by Andrea Malcolm
Compared to Australia, the New Zealand financial advice industry is more advanced in some areas and a long way behind in others, says Inwood who grew up in Papakura but now lives and runs his business in Australia.
It has had nothing like the scrutiny of the Australian market where regulatory interference has resulted in some perverse but also some very good outcomes, he says.
New Zealand advice is more expensive than Australia, particularly in the insurance sector. Inwood says his personal financial adviser here costs four times more than in Australia where he has more funds under management.
Price competition, regulation and deep scrutiny by the government has meant adviser fees have been really compressed in Australia, he says. As a result people are trying to find margin in other places. Inwood says New Zealand didn’t have the misselling scandals as in Australia allowing advisers here to preserve their margins.
“In Australia we had the Cooper Review, the banking royal commission, and this current government is really working hard to reform the superannuation industry, which is looking not at price now but at service.”
The compulsory Australian Superannuation Guarantee which started in 1992 stood at AU$3.5 trillion by 2022. People on average retire there with about AU$200,000 and the Australian government has now capped that at AU$1.3 million.
So should KiwiSaver be made compulsory here? Inwood says soft-left capitalism which includes compulsion is often criticised as bringing about a ‘nanny state.’
“That’s happening in the UK. It’s happening a bit here, in Australia and the Scandinavian countries. Then you get the German system where the Germans say, ‘what we’ve got to do is create incredibly effective competition. And may the best one succeed’.”
Inwood says socio-left capitalism works for a large number of people for a time but creates an enormous cost base whereas the German model of “manic competition” creates a highly effective outcome.
Restoring confidence
Confidence in financial services in New Zealand is good although softening for obvious reasons, says Inwood. “The post-Covid economy has been challenging, the government has faced all sorts of pressures, not only economic pressures. There’s meteorological pressures, genealogical pressures and historical pressures facing this country. So the pressure’s significant. The depth of the economy isn’t there to support it.”
He says trusting the government has to be absolute at a time like this but that’s wobbling in the post-Jacinda era. “Trying to get the talent back into the government and trying to get really positive decision making becomes really important.”
Proposed changes to taxation structure create more confusion than certainty, he says.
Research from the 1970s on building confidence lists benevolence, compliance, authenticity and predictability as the four main integers.
Inwood says a lot of those integers are “pretty wobbly” right now. He thinks European states, particularly Nordic or near-Nordic are exemplary.
”They publish what they’re going to do and they do it. And when they change their mind they simply change their mind and they say ‘we changed our mind, that doesn’t work anymore, we’re doing this differently.”
He says Germany’s budget balancing rule black zero (schwarze Null) is a good example. “They said each year we make a billion and spend a billion because we’re in debt…this idea that they produce a set of accounts like a small business where it was black zero every year.” Other examples are Germany’s policy of opening immigration to tackle a worker shortage caused by an ageing population. And then post-Covid, the announcement that black zero was over.
“The Germans have this interesting phrase which is ‘wir schaffen das’ which means we’re German, we can cope. And one of things I would constantly say about New Zealand, when people say ‘oh New Zealand is in trouble’, is, you never write off the Kiwis.”
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