FMC moves positive for clients: AMP

New disclosure requirements should make the funds management industry less scary for the average retail investor, one manager says.

Thursday, December 17th 2015, 6:00AM

by Susan Edmunds

AMP has started moving its retail products to the new regulatory regime required under the Financial Markets Conduct Act.

New compliance obligations will apply to the offer, distribution and governance of the 24 funds in the AMP Capital Investment Funds product suite.

All fund managers must comply with the rules by the end of next year.

Grant Hassell, AMP Capital managing director and head of fixed income, said it was a positive move for consumers.

“I think they will notice a huge difference. The old regime required an annually-updated investment statement and prospectus. The new one is much more prescriptive about what you present to the market.”

That would include improved disclosure, plain language and more transparency in information delivered in a user-friendly way, he said.

Disclosure statements have to meet set guidelines and include things such as a risk indicator to allow consumers to gauge how volatile a fund has been over the past five years, and its historic returns.

They must also disclose all the investments within the funds.

“That’s something fund managers are not used to, having all their assets out there for everyone to see on a quarterly basis," Hassell said.

But he said it was positive for consumers and would help them to compare fund managers.

“Investors have been through a bumpy road post-GFC and with the finance company defaults. This is the most transparent regime there could be in place. I know we are one of the first showing all the positions we’ve got in the funds but that is the way it should be, investors need to know what they are investing money into it.”

It would likely not drive an immediate change in investor behaviour, he said, but over time with full disclosure it would help as financial literacy levels improved.

New Zealanders needed to get better at understanding the benefits of matching an investment that suited their level of risk instead of chasing guaranteed returns, he said.

“Some people will invest and accept a 3% certain return instead of 6% with some variability.”

Part of that education needed should come from KiwiSaver default providers, he said.

But he said the new rules should mean funds management was not as scary as it used to be for "mum and dad" investors.

“The problem is getting money out of the bank where there is a defined return and getting them to do what is better for them, taking a bit more risk. The regime is a wonderful platform to get people thinking about funds management.”

Advisers would have a higher level more macro role helping people define their goals and what might help them to reach them, he said.

Tags: AMP Capital financial advisers funds management