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Banks split on demand for personalised advice

[UPDATED] There are calls for more promotion of investment and retirement planning as a career, as a survey of banks reveals low numbers of advisers being hired.

Thursday, February 16th 2017, 6:00AM 4 Comments

by Susan Edmunds

Institute of Financial Advisers chief executive Fred Dodds said it was hard for new advisers to get started in investment planning.

“It takes time and quite a bit of it to get sufficient FUM to generate an income that will leave a decent income for the new entrant –$20 million at, say 0.80, is $160,000 of ongoing fees, of which a chunk would be held by the independent principal … and how long would it take to get to $20m?”

He said it had been suggested that big providers, such as banks, could be a stepping stone or “kindergarten” for those who wanted to move to independent practice..

But a survey of banks reveals that they are not hiring great numbers of advisers. ASB is recruiting Auckland advisers but has only hired four across the country in the past year. ANZ’s number of AFAs has held steady at 110. Westpac has about 50. BNZ has 69 AFAs, of whom three are newly qualifying.

ASB general manager of wealth Jonathan Beale said he expected adviser numbers to grow as the bank's wealth division did. He said, when recruiting, he looked for people with a keen interest and understanding of investments but not necessarily a finance background. Customer service and communcation skills were more important.

He said there was strong demand for personalised advice from bank customers.

“Customers don’t necessarily ask for 'personalised advice' but, naturally our approach to each customer is tailored to meet their needs,” he said.

BNZ's head of wealth and private bank, Donna Nicolof, said her bank was hiring, too.

"BNZ is growing the number of AFA-qualified advisers we have in our team. We have almost tripled the size of our funds under management in three years from $1.5 billion to $3.8 billion so there’s an increasing demand for qualified advisers.

“We have a strategy of developing our own people to become AFAs rather than hiring externally. Achieving AFA qualifications is part of the career development for many in our team and we actively engage and develop talent from within BNZ and have a learning pathway in place to support this.”

She said there was growing demand for personalised advice, especially as the population aged and business owners looked to sell their firms and invest the money to retire. 

But at ANZ, Ana-Marie Lockyer, general manager of funds and insurance, said demand was less clear. “We find that most of the requests for advice can be managed through a class advice conversation where we can direct customers to our online tools or calculators.”

But she said online tools would not replace human interaction.

“While there is no question that online tools will play an increasingly important role to help these people, we believe people will want and benefit from personalised advice and financial plans so we will continue to support advisers and provide advice solutions for New Zealanders.”

Dodds said banks would have to hire more AFAs because they had the majority of the growing KiwiSaver market.

But he said he had not yet seen any real evidence of how they might move from there to the “real world”.

“The issue for this independent world is paying them.

“They can of course go sell insurance and no doubt have to as they get to a FUM target but many new entrants just want to go straight to the investment world, which brings up the real issue which is one of true financial planning and the focus that Financial Advice NZ is on about – New Zealanders will be better off with advice and that is a fact so the issue is about promoting financial planning and all that it involves – risk, health, debt, retirement planning and investments as a career – that is what New Zealand needs. And that is a great career and does not need the banks to be our kindergarten.”

Tags: banks Fred Dodds

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Comments from our readers

On 16 February 2017 at 7:15 am Just Saying... said:
Australasian banks are unique in their vertical participation in wealth management, with many now questioning the relevance to their overall banking business. Typically, wealth management represents 5-7% of an Australasian bank’s balance sheet, a smaller percentage of their P&L, and – more recently – 80%+ of their bad press.

To imply that banks need to increase their employment in wealth management is a bit like suggesting that taxi companies are looking for drivers.
On 16 February 2017 at 3:10 pm Brent Sheather said:
Mr Dodds raises a couple of interesting points; first off an 80 basis point monitoring fee on top of fund management and, probably platform fees, reduces the post-tax, post-fee total return of a balanced portfolio by at least 17% - using AQR and McKinsy’s forward looking assumptions for long term returns. That’s a big hit and the fact is the higher the annual fees the more time it is likely “to take to get to $20million”.


The other important issue is Mr Dodds’ statement that “New Zealanders will be better off with advice”. President Obama’s study into the financial advisory industry in the US that prompted the DOL’s version of “putting clients’ interests first” found that “no advice” was substantially better than “bad advice”.

It is quite easy to observe “good advice” and that is to look at the practices of the average pension fund, for example no finance company debentures, highly diversified, 50% indexed etc etc.

Regards
Brent
On 18 February 2017 at 4:05 am henry Filth said:
As a poor old mug punter, I want an adviser who will give me advice, which I pay for.

The same sort of relationship model that I enjoy with my lawyer and my accountant. Professional services, which I pay for.

I'm not much interested a model which lumbers me with "ongoing fees".

Is there a place for me in this brave new world?
On 18 February 2017 at 11:33 am Dirty Harry said:
Henry, yes. But it's a small club.
Start by looking up SIFA

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ANZ 5.79 5.05 ▼5.19 ▼5.49
ANZ Special - 4.55 ▼4.69 4.99
ASB Bank 5.80 4.75 4.99 5.29
ASB Bank Special - 4.45 4.69 4.99
BNZ - Mortgage One 6.50 - - -
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Credit Union South 6.45 - - -
Finance Direct - - - -
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Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 5.00 5.20 -
Housing NZ Corp 5.79 ▼4.75 ▼4.99 ▼5.29
HSBC Premier 5.79 4.09 4.29 4.89
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
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ICBC 5.80 4.59 4.69 5.09
Kiwibank 5.80 4.95 5.15 5.59
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.55 4.65 5.09
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.94 5.30
RESIMAC Special 5.00 - 4.75 -
SBS Bank 5.89 4.99 ▼5.19 5.59
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SBS Bank Special - 4.59 ▼4.69 5.25
Sovereign 5.90 4.75 4.99 5.29
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TSB Special - 4.55 4.69 4.99
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Westpac 5.95 4.99 5.19 5.59
Westpac - Capped rates - 5.26 5.36 -
Westpac - Offset 5.95 - - -
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