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Fidelity responds to TOWER's hostile offer; KiwiSaver growth slows; Commission consults on standard conditions for QFEs; Nothing more than a pause.  

Monday, October 4th 2010, 7:00AM 5 Comments

Fidelity Life has told its shareholders to do nothing at this stage in reaction to TOWER's unsolicited takeover bid for the company.

The board is seekeing independent advice on the offer and will communicate with shareholders "in due course." 

"Directors have recommended that Fidelity shareholders take no action at this stage. Shareholders should wait for a formal takeover offer to be made and full details of Fidelity's assessment of the offer, including the board's recommendation and the independent financial adviser's report."

Meanwhile Fidelity has reported a record net profit of $16.9 million, for the 12 months to June 30. This is up 63% on 2009.

Commission consults on standard conditions for QFEs
The Securities Commission is inviting submissions on proposed standard conditions for financial adviser businesses that apply for Qualifying Financial Entity (QFE) status.

The consultation paper sets out the content of the proposed standard conditions for QFEs. It is relevant for all QFE applicants.

Entities that wish to apply for QFE status must first submit an Adviser Business Statement to the Commission for consideration by 1 December. The Commission has received just over 20 statements to date.

The consultation paper is published at www.seccom.govt.nz 

KiwiSaver growth slowed
Plan For Life says KiwiSaver growth slowed during the June 2010 quarter to a relatively sedate (in KiwiSaver terms) 4.3%, as the recovery from the global financial meltdown came to a fairly abrupt halt with markets falling back in response to potential sovereign debt defaults by a number of European countries.

“Nevertheless despite this latest setback over the past 12 months total KiwiSaver funds under management were still up by an impressive 79.9%.”

The companies that achieved the highest growth rates in percentage terms were Fidelity Life (145.4%), ING (100.9%), BT / Westpac (95.8%), ASB Group Investments (93.7%) and Fisher Funds (88.3%).

Fidelity recorded a more than doubling of its KiwiSaver Inflows year on year while ING, ASB, Fisher, Tower, AMP and Mercer also all experiencing double digit percentage increases.

Nothing more than a pause
With monetary policy expected to remain extremely easy and the global economic recovery intact, financial market conditions are favourable for investors, according to Barclays latest research publication, Global Outlook: Nothing More Than a Pause.

Head of Research at Barclays Capital Larry Kantor says "While we do not expect growth to reach the pace of the initial post-recession phase, easy monetary conditions are working across global financial markets, and it is simply a matter of time before that provides a lift to real activity.

"Emerging markets should continue to outperform developed markets, and we see the massive underperformance of equities relative to credit nearing an end."

Workplace Savings encouraged in Retirement Income Adequacy debate
Workplace Savings undertook a survey at its conference to get views on some topical issues and a few of the clear messages are:

  • Most respondents would like to see Workplace Savings take ownership of the Retirement Income Adequacy debate;
  • Most respondents would like to see Workplace Savings NZ focus more on promotion of financial literacy in the workplace;
  • General support for the introduction of a new individual membership category called a “Workplace Savings Professional” (WSP).
« Fidelity – “a nice size and fit for TOWER”KiwiSaver mismatch a 'huge challenge' for advisers »

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Comments from our readers

On 4 October 2010 at 9:51 am Hermy said:
I guess congratulations are in order for Fidelity's 63% increase in gross profit? Just a shame that they keep on paying some of the lowest commissions in the market as recognition, and to the expense of the advisers who generate this return!! Fidelity keeps all the profit for its mates and shareholders how about its advisers? And this after they’ve gone on about not being able to afford to pay more...
On 4 October 2010 at 11:09 am Ron Flood said:
Fidelity life receives around 25% of my new business. They may pay lower commissions but to some degree this is reflected in their lower premiums, especially in the income protection market. Their products have also been consistently rated highly by both Plantech and Strategy. If you only sell on commission then don't use Fidelity. Leave them to others who would rather put their clients needs before their own. Profit is not a dirty word, it is what all our business aim for.
On 4 October 2010 at 4:34 pm tony vidler said:
The "lowest commission" argument is one of those wonderfully simplistic one-dimensional views that too often prevail in the industry.

It is true that Fidelity Life deliberately decided to reduce the up-front commission payable on risk business - at the same time it deliberately decided to increase the renewal commission on the same business. That included incidentally increasing renewal commission on business already in place that had previously received higher up-front commissions for placement - how unfair on advisers was that?

The revised remuneration package is clearly aimed at distributors wishing to use highly rated and highly sustainable quality products for the long term for their clients - and who wish to derive sufficient commission to be profitable for their businesses (and increased future capital value) over both the short and the long term. It also rewarded those who had built good books of business with good persistency.

It sort of align's the client and the professional career-orientated advisers interests it seems. And the increased support of Fidelity Life since doing so is clearly no coincidence.

As an aside, the profit made by a company such as Fidelity Life which is both a life insurer and a funds management company is not attributable to simply charging too high an insurance premium or too low a placement commission - it is a touch more complicated than that.

(disclosure of interest: I do actually work for Fidelity Life....note: there is no apology accompanying that disclosure.)
On 4 October 2010 at 7:27 pm Adolf Fiinkensein said:
Here's a very polite 'up yours' to Mr Gibbs, arguably the greatest destroyer of corporate value in recent history.

"You will be aware that Tower Limited has advised us of its intention to make a takeover offer for Fidelity Life. As an unlisted company subject to the Takeovers Code, we are legally bound to follow a prescribed process. However, we would like to provide you with a summary of our attitude.

The Fidelity LIfe model, with our total commitment to independent advisers, is a critical component of our success which we are 100% committed to maintain.

This bid is unhelpful and in our view inappropriate. Tower is a competitor of Fidelity Life and is smaller than we are in the life market.

We are pleased to note that the two major shareholders in the business, who together own 70% of the Company, have advised the Company that they would not be accepting the intended offer.
Ian Braddock
Chairman"


On 4 October 2010 at 10:41 pm Rob said:
Jerky, Fidelity get about 25-30% of my business up from very little this time last year. This is simply due to the excellent products and in my opinion an excellent commission structure which will reward my business long term whilst at the same time give my clients the advantage of top rated products.

Carry on placing business based on commission - I'll carry on placing business in accordance with my clients' wishes for quality products.

To the Fidelity shareholders, please treat this hostile bid with what it deserves - a resounding NO THANKS!
Commenting is closed

 

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