Western counterparts. This is particularly true for sovereign debt; for instance, Sri Lanka, one of the oldest countries in the world, has never had a sovereign debt default. This story shows that Asia has plenty of high-quality, low-risk companies and countries to invest in if one knows where to look.

Amongst our latest Poeple news we have Camelot adding a new adviser in the Bay of Plenty and one of the Newpark business development managers moving to TNP. Details here.

An insurance story worth reading is this one where some interesting comments are made about claims paying ratings for life companies. Have a read.

In mortgage news this week there was plenty of speculation about mortgage rates (and the OCR) going even lower. An ANZ economist says home loan rates could be lower if international markets weren't so nervous, while BNZ economists say the conditions for an OCR cut are improving by the day. Tower says the catalyst for such a cut could be a rise in the New Zealand dollar against the Aussie, but home loan rates may not fall much further.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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