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There will be a boom in advice: James

Regulation of financial advice isn’t a bad thing, NZ Funds Management chief executive Richard James says. In fact it is a positive for the industry.

Thursday, September 19th 2013, 6:00AM 4 Comments

by Philip Macalister

He says there is no evidence that regulation drives advisers out of business, rather regulation helps.

Overseas all the countries which have highly regulated financial markets have strong advice industries.He expects the same to play out in New Zealand.

He acknowledges there is a small number of independent authorised financial advisers in New Zealand, but believes this number could grow significantly over the years. He also says that regulation won’t drive all advisers into bigger groups or chains of advice firms.

"There will be a explosion in the demand for advice," he says.

The idea that reguation is bad for advisers is "just not supported by the facts."

One of the big challenges advisers face is the changing make up of their client bases.

James says many of the traditional clients of advisers are in hibernation. There are the people who have built up a lump sum and want a personal annuity to live on.

He says many of these people may not return to the advice market, therefore advisers have to think about a different market.

These are younger people. Part of the catalyst for seeking advice will be KiwiSaver. While NZ Funds was a later player to the KiwiSaver market it has a membership with a reasonably high average balance.

James says 12% of its members have balances of more than $25,000. and in three years time that is likely to be 40%. Then around 10% of the scheme's members will have balances of more than $100,000.

As balances grow people will seek advice. "They are going to want help."

James says one of the important things for advisers to do with this market is help self-directed customers.

Advisers can give information and tools to clients to help the “self-manage” their investments and over time these people will seek more advice and even move to being full service clients.

He also said margins were being driven out of financial services through competition and regulation. Advisers need to be clear of their proposition, he says and have different fee structures. This may include free advice around KiwiSaver, an intermediate level of advice where clients ask some questions and then full service advice.

People are "going to want help," he says, "but in a different way what we have traditionally serviced these people."

 

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Comments from our readers

On 19 September 2013 at 9:39 am Mac said:
I agree 100% with James. Those advisers who are not actively seeking KiwiSaver business with individuals and groups will most certainly "miss the boat" to a significant future access opportunity to a new generation of clients.
On 19 September 2013 at 12:25 pm brent sheather said:
KiwiSaver is an interesting one...I wonder how many independent financial advisers outside the banks recommend only KiwiSaver products that pay fees of some sort.
Given that none of the low cost KiwiSaver funds pay commission how can this be consistent with putting your clients interests first?
Be interested to know how advisers approach this..presumeably they charge an hourly rate or a set fee?
On 19 September 2013 at 1:23 pm RFA - insurance said:
I'd rather pull my teeth out with a pair of pliers than advise on KiwiSaver. How many providers have already disappeared/merged/gone/sold? Do advisers really think their trail income will be there in 30 years time? Highly unlikely...and please don't start with the ring fence your clients rubbish...Just my humble opinion...
On 19 September 2013 at 5:47 pm Independent Observer said:
Well said Richard. Nice to see that someone can see the wood for the trees

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